Today, many businesses are advancing their environmental, social and governance (ESG) objectives as they recognise the importance of having a positive impact on the world. This is not only because it’s the right thing to do, but because they are under increasing pressure from governments, consumers, and investors.
As businesses embark on their ESG journeys, they soon appreciate some of the challenges of turning good intentions into meaningful actions. There’s a lot to consider and to put into place to get it right. Not only do businesses need to establish their ESG priorities and objectives, but they also need to have the right processes in place to help them monitor progress and make adjustments to operations as needed.
Businesses that prioritise visibility and transparency in their ESG operations will have a head start. An important example of this is through business spend – specifically, knowing exactly how and where a business is spending their money so they can ensure it’s spent in the most sustainable and inclusive way. This is what we call Sustainable Business Spend Management (BSM).
The power of Sustainable BSM
Sustainable Business Spend Management (BSM) is a strategy and an approach to business spend that enables and empowers organisations to create measurable impact on both their bottom line and on the world. It helps businesses drive change and progress on ESG goals by improving back-office processes, such as procurement, sourcing, supply chain, and travel. It gives businesses the power to adopt more sustainable practices, and make important decisions based on real-time data.
By adopting a more sustainable approach to business spend, organisations can make meaningful improvements in several key areas like supplier diversity, sustainability, or ESG risk.
Increasing supplier diversity is one of the most powerful ways that a company can deliver on diversity, equity, and inclusion (DEI). What’s more, it can drive economic development in local communities and allow for additional perspectives and innovations to be uplifted. Being able to access a range of different suppliers that suit your business’ needs, and can enable innovation and expansion, is empowering and hugely valuable.
Another key area where Sustainable BSM can help is supply chain sustainability.With many businesses today striving towards net zero emissions goals and reducing environmental costs, it’s essential for them to have greater visibility into their value chain. Such values may not be as well enforced by supply chain partners, and indirect emissions made by a company’s value chain are usually far greater than direct emissions from its own operations. Through having this extended visibility, businesses can empower themselves to find the right balance between emissions and costs, and to factor in emissions alongside other criteria when bidding to source raw materials, freight and logistics, goods, and services.
Supply chains also represent a major source of ESG risk. Recent Coupa research shows that supply chains are a major ESG blind spot for businesses. Nearly two-thirds (65%) of businesses cannot tell if their closest supply chain partners are meeting any kind of ESG standards. Worse still, 57% admit they lack an effective risk management system to ensure the ESG integrity of their supply chains.
Globally, governments are making supply chains the focus of new legislation related to ESG. For instance, Germany’s Supply Chain Due Diligence Act and the UK’s Limited Liability Partnerships (Climate-related Financial Disclosure) Regulations 2022 require companies to vet supply chains for partners who may be causing environmental damage or abusing human rights. In addition, recently proposed SEC regulations will compel public companies in the US to report on their emissions.
It’s essential for businesses to improve their supply chain visibility and take advantage of real-time supplier health and third-party risk data. This will enable them to minimise their carbon footprint and to understand the contribution and risk of their supply chain partners.
Navigating and ensuring compliance with such expanded legislation can seem overwhelmingly challenging. But for businesses to safeguard themselves, ensure compliance and avoid hefty fines as legislation rolls out, they should take actions now that provide them with greater visibility into their supply chains. A sustainable BSM approach allows businesses to have access to this risk data and be able to leverage it – whenever necessary.
A united community
There’s a huge opportunity for businesses to make every dollar they spend more effective, equitable, and sustainable. By adopting more sustainable practices and unlocking their full potential, businesses around the world can do well and do good. We’re moving closer to a global community of companies and leaders united in this vision. It hasn’t always been easy to implement, but we’re now seeing the right approaches and the right technology to turn this vision into action and begin making a positive impact.
