News / Sustainability concerns don't show on shippers' procurement radar

© Sarayut Thaneerat

Despite frothy pledges from shippers, ‘sustainability’ barely registers when it comes to them making procurement decisions.

A survey by sustainability software provider Sedex of more than 250 supply chain procurement leaders has found 40% ‘ignore it’ for their procurement operations.

And half of the respondents reported that sustainability was “an afterthought”, or not considered at all in their organisations.

One-third (34%) said they saw no benefits to sustainable practices when measured against short-term procurement goals, such as supply continuity and competitive pricing. This is despite the fact that 90% of the top 1,000 firms by market capitalisation in the US have published ESG reports, which suggests many of their commitments are little more than lip service.

“These findings are a wake-up call for any business serious about its social and environmental performance,” commented Sedex’s chief marketing officer, Maurizio Capuzzo. “The research underscores the urgent need for executive teams to realign ESG commitments and operational goals, to truly embed sustainable practices in their organisations.”

The findings were not a shock to Abe Eshkenazi, CEO of the Association for Supply Chain Management. In the organisation’s annual survey of the top ten priorities for 2024, sustainability dropped from seventh to ninth place.

“There have been some telling indicators,” he said, pointing to the pushback on ESG investing BlackRock experienced last year, and more recently comments by Exxon chief Darren Woods, who declared consumers were not willing to pay for clean energy transition.

In the present environment, cost has emerged as the prime issue in boardrooms, which is in line with Hackett Group’s 2024 Procurement Key Issues report, which identified it as the top priority.

Supply chains are in the crosshairs. Research by Boston Consulting found 65% of executives prioritise supply chain and manufacturing costs as the biggest levers to achieve savings.

Even if they are not targeting supply chain costs, firms may shy away from sustainability efforts,Mr Eshkenazi noted

“Implementing sustainable practices does require upfront investment. Large organisations may have the resources to do so, but not small and mid-sized businesses.”

The financial aspect has a direct effect on procurement professionals. In the Sedex survey, 63% stated they believed meeting sustainability targets could impact their performance evaluations or compensation – a stark indication of how sustainability is viewed in the C-suite.

Another challenge lies in the need to push sustainability along supply chains, which becomes more difficult with tier three and four suppliers, said Mr Eshkenazi. For one thing, it may be difficult for them to invest in something when the payback may not materialise in the short term.

Moreover, for transparency it is necessary to share data, which is a significant challenge, he pointed out.

“Transparency requires digital transformation. You need real-time information, you need to integrate all players,” he said. And there are also concerns about smaller firms’ capabilities in cybersecurity.

“Most cybercrime occurs at tier three and four,” he said.

According to the Sedex study, procurement leaders are not only ignoring sustainability, 37% of them are also ignorant of sustainability-related legislation that impacts their business.

Mr Eshkenazi thinks that in part this is a reflection of a weakening regulatory drive. He said: “We’re seeing a relaxing of some regulations. The EU is backing off of some of its targets,” adding that this was fuelling hesitation to embrace a standard that is in flux or not consistent.

While sustainability has dropped down the agenda of supply chain executives and their bosses, there is concern over a related issue.

A new report by Breakthrough, a provider of sustainable fuel and freight solutions, found that extreme weather events, like floods, droughts and tornadoes, were seen as the biggest challenge by the 500 transport leaders it surveyed. It was identified as the top challenge by 39%.

Emissions reduction goals and regulations came third, at 33%.