As the pressures of environmental degradation and diminishing natural resources increasingly impinge on the supply chain, procurement can play an essential role in nurturing a more resilient future. According to new research from H&Z, organisations must adapt to growing environmental pressures, from CO₂ management to circular economy initiatives.
“The Procurement Pathfinder 2024 is the result of a collaborative effort between H&Z, The Procurement Initiative, and The University of St. Gallen’s Supply Chain Institute. The Pathfinder 2024 is more than just a trend analysis; it’s an essential compass for procurement leaders,” the experts note.
Drawing from the report, the H&Z specialists have defined a number of ‘megatrends’, chief among which is a drive for procurement leaders to insulate their operations from environmental factors. As climate change, resource scarcity, and increasing regulatory pressures cause uncertainty throughout the global supply chain, the environment megatrend is influencing how procurement teams will adapt and succeed in three key areas.
- CO2 Tracking and Management
Speaking on the findings of their research, experts from H&Z suggest that stricter global regulations and the push for net-zero emissions have pushed procurement teams to build new strategies around their emissions. In particular, they need to work harder to “monitor and reduce carbon emissions throughout the supply chain”.Many procurement leaders are turning to new technology to do that. In particular, they are leveraging things like, carbon emission calculators – software-based calculators which can be integrated into all areas of the business process and across the supply chain to calculate the carbon footprint of a single product or the entire organisation. Many of them work in tandem with Internet of Things (IoT) technologies, including global sensor-networks, allowing for real-time CO2 tracking to better assess necessary changes.
- Resource Efficiency
“The days of wasteful practices are over” contend the researchers. With various supply disruptions meaning that no resource can be guaranteed – for example, escalation by Israel’s military in the Middle East is already causing shortages of textiles and automotive parts in Asia; while in Florida, businesses are struggling to resource their operations in the wake of Hurricane Helene – procurement professionals must not only focus on acquiring goods, but minimising waste of the things they already have “at every stage”.Procurement professionals can most simply leverage waste assessments to identify and manage left-over goods responsibly and efficiently. But increasingly, they are also turning to smart purchasing practices – analysing data to see peaks and troughs in when they need certain materials – to make sure they prepare for lean times ahead of schedule. At the same time, improved and flexible storage solutions which are appearing across Europe are helping to both prepare for lean times, and minimise the environmental impact of constantly shipping goods and services around.
- Circular Economy
Finally, the researchers suggest “one of the most critical aspects of the environment megatrend” is its resulting shift towards a circular economy. For procurement, they explain, “this means shifting from a linear “take, make, dispose” approach to sourcing secondary materials, extending product life cycles, and promoting reuse and recycling.”Circular procurement enables the purchasing party to ensure that, at the end of their service life or useful life, products or materials will be re-used effectively in a new cycle. This can reduce the waste of resources such as raw materials and energy, and thus the environmental impact of a supply chain, helping a company cut its Scope 3 emissions – which are a crucial, and often neglected part of the road to Net Zero.
Strategy for success
Advising on how to move forward, the experts suggest organisations need to take “a proactive and strategic approach”. Outlining the transition, they argue that “moving into the back half of the year and looking ahead, the time to act is now”.
“Implement immediate actions to reduce environmental impact, such as carbon tracking systems and more sustainable sourcing practices,” the H&Z experts conclude. “Begin planning for the longer-term adoption of circular economy models and prepare for future regulations focused on sustainability and environmental compliance. And continuously assess the environmental impact of your supply chain and stay informed about new technologies and innovations that can help your organisation stay ahead of environmental regulations.”