Purchasing and ESG (Environmental, Social and Governance) are increasingly intertwined in the modern business landscape. ESG refers to a business approach that considers environmental, social and corporate governance impacts in decision-making. When it comes to procurement, organizations are incorporating ESG principles into their strategies to ensure sustainable and ethical practices throughout the supply chain.
But to begin with, what is ESG?
ESG refers to three main criteria that are used to evaluate the environmental, social and corporate governance performance of a company or organization. Here is a detailed explanation of each ESG component:
Environmental (E – Environmental): This criterion assesses the company's impact on the environment. Elements considered include sustainability practices, waste management, greenhouse gas emissions, use of natural resources, energy efficiency, among others. Companies with a strong environmental score often adopt practices that minimize their impact on the ecosystem.
Social (S – Social): This criterion focuses on social practices and the company's relationships with its stakeholders. Elements considered include employee relations management, diversity and inclusion, working conditions, human rights, product safety, occupational health and safety, as well as social impacts on the communities in which the company operates.
Governance (G – Governance): The governance criterion evaluates a company's leadership and control structure. Elements considered include board independence, transparency in accounting and financial practices, business ethics, risk management, executive compensation, and compliance with laws and regulations. Companies with strong governance are generally considered more stable and ethical.
The successful integration of ESG criteria into business practices aims to create long-term value for the company, its shareholders and society at large. Investors, consumers and other stakeholders are increasingly recognizing the importance of these criteria as key indicators of an organization's sustainable and responsible performance. Companies that effectively adopt and communicate their ESG practices are often seen as more attractive to ethical and conscientious investors, as well as being better positioned to face future challenges related to sustainability and corporate responsibility.
Discover now in these 6 steps the importance of the relationship between purchasing and ESG:
Selection of sustainable suppliers:
Companies are giving preference to suppliers that adopt environmentally friendly, socially responsible and good governance practices. Supply chain assessment becomes crucial to ensure business partners share ESG values.
Transparency in the supply chain:
Transparency is fundamental to ESG practices in procurement. Companies are seeking greater visibility into their supply chains to ensure products are produced ethically, with low environmental impact and in compliance with social standards.
Innovation and energy efficiency:
Purchasing can play a significant role in promoting innovation and energy efficiency. Choosing products and services that contribute to reducing the consumption of natural resources and energy is a practice aligned with ESG principles.
Sustainable performance assessment:
Organizations are developing metrics and indicators to assess the sustainable performance of their suppliers. This not only helps monitor compliance with ESG standards, but also encourages continuous improvement over time.
Engagement with stakeholders:
Companies are recognizing the importance of actively engaging their stakeholders, including suppliers, customers and local communities, to ensure ESG practices are aligned with the expectations and needs of all stakeholders.
By incorporating ESG principles into purchasing decisions, organizations can contribute to a more sustainable, ethical and socially responsible business model, while mitigating risks and strengthening their reputation in the market.
To implement a purchasing system in an efficient and agile manner, it is crucial to have specific purchasing management systems, such as GOEVO SCM, which plays a fundamental role in automating and optimizing several stages of the process, from request to payment. This results in more precise control over acquisitions, saving time and minimizing errors. Incorporating GOEVO SCM into your company's purchasing cycle provides greater transparency, speed and effectiveness, essential elements for the success and financial stability of any company.
