Digital transformation is key to supporting Procurement’s role in ESG Reporting Compliance
With compliance enforcing many organizations to reevaluate the tools they use to report and analyze their environmental, social, and governance (ESG) impact, the modern enterprise must ensure that its entire organization is supported in this, recognizing procurement’s role as well.
ESG reporting compliance is more than sustainability initiatives but takes a keen interest in the impact an organization has on social and governing issues.
Organizations of all kinds need modern tools to cover compliance and build strategies for the continuous optimization of these factors.
In this blog, we will explore ESG compliance measures and how this will affect procurement and supply chain operations going forward – keep reading to learn more.
What is ESG reporting compliance?
As of 2024, ESG reporting compliance is being enforced. ESG stands for Environmental, Social, and Governance, displaying three key areas an organization’s practices may impact.
In short, investors and governing bodies are taking more interest in the quantitative impact an organization has on these three factors and wish to enforce compliance around how an organization quantifies and reports on these impacts.
While there is some regional variation in ESG frameworks and applications, generally organizations of all sizes, and their various functions, will be affected and need digital tools to cope with reporting.
How will ESG affect procurement?
ESG reporting compliance isn’t just about sustainable practices but also covers governance and social impact – all three areas of focus should be of note to the CPO and their office.
Environmental Responsibility
Scope 3 Emissions from the supply chain make up over 70% of an organization's entire carbon emissions. Procurement has a key role in ESG reporting for an organization and needs to be supported by data tools to meet reporting demands.
Investors will show more and more interest in how an organization’s procurement practices, and their ability to report and optimize them, are sustainable and environmentally friendly.
Social Responsibility
Procurement’s social responsibility can cover quite a few areas, as they interact more with external customers, clients, and suppliers than most other business functions. ESG reporting around social responsibility will ensure supply chain partners and those the organization deals with aren’t affiliated with exploitative labor practices.
Corporate social responsibility remains a high priority for investors and governing bodies, for clear reasons, but this is also true of both employees and customers. 54% of global consumers consider social responsibility when purchasing, and 83% of employees consider leaving if it is not upheld, according to one survey.
Governance Responsibility
ESG reporting compliance ensures that all the decisions made by an organization’s senior hierarchy remain ethical and are in the best interest of the business. For the CPO, this can affect their supplier relations, with tracking and reporting of procurement relationships with suppliers being key.
Organizations at least must ensure the suppliers they work with aren’t involved with fraud, corruption, and other governance issues, ensuring supply chains are free from conflicts of interest.
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How can data tools help?
The key to accurate ESG reporting compliance is data management, if an organization has its procurement data spread across disparate legacy systems the requisite reporting will bring arduous and legally unavoidable manual processes that will eat into valuable time.
Additionally, the nature of quantifying the environmental, social, and governance impact of an organization and its departments will naturally require integrated data. With disparate sources of data compliance will suffer greatly – for example, procurement’s social impact will struggle without the context of HR data.
With ERP you can integrate all your data into the Cloud, this ensures the flow of data is seamless, allowing departments to collaborate to form ESG-related strategies.
Reporting is also greatly enhanced with ERP capabilities, enabling organizations to generate reports automatically and fit the pre-determined ESG frameworks to comply.
How can Unit4’s Source-to-Contract solution support procurement’s role in ESG compliance?
Our Source-to-Contract solution improves data management across the procurement function, and when integrated with a wider ERP system enables next-level collaboration with other key departments like Finance and HR, a vital tool for ESG compliance and reporting.
With the Carbon Accounting module, procurement teams can extend the visibility of carbon emissions by measuring, reporting, and analyzing their Scope 3 Emissions, allowing procurement teams to report succinctly and develop strategies to reduce supply chain carbon emissions.
With Unit4 eRFx, procurement teams can shorten the supplier vetting process greatly with automation, allowing this vetting process to be optimized. But, teams can also analyze historic, current, and prospective supplier relations greatly, ensuring social responsibility is upheld.
Similarly, the Supplier Management module provides deep visibility into your supplier base to safeguard supply chains, boost risk management, and enable compliance, all while removing 65% of the manual workload through automation.
To ensure that your procurement teams can effectively fulfil their role in ESG reporting compliance partner with Unit4’s Source-to-Contract solution to gain these capabilities and more. Read the full capabilities on our product page, hear from our customers, or talk to sales, today!
