The predictions from the ProcureTech100 were focused on 4 main themes of:
1. Digitalisation, 2. Intelligence, 3. People, Planet and Prosperity and 4. Organisation.
For People, Planet and Prosperity, the great triple bottom line, the predictions for 2022 focus on the table stakes and the practices that leading organisations are deploying.
The integration of ESG into all supplier management activities should clearly be the norm “ESG performance spending”, prioritising sustainability goals as businesses look to deliver value beyond cost with procurement.
The supply of digital solutions to meet ESG needs is rapidly growing and maturing, incorporating intelligence at their core. These solutions should also be front-runners in developing responsible AI and use cybersecurity as an enabler.
Leading organisations will push sustainable digital procurement solutions further into the circular economy (addressing TCO), water access, social fraud and creating new business models to create social impact.
“We can’t pretend these issues don’t exist.”
Dr Elouise Epstein, Partner at Kearney and Futurist
“We want to be real and have invested in a large sustainability team that is driving Scope3 projects across the business with appropriate suppliers to drive the right solutions.”
Patrick Foelck, Head of Strategy & Transformation Procurement and Head of Professional Services Procurement at Roche
Integration of ESG into all supplier management is the norm
While sustainability used to be considered a “nice-to-have”, tightening legal framework and pressure from stakeholders has made it a strategic business imperative for companies. With increasing ESG regulation (e.g. the German Lieferkettengesetz), heightened consumer awareness and a new focus on ESG investing, there really is no way around it. Procurement is in the unique position to drive their companies sustainability strategy at scale by integrating sustainability aspects into procurement and supplier management processes. In order for procurement to achieve this, there will be a greater demand for state-of-the-art supplier sustainability applications that integrate easily into the existing tool landscapes and processes.
ESG is driven in large part through intelligent solutions
Environmental, social and governance (ESG) initiatives are quickly rising to the top of procurement and supply chain agendas. Artificial intelligence and machine learning are foundational to helping organizations make decisions that drive ESG performance. These tools process data much faster than traditional methods, enabling teams to more effectively use valuable ESG intelligence in their decisions, such as which suppliers should be invited to a sourcing event based on their ESG scope. Predictive analytics can run ‘what if’ scenarios to show the product impact of choosing a sustainable supplier and the outcome of not working with such a partner.
My hope is that increased pressure from investors and the public on sustainability will lead to faster adoption of AI-led features including supply chain carbon footprints calculations, and more. Procurement technology can prove that a solid ESG strategy can translate into strong products and business performance. As more organizations take responsibility, we’ll start to see more practical use cases for intelligent procurement and supply chain solutions that drive sustainability and ESG efforts along with traditional business objectives.
ESG will become an even higher priority. Tech companies will explore the role AI and other emerging technologies can play in accelerating ESG initiatives.
Procurement department plays a strategic role in setting metrics, tracking performance, and holding suppliers accountable to reduce Scope 3 emissions.
More time towards developing responsible AI
There is a real need for AI systems that we can trust. The business community is becoming more aware of the reality and risks associated with AI—issues with privacy, security, and bias. My wish is that in 2022, teams in charge of these systems will devote around 70% of their time to ensuring AI is designed and operating in a responsible way. The remaining 30% can be spent building out the other details. This is how important ethical and responsible AI is becoming.
Regardless of the number of features an AI system has, if not properly managed and trusted, the risks of the system outweigh any potential benefit.
Businesses prioritise sustainability criteria in supplier negotiations
Corporate decarbonization efforts will continue to proliferate, with enterprises putting sustainability criteria at the core of their supplier strategies.
The number of Fortune Global 500 companies that have either achieved or publicly committed to hitting their corporate climate goals by 2030 grew from 6% in 2016 to 30% in 2020. In 2022 more business leaders will address the environmental impact of their value chain as a point of competitive advantage: Supply chain emissions are 5.5 times larger than a company’s direct operations; 40% of the emissions across the eight major supply chains can be eliminated with measures that bring cost savings or are at costs of less than €10 [~$12.10] per ton of CO2 equivalent.
Look beyond cost to deliver value
It is becoming imperative that businesses look at sustainability as being strategically important, and sourcing is at the nexus of that challenge. Factors including vehicle and equipment types, packaging materials, and lower emissions will become more important as procurement leaders will be under significant pressure to act on customer demands and corporate pledges around sustainability – or risk being called out for greenwashing.
Unlocking new sources of funding for social impact
Procurement Organizations will play a more strategic role in creating sourcing events that align with organizational goals, while also unlocking new sources of funding for Social Impact – placing procurement at the forefront of ESG for their companies.
Paul Polizzotto. Founder and CEO
We need more ambition, more action, more scale, greater urgency in delivering the 2030 Agenda and the Paris Agreement – and we certainly need more fuel, more financial resources & more investments.
Amina J Mohammed, Deputy Secretary-General, speaking at the BBridgesCH Summit in Geneva
Cybersecurity as a strategic enabler
ESG will begin to incorporate cybersecurity as a pure governance matter and forward-thinking organizations will embrace cybersecurity as a strategic enabler. It cannot and should not be thought of as a separate item for discussion with the business leadership. Assessing third-party risk and supply chain risk during the procurement process instead of afterwards is the predicted change in behavior. This is just one of the 6 “Principles for Board Governance of Cyber Risk” that has emerged from the World Economic Forum and is likely to come up in your board meeting.
Business payments and social fraud
In 2022, awareness of the scourge of Business Payments / Social Engineering Fraud will expand beyond public sector into the Enterprise Market – becoming a “Top 5” agenda item for Corporate CFO’s and CPO’s as they contend with losses estimated to be 5% of revenue each year.
+ACFE 2020 Report to the Nations
Ongoing access to water for production will become an operational priority as well as a pillar of ESG strategy.
Of the companies Everstream Analytics surveyed, over 60% of them have shown a strong interest in analytics to predict water stress and risk.
Digital procurement is the game changer for turning fragmented waste supplies into reliable feedstock of the circular economy.
With increase regulatory and consumer pressure for brands to reduce the plastic pollution their products are causing, procurement managers and CEOs around the globe are now serious about turning pastic waste into high-quality recyclates, only to realize just how fragmented, intransarent and inconsistent the waste and recyclates markets are in the year 2021. Digital procurement will be core to solving these challenges that all brands face which wish to increase the recycled content in their products.
Demand for digital solutions to enable and scale efforts > supply
The momentum in sustainable procurement will continue to accelerate exponentially, but this will be coupled with demand for digital solutions to enable and scale those efforts, that will dramatically outweighing supply
In the last 3 months alone, LinkedIn members listing Sustainable Procurement as part of their skillset or role has grown from 275,000 to over 320,000. Given the increased corporate and investor focus on addressing our full impact on the environment, this is hardly surprising: the vast majority of the average enterprise company’s carbon emissions – usually more than 80% – sit in the supply chain. Tasked with not only delivering on carbon commitments, but also on the wider social and governance sustainability agenda, the challenges for sustainable procurement professionals will be myriad:
Skill & capability uplift will need to be rapid and wide-ranging, driven by a new set of KPIs & rewards. Organisations that prioritise sustainability targets above cost savings in employee assessments will ensure they are driving the right behaviours to support sustainable business outcomes.
The sheer volume of suppliers plus the extent of the data and carbon calculations required is vast and overwhelming, threatening organisations with analysis paralysis when urgent action is needed. To combat this challenge, technology should be deployed to enable organisations to manage the sheer scale and volume of required activity and analysis.
Despite this need for technology enablers, platforms are in short supply and frequently offer limited functionality; analyst market guides for supplier sustainability applications highlight the lack of comprehensive applications available to tackle the full sustainability agenda. As a result, businesses are likely to need multiple platforms to address all of their sustainability goals. This might entail a combination of sustainability data aggregators, responsible sourcing solutions, and a Supplier Collaboration & Innovation platform to manage close collaboration with incumbent suppliers and to open source sustainable transformation through innovation in as-yet undiscovered suppliers and partners.
ESG Performance Spending
Procurement will elevate its role across the enterprise by enabling a company’s ESG strategy through ‘Performance Spending’.
74 per cent of institutional investors are likely to “divest” based on poor ESG performance (2021 EY Global Institutional Investor Survey). How a company spends its money is the biggest asset it has to advance and achieve its ESG strategy, and procurement can use sophisticated AI-powered technology to create an intelligent, automated, transparent, inclusive, sustainable, and easy-to-use ecosystem for global trade in B2B services.