Five reasons why sustainability in procurement matters now more than ever

Companies that ignore their ESG responsibilities will struggle to attain pre-crisis growth rates

As the number of new Covid-19 infections decreases, many national governments are gradually easing restrictions and companies are slowly trying to resume operations step by step.

This is tough work. But we must not forget that the pandemic has overshadowed another, larger crisis only briefly. The climate crisis has not disappeared because of coronavirus. On the contrary, the current crisis has shown us how vulnerable businesses and society are. It has sharpened our perception of what matters and that we must be considerate of both our environment and our fellow human beings.

As a result, sustainability will become more important than ever. Companies that do not take their environmental and social responsibilities seriously today will struggle to return to pre-crisis growth rates and, most likely, fall behind their competitors.

 

Here are five reasons we need to hold onto our sustainability agenda not despite, but because of the crisis.

1. To future-proof our supply chains

Sustainability-related issues were previously deemed reputational and regulatory risks and, as such, could cause significant damage in terms of financial liability and loss of trust. But the crisis has shown us that broader sustainability issues such as substandard labour conditions are now manifesting as operational risks, causing critical delays and disruption. To future-proof our supply chains, we need to integrate sustainability deeply into corporate risk management and treat the health and safety of our planet and people as key assets.

2. To gain competitive advantage

Although some politicians have called for loosened environmental constraints to aid industry during the downturn, many companies have long seen climate protection as a competitive advantage and a source of growth that they intend to hold onto – even during the crisis. Clariant CPO Markus Mirgeler, whose company is an IntegrityNext customer, says: “Our focus on sustainability helps us win new business.” On the other side, companies that don’t move now will fall behind the competition.

3. To respond to changing consumer behaviour

The crisis has shown consumers how vulnerable our world is and raised awareness for social and environmental sustainability, even among those that weren’t previously interested in the topic. Alongside this newly rekindled concern, lockdown restrictions have tangibly demonstrated what businesses can do to address climate change – take the reduction in air pollution above large cities, for instance. This makes a return to precrisis consumption behaviours unlikely. First surveys are indicating that consumers are now even more likely to give preference to sustainable products.

4. To perform better during and post-crisis

Results are showing that a focus on sustainability would have helped relative performance during the recent market turbulence. Various analyses have established a link between better sustainability performance and improved share price performance. Companies that take their responsibilities towards stakeholders – customers, employees, suppliers, regulators, shareholders, and the environment – seriously during the crisis are outperforming those that do not in terms of share price and trust. These socially responsible companies may also find themselves better placed for the post-crisis future. Sustainable investing is bound to gain even more momentum as it becomes apparent that it isn’t a mere luxury but a way to generate above-market returns in difficult times.

5. Because we simply can’t afford to do otherwise.

Climate action remains critical over the next decade and our planet cannot forgive being put off, even if the current pandemic seems like a good excuse. According to McKinsey, there is no better time than the present to invest in climate-resilient infrastructure. Investing in sustainability now will not impede pandemic recovery plans but may, in fact, accelerate them by creating jobs, driving capital formation and increasing economic resilience. We shouldn’t make this a question of either/or, but use this time of general rethinking to work on solutions that provide both environmental and economic sustainability.

 

Just because we currently don’t hear the word sustainability as much as we did a few months ago, that doesn’t mean it’s off the agenda. If we fail to use this opportunity for change, we are going to see a crisis much bigger than coronavirus.


Nick Heine is cofounder and head of sustainability and compliance at IntegrityNext.

Procurement Leaders is proud to have IntegrityNext as research partners for the Sustainability stream. Access more insights and resources from IntegrityNext here.

 

Nick Heine
Posted by Nick Heine

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