ESG-driven procurement offers opportunity, challenges for businesses

4 Panelists sit on stage at Amazon Business

SCOTTSDALE, Ariz. — ESG goals may be taking a back seat at the moment as companies navigate high inflation, supply chain disruptions and changing consumer demands, but for procurement professionals, it remains top of mind.

Three leading procurement leaders joined Amazon Business’ Aster Angagaw, vice president of commercial, public and strategic sectors, on Wednesday to discuss environmental, social and governance goals as part of Amazon Business’ Reshape 2022 conference at the Hyatt Regency Resort and Spa.

On Wednesday, Amazon Business released its 2022 State of Business Procurement Report, which found that the top priority for procurement specialists is improving sustainability in purchasing practices, with 63% citing that as No. 1. Additionally, 39% said supporting local businesses and 34% cited diversity in purchasing practices.

“Optimizing purchases and achieving CSR goals are not mutually exclusive — with Smart Business Buying, organizations can use search and filter features to find products from certified suppliers that are also within their price range,” Amazon (NASDAQ: AMZN) said. “Considering business buyers’ most frequently cited pain point over the past 12 months was accessing a wider range of products in their price range, e-procurement can help procurement access more suppliers, reduce costs, and diversify spend.”

The panelists all noted that finding products is part of the problem, but so is simply talking about ESG.

“For ESG, perception is No. 1 for most people,” explained Stephane Masson, senior vice president of procurement for Marriott International. “When you talk ESG, it is complex, and it is expensive.”

Masson noted that even today, it remains difficult at times to access the data to make critical operational decisions around ESG.

In an interview with Modern Shipper, Angagaw said ESG-driven procurement is a “big lift for companies, and it’s expensive.” But Amazon is working to make that process easier. Amazon Business offers guided buying options for businesses and will identify sustainably sourced products and companies that are ESG focused. For fast-fashion retailer Francesca’s, that has helped it meet some of its ESG goals.

With over 500 stores, Francesca’s managers would often go to the local big box retailer to pick up supplies they needed. That meant inconsistent pricing, invoices, reimbursements and more. Stephen Harwell, senior vice president of operations, supply chain and logistics for the retailer, said Amazon Business has “really streamlined some of that process.”

Harwell said the retailer is very early in its ESG journey but it is moving forward with efforts to both source sustainable supplies and purchase from a more diverse supplier base as part of a diversity, equity and inclusion program. By Q2 2023, he said, 75% of Francesca’s suppliers will be diverse.

One of the benefits of Amazon Business is that it is able to meet the ESG procurement needs for businesses of all sizes, Angagaw said.

“All we need to know is what they are trying to accomplish,” she said. From there, advisers will work with the companies to craft solutions that meet those requirements. “We customize company by company.” 

Marriott, owing in part to its size with more than 30 hotel brands under its umbrella and over 1.5 million hotel rooms, uses scorecards for its ESG programs and now requires suppliers to submit a corporate social responsibility (CSR) scorecard to a third party. If the supplier is rejected, Marriott gives them a specific time frame to come into compliance or it can no longer supply the hotel company, Masson said.

Not all companies can easily achieve ESG goals, though. Geoff Hill is CFO of DonorsChoose, a nonprofit that crowdsources support for teachers by creating lists of needed supplies and allowing people to purchase those supplies. The platform had over 230,000 teachers participate in the last three months.

But while DonorsChoose has set out goals for ESG, getting teachers on board is a bit more difficult because they don’t work for the organization. Still, DonorsChoose is working with Amazon and others to identify products for wish lists that are sustainably sourced.

“There are areas where we want to concentrate funding,” Hill said, and using guided buying “to curate products for teachers that are buying goods” is one way to help achieve ESG goals.

Angagaw noted that sellers, whether they are ESG-focused or diverse businesses, greatly benefit from the platform by having such a large representation of businesses using it.

“The same sellers that are selling to DonorsChoose and Francesca’s are selling to Marriott, all without leaving their homes,” Angagaw said. “That is a huge opportunity for diverse businesses.”

All three panelists told attendees that they need to be patient and not expect instant success. Masson added another point, relating a recent event where all the presenters highlighted their ESG goals, but then when he shook hands and collected business cards, he noticed that none had cards made from recycled materials.

“It’s not just about the words and numbers and presentations, it’s about the details,” he said.

In the end, businesses ultimately choose who and how much to buy from someone, Angagaw noted, but Amazon Business is helping bring together businesses of all shapes and sizes. Still, there is no one metric that defines ESG success.

“They need to look at their footprint, how they impact their society, how they impact their environment,” Angagaw said. “The numbers are very [different] so when people are throwing numbers around, they need to [put that in context].”

Angagaw concluded by saying that any business that is setting and working toward ESG goals should be celebrated for trying to do good for the environment. But they do need to be careful.

“Companies have to ask what they are trying to achieve,” she said. “They just can’t jump in and say they want to do ESG. ESG is different by business.”

Click for more articles by Brian Straight.

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