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Incorporating Environmental Sustainability Criteria into Procurement Decisions

Global firms face mounting pressure to improve their environmental sustainability from various stakeholders across the ecosystem, including customers, regulators, suppliers, employees, and shareholders. In this blog, learn more about the study, the research, and how companies are addressing these expectations, particularly concerning purchasing.

Barriers to Sustainability

Lack of performance measures (40%), lack of business case (37%), and unsupported system integrations (37%) are the primary barriers to adopting sustainability criteria in supplier selection according to a recent study released by CAPS Research. These numbers will likely persist until universal sustainability standards and a clear business case motivate companies to integrate initiatives into their sourcing processes.

CAPS News-12 June 2024

Read about: Supplier Risk Assessment Process, Estimating Risk, Third-Party Risk Management, ISM's Report On Business

Top Uses for Generative AI

Results from a recent report from CAPS Research show that 38% of companies are using Generative AI for cleaning spend data, 29% use it to analyze marketing and category intelligence, and 26% to help users through requisitions, guided buying, etc. This data suggests engaging Generative AI in procurement could bring a significant boost to productivity and profitability.

CAPS News-29 May 2024

Read about: New Metrics of Supply Management Dashboard | Managed Spend Data | Decreasing Global Inflation | India's Emerging Supply Chain Role

Using AI in Procurement

62% of companies are currently using generative AI in procurement, according to a recent CAPS survey. However, only 15% of companies have generative AI governance policies in place, with 19% currently creating them. This indicates a significant percentage of companies are likely using Gen AI models without guidelines for protecting intellectual property and other sensitive data.

CAPS News-15 May 2024

Read about: Register for Sustainability Webinar, Member Engagement Report, ESG Barriers, Manufacturing, Tariffs

Factors During Supplier Selection

CAPS asked procurement practitioners to rank the most important ESG factors they consider when selecting suppliers. Safety, Social Sustainability, and Governance were the top 3, suggesting a greater focus on the humanitarian elements of the ESG agenda.

CAPS News-01 May 2024

Read about: ESG Requirements, Implementation Drivers, Sustainability Initiatives, Plastic Pollution, Shipping

Most Important ESG Practices

Across all manufacturing and services industries surveyed, sourcing from suppliers that comply with ethical ESG practices is most important. Interestingly, just over 30% of supply chain professionals feel reducing Scope 3 emissions is important, despite looming regulatory reporting requirements in California and Europe.