Australian organisations are under mounting pressure from consumers, investors, and regulators to account for their environmental and social impact along their entire supply chains.
Robust sustainability reporting not only allows companies to demonstrate their commitment to ESG, but also empowers procurement professionals to make more informed decisions about their supply chains and product sourcing. However, navigating the intricate landscape of sustainability metrics, frameworks, and reporting requirements can prove daunting for many Australian businesses.
Professionals working in the ESG space will also be aware of “greenhushing”, where a company refuses to publicise ESG information due to concerns around stakeholder pushback. A recent index published by RMIT revealed that only 11% of companies in the ASX 200 comprehensively disclosed information about the sustainability of their sourcing practices. The limited disclosure highlights the need for greater transparency around the environmental and social impacts of supply chains within Australia's largest publicly traded companies.
Ahead of the ESG Procurement Conference 2024, Quest Events interviewed Amy Meli, Head of Procurement at The Source Bulk Foods, and Josh Begbie, CEO at GECA, to gain their insights into best-practice sustainability reporting in procurement.
1. What are some ways procurement professionals should adapt their processes to meet sustainability reporting requirements?
According to Meli, supplier selection and engagement processes must evolve to meet the challenges of sustainability reporting. “Requirements will only be met if the procurement function realigns the supplier selection process”, says Meli. “Supplier selection now goes beyond a common value proposition and is shifting to an ethos aligned to environmental stewardship. The procurement function needs to foster a collaborative and transparent working relationship from the outset so that all parties uphold the drive and compliance that is required for such targets.”
The good news is that procurement teams seeking to improve their sustainability reporting don’t need to invent an entirely new framework. “A critical and practical tool for procurement teams of any size or industry is the ISO 20400 Sustainable Procurement standard”, says Begbie. “It covers organisational governance, human rights, labour practices, the environment, fair operating practices, consumer issues, community involvement and development.”
2. What other stakeholders in the business should procurement partner with to ensure better sustainability reporting, and why?
One of the hurdles (and frustrations) hampering sustainability reporting is the need to source key reporting data from other teams in the business.
“Procurement teams need to engage with reporting teams early and regularly to ensure sustainability goals are aligned, KPIs are agreed, and linkages are clear”, says Begbie. “They should never operate in a silo! Sustainable procurement means considering the social and economic impacts of purchased goods and services, along with their environmental footprint. Engagement with your sustainability team, process design, product innovation, and even human resources (HR managers, for example, understand the impacts on areas relating to working conditions and other social criteria) as well as leadership teams is vital to ensure sustainability goals are both current and have buy-in. Ultimately, every procurement policy should require continual improvement to meet the Sustainable Development Goals (SDGs),”, he notes.
To be effective, sustainability reporting should be treated not as a task but as a mindset to be embedded throughout the organisation. “The understanding of sustainability reporting needs to be embedded in the total business unit; it becomes a lens of which all employees look through”, says Meli. “IT and Technology, for example, can not only look at their own process improvements but also be an ally in creating or implementing tools into the business unit which help identify and report on sustainability. Procurement can gain a seat at the table with the company’s operational division, and question how internal strategies can be developed and/or changed that support the targets.”
3. What capabilities do procurement teams need to train and hire to improve sustainability reporting?
While it may not be necessary to hire an ESG Procurement Specialist, organisations may find it necessary to train, hire, or partner with consultants to fill sustainability reporting skills gaps.
“Companies can support their procurement professionals by encouraging the participation in guided learning or courses”, advises Meli. “If they are at the beginning of a journey [and require extra help], then seek out a consultant organisation who can assist with reporting tools and already certified data.”
Begbie recommends that the team be well-versed in their own organisation’s net zero commitments, timeframes, priority actions, and KPIs. They must also be familiar with the principles which comprise the ACCC’s final guidance on environmental claims to avoid accidentally supporting greenwashing or seeing decisions fail to make material impacts, the SDGs, circularity and embodied carbon, and human rights.
4. What are the risks procurement needs to be aware of in sustainability reporting, and how can they be managed?
The key risks around sustainability reporting, according to Begbie, include greenwashing and making other unsubstantiated claims, outdated procurement guidelines that do not change with the times, and a blinkered, non-holistic view of sustainability that leads to meeting some goals but potentially going backward with others.
One highly effective way to manage these risks is through third-party certification. “Thanks to the built-in assessment and assurance processes, procuring products and services with independent and impartial third-party certification is the most holistic way to ensure you genuinely purchase sustainably”, Begbie says. “Choose products and services assessed under a certification scheme that is independent, transparent, reputable, and robust. For example, assessment under GECA certification looks at impacts across a product or service’s entire lifecycle, from the extraction of raw materials to the end of its life. To become certified, applicants ensure they do not make false or misleading claims about environmental performance.”
Some level of risk is unavoidable in sustainability reporting, but it can be managed. “Compliance will continue to be a risk as companies and their suppliers develop their reporting strategies”, adds Meli. “The ability to audit and have access to real-time data will improve this. Within a business there is different needs and diverse interests, Procurement needs to find a way to engage stakeholders at all facets.”
5. How can procurement improve supply chain visibility to gain the data necessary for meaningful sustainability reporting?
It’s difficult to translate sustainability reporting into meaningful action if the data is six to twelve months old. “Procurement needs to continually leverage technology that provides real time data”, urges Meli. “Continuous innovative and collaborative approaches between the business and supplier will improve the accuracy and availability of such data.”
Begbie agrees that supplier communication is key: “Ask questions of your supply chain, either by directly building trusted relationships or using reliable third parties. Assess these supply chains for key areas of risk such as modern slavery or potential greenwashing, and focus efforts getting more transparency around those hotspots. Make sure you keep accurate records of all purchasing decisions for future reference – these are important for measuring progress against your sustainable purchasing goals, managing risk, and informing continuous improvement. Finally, it’s important to communicate your purchasing decisions to stakeholders, establishing your organisation’s reputation for responsible procurement and building trust. Gather your team, contractors, suppliers, and stakeholders across your supply chains to learn from each other and address any hot spots appropriately”, he adds.
Join us at the 3rd annual ESG Procurement Conference 2024 to hear from Josh Begbie, Amy Meli and a host of other procurement leaders from 6-8 August 2024. Learn more.
To access the detailed conference program, download the brochure here.