Businesses risk non-compliance -- will their sustainability plans hold water in the face of changing regulations?

Organizations have a critical part to play in combating climate change through more sustainable supply-chains, the source of approximately 70 percent of business carbon emissions. Not only will this prevent them from being caught off-guard in the short and long term, but it will also be significant for laying out the company's green future. Failure to do so could see businesses alienate customers, lose sales and become irrelevant in an eco-driven world. Businesses in the UK must wake up -- it's time to think sustainably about supply chains.

In the face of upcoming sustainability regulations, there is more emphasis than ever for UK businesses to renew their focus on ESG. We've already begun to see changes following the creation of the Green Claims Code, which aims to ensure that organizations are not misleading consumers by making claims about sustainability without actually having a concrete plan in place. The green agenda has also been bolstered by upcoming requirements for listed UK businesses to publish net zero plans.

Switching to green practices is something businesses say they are prioritizing, but concrete plans largely haven’t emerged. This is despite increasing customer demand for sustainable products and services. In fact, recent research from Ivalua found that 97 percent of UK businesses believe sustainability-led innovation will help to improve customer relationships, while 96 percent say it will help to increase sales.

With sustainability becoming paramount, businesses must take action now to ensure they can deliver against their commitments and not get caught short when changes are required.

Getting ahead of the pack on green goals

Despite the focus on sustainability, less than a quarter of UK businesses have plans and KPIs in place for improving the sustainability of goods and services. Just 21 percent have plans in place for reducing carbon emissions, while there was also a lack of plans for adopting circular economy principles (22 percent), reducing e-Waste (20 percent) and adopting renewable energy (18 percent).

Clearly, current statements about green credentials aren’t going far enough to avoid falling foul of upcoming regulations. As such, many will struggle to reach net zero 2030 or 2050 targets. This puts businesses in the crosshairs of non-compliance if they don't follow through with green initiatives, and increases the risk of fines and reputational damage.

Competing priorities, in particular ensuring supply continuity, further distract from sustainability progress and illustrate common challenges to success. 30 percent of UK businesses say they suffer from an inability to effectively assess their overall risk across suppliers. In addition, 26 percent of organizations lack adequate systems for defining and triggering a response to supply chain disruption, while a quarter (25 percent) have an inability to effectively assess the risk of individual suppliers. Such challenges with supplier visibility and collaboration hinder progress on a broad set of objectives, including improving sustainability..

Rethinking procurement for a green future

To close the gap between sustainability goals and results, organizations must take a smarter and more holistic approach to supplier management. This involves implementing suitable systems and processes to enable effective visibility and collaboration at scale.

This can be achieved through digitizing processes with specialized spend and supplier management platforms. Such platforms bring internal, supplier-provided and 3rd party data together to better assess and monitor sustainability, as well as other types of information. They can also enable more efficient, effective collaboration, including sharing of information, defining and tracking improvement plans and more. Ultimately, procurement can then enable a more holistic approach to managing suppliers to improve sustainability, resilience and profitability.

This will help procurement to evolve into a more strategic partner to the business. With its digital revamp, procurement’s new role will see it continually working with and strengthening collaboration with suppliers to find long-term and more sustainable solutions.

This can enable UK businesses to have a significant influence over sustainability initiatives, working with suppliers to achieve targets such as adopting renewables, reducing waste and reducing emissions. By adopting these internally, and along the supply chain, organizations can unlock significant business value. By becoming a business with a reputation for responsible behavior, companies will find that they will become 'customers of choice' for green-minded individuals and businesses. 

The benefits of taking a renewed look at procurement stretch beyond sustainability and helping define a greener future. A renewed look at the procurement function can increase agility, making businesses more adaptable and resilient to upcoming regulation changes. This can also ensure companies make more informed decisions on suppliers by reviewing their sustainability ratings, finding cost savings and unlocking the potential to innovate and collaborate together to meet strategic goals.

Opening a new sustainable chapter

To avoid greenwashing, organizations that are serious about turning sustainability words into action need to empower procurement, especially in light of the UK’s net zero 2050 pledge. Businesses must make moves to address upcoming legislation and increased demand from sustainable-focused customers.

Organizations have a critical part to play in combating climate change. Not only will this prevent them from being caught off-guard in the short and long term, but it will also be significant for laying out the company's green future. This will require organizations to think about sustainability and the role of procurement.

But critical to this is investment. The right technology is vital when it comes to assessing and engaging suppliers, increasing collaboration, and effectively guiding greener practices. And so is agreeing on KPIs that incentivize suppliers to improve sustainability. The data can also be used to enable better monitoring of progress, allowing organizations to course correct as required. Failure to do so could see businesses alienate customers, lose sales and become irrelevant in an eco-driven world. Businesses in the UK must wake up -- it's time to think sustainably about supply chains. 

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Alex Saric is smart procurement expert at Ivalua.