Environmental Social Governance (ESG) considerations are on the cusp of becoming fundamentally mainstream aspects to corporate strategies, and as such businesses appear more focused than ever on acting sustainably throughout their business practices. But, the issue of greenwashing—when companies overstate or lie about sustainable practices—is a huge barrier. To address, procurement professionals must play a critical role in verifying ESG claims made throughout the supply chain. In this blog, we cover the latest trends in ESG, greenwashing implications and actionable procurement practices to promote real sustainability.
ESG stands for environmental, social and governance (ESG) criteria which are a set of standards that socially conscious investors use to screen potential investments. Those criteria include everything from climate impact and resource use, to labor practices in the most extreme finalist cases, through corporate governance on down.
Greenwashing — misleading consumers about the benefits of a product or service (most often using superficial or confusing marketing) Over 60% of consumers said they have felt hoodwinked by companies that say they are sustainable without actually providing any proof according to an U.S. Federal Trade Commission (FTC) report in 2023.
Growing Regulatory Oversight.
Global: Government And Regulatory Scrutiny Of Corporate Environmental, Social, Governance Claims Ramps Up Companies will have to disclose comprehensive sustainability information in accordance with the Corporate Sustainability Reporting Directive (CSRD) of the European Union, making it more connected and transparent. Similar pushback is beginning to emerge in the U.S., with hints that they may be followed by new regulations intended to improve ESG disclosure and clamp down on greenwashing.
Supply Chain Visibility necessities:
Consumers value more transparency and expect companies to share information about their supply chains. A recent report by McKinsey revealed that two-thirds of consumers, or 67%, are altering their shopping choices with a goal to diminish environmental degradation while also pushing businesses towards more sustainable sourcing. .
Third-Party Certifications Adopted:
Businesses are looking for ways to establish trust and authentication of their sustainability claims, and increasingly obtain third-party certifications that they can point out on-pack such as Fair Trade or Rainforest Alliance-certified products, not unlike an ISO 14001. They are certifications that confirm to customers and stakeholders an organization is indeed pursuing sustainability in a company way. .
Circular Economy Principles: Integration
Procurement is changing to include circular economy approaches that reduce waste and maximize resource usage. Firms are taking advantage of sustainable sourcing and recycling, upcycling materials to decrease their environmental impacts.
Establish Clear ESG Criteria:
To evaluate suppliers and products, procurement teams must establish ESG criteria that are comprehensive as well. These standards must include environmental, social and governance (ESG) factors to meet with its sustainability requirements.
Conduct Supplier Audits:
Performing regular audits and reassessments of suppliers is one way to validate that they are compliant with ESG standards. This should involve on-site assessments, a review of documentation and verification by third parties for transparency and accountability.
Build a Network of Collaborative RElationships
This forges good relationships with suppliers and means both sides of the procurement process have sustainability-gains in common. Best practices: Working together helps to stimulate the best cost benefit for everyone, and sharing resources can lead to a more sustainable complete solution in your supply chain.
Use Technology for Transparency
Supply chain transparency can be enhanced by deploying technology solutions e. g., blockchain and leveraging advanced analytics functions. Which offer the resources to track materials in real-time, in so that any claims made around sustainability can now be backed with data.
Train and get Buy-in from Inside Stakeholders:
Providers should make this training on the significance of genuine ESG methods in their own business. Procurement teams need to partner with other departments like marketing or finance in order to align and promote a corporate culture of sustainability.
Addressing Data Gaps:
There is a big hurdle to overcome while making the right ESG claims, which is there no proper data that can be trusted? Accordingly, companies need to implement data collection and reporting systems that deliver accurate as well as complete details on their sustainability practices.
Consumer efforts around complex supply chains:
This is further complicated because supply chains are often long and global, making it difficult to trace whether ESG claims are true. Procurement teams must have good communication channels and a strong collaboration framework with their suppliers to improve visibility and accountability.
Fighting Against Resistance to Change
However, internal stakeholders may resist the adoption of sustainable procurement practices. Procurement experts need to be the champions of sustainability and clearly demonstrate its long-term value with key messages around cost savings, brand reputation and risk minimization.
Conclusion
For any business looking to thrive in a conscientious marketplace the move from greenwashing to actual sustainability is essential. It is in this respect the procurement professionals argue that they have a significant part to play in determining how accurate ESG-related claims made by firms are hence their need to set metrics and benchmarks through extensive auditing and building strong mutual relationships with suppliers. Transparency and accountability can help organizations to win back consumer trust, stakeholder confidence as well as contribute effectively towards sustainable approach. We can support you as well in getting to grips with sustainable procurementSave yourself the headache and allow us at Crescendo Worldwide help your business reach its ESG targets efficiently