Closing the gap between intention and action regarding ESG

The conversation around Environmental, Social, and Governance (ESG) reporting has been steadily intensifying in procurement circles worldwide, with Australian businesses showing a particularly strong interest in aligning their supply chain operations with ESG standards.  

However, as any seasoned procurement professional will attest, there's a significant difference between understanding the importance of ESG and implementing it across complex procurement processes. Our latest research report, Future-Focused Procurement: The Rise of ESG, sheds light on this challenge, revealing that while procurement leaders recognise the necessity of ESG, many are still grappling with how to integrate these principles effectively into everyday practice. 

The question remains: how can procurement professionals bridge this gap between intention and action in ESG? With time constraints as the top barrier to balancing business and ESG objectives, procurement professionals need practical pathways to meet ESG demands without compromising their core responsibilities. How can they move beyond conversation and make meaningful progress on their ESG journey? 

ESG in procurement: from ambition to action 
At its core, ESG in procurement is about embedding environmental, social and governance considerations into procurement and supply chain management practices. It's about making conscious choices and prioritising sustainability, ethical labour practices and robust governance mechanisms across the supply chain. However, as the demand for ESG-aligned processes expands, procurement teams often face a growing list of ESG expectations, from reducing carbon emissions to ensuring fair wages among suppliers. 

The intention is clear, but the gap between this ambition and the reality of procurement workloads is real. Procurement professionals are tasked with sourcing high-quality goods and services at competitive prices and must ensure that these decisions align with ESG principles. This has raised questions about the practicality of achieving such ambitious ESG objectives and whether the procurement function has an impossible task. 

How is ESG being actioned and prioritised in procurement? 
Despite these challenges, many procurement professionals are taking proactive steps to action ESG. According to our procurement report, 57 per cent of organisations have made ESG a moderate to high priority, with procurement leaders recognising their role as a crucial bridge between ESG strategy and action. However, the report also revealed that 13 per cent of respondents were uncertain whether ESG was a priority in their organisation, and only a third had adopted ESG practices.

This divide indicates that while there's a broad consensus on the importance of ESG, practical implementation remains patchy. Procurement leaders who have successfully embedded ESG into their practices often have clarity around their ESG objectives and a clear action plan for achieving them. For others, prioritising ESG might require addressing uncertainties and developing a structured approach that starts small, focuses on achievable goals and gradually expands in scope. 

What is the risk of inaction on ESG? 
The risks of neglecting ESG are becoming increasingly apparent for businesses and society. On the environmental front, climate change and resource scarcity represent growing threats to supply chains worldwide. Inaction on these issues could expose businesses to reputational damage, regulatory risks and disruptions that could affect the entire supply chain.  

On the social side, a failure to address concerns such as labour conditions and diversity within the supply chain can lead to severe reputational damage and erode trust with consumers and stakeholders. 

Stakeholder Engagement Risks 
One of the most critical yet often overlooked risks of ESG inaction lies in stakeholder engagement. Stakeholders, including investors, employees, customers, and regulators, increasingly prioritise ESG in their decision-making processes. Failing to meet these expectations can result in: 

• A loss of investor confidence, reducing access to capital. 
• Decreased employee morale or difficulty attracting top talent. 
• Declining customer loyalty and sales as consumers opt for socially responsible businesses. 
• Increased scrutiny or penalties from regulatory bodies. 

Conversely, the benefits of pursuing ESG are also considerable. Companies that actively engage in ESG practices often experience enhanced brand loyalty, improved supplier relationships and, in some cases, even financial gains through operational efficiencies. Procurement professionals who champion ESG will safeguard their organisations against future risks and position them as forward-thinking leaders in their industry. 

How can procurement start taking action on ESG? 
Procurement leaders can take a few key steps to move from ESG intention to action: 

Define and prioritise key ESG objectives 
Instead of tackling all aspects of ESG at once, procurement professionals should identify which issues are most relevant to their industry and operations. This focus will allow them to allocate resources and energy to areas where they can make the most impact. 

Integrate ESG metrics into procurement processes 
A robust ESG framework starts with clearly defined metrics. Establishing benchmarks, such as carbon emissions per supplier or diversity in the supply chain, allows procurement teams to measure progress over time. Organisations can make ESG a built-in part of decision-making rather than an afterthought. 

Adopt technology and tools for transparency 
Procurement systems make ESG tracking straightforward and more transparent. The ib-built analytics capabilities can help procurement teams track emissions, labour conditions and material sourcing metrics. Enhanced data visibility not only aids in compliance but also makes it easier for procurement professionals to communicate the benefits of their ESG efforts. 

Bridging the ESG gap 
As Australian procurement professionals grapple with balancing traditional procurement responsibilities alongside ESG demands, one thing is clear: the gap between ESG intention and action must be closed if organisations want to remain competitive and responsible. The risks of inaction are real, but so are the opportunities for procurement teams that embrace ESG as a pathway to innovation, resilience and trust. 

While the journey towards full ESG integration won't be immediate or easy, procurement leaders who take actionable steps now will be well-positioned to lead in a future where ESG is no longer just a talking point but a standard part of doing business. In the procurement world, the time for ESG talk is over; it's time for action.