CPOs lean on supplier relationships as they pursue cost, ESG goals: report

CPOs lean on supplier relationships as they pursue cost ESG.jpg

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Dive Brief:

  • Chief procurement officers are enjoying an expanded suite of priorities and responsibilities, though they are struggling to meet their cost plans in an era of persistent inflation, according to a recent survey from Deloitte.
  • Top priorities for businesses include operational efficiency, ESG and corporate responsibility, digital transformation, and cost reductions, with more than 70% of surveyed CPOs citing each of the above.
  • Increasing collaboration with suppliers was the top strategy for delivering value, with 61% of executives listing it, followed by investing in digital transformations (42%) and enhancing demand management capabilities (37%). Another 36% said they were negotiating with existing suppliers to drive value.

Dive Insight:

Cost reduction has decreased slightly as a priority among organizations, but remains among the top goals for procurement. It’s also a hard one to achieve in the current environment.  

Only 30% of procurement executives had met their cost savings targets, compared to about 50% from Deloitte’s previous CPO study. 

“Any CPO who thinks cost competitiveness can be parked while they ride the new wave of exciting priorities is in for a shock,” the Deloitte authors said in the report. “We are already seeing CFOs press hard on cost. CFOs have agreed that cost control and reduction remain top priorities in the next 12 months, and procurement leaders must remain laser focused on this oldest of procurement goals.”

Yet other goals have risen in importance. The number of procurement executives ranking ESG efforts as a top priority rose by four percentage points since 2021, pushing it to the second most-cited priority behind operational efficiency. 

ESG is also now among top areas for talent development, ranking second behind strategic sourcing/category management. It’s also potentially deepening relationships between purchasers and their supply base, with 63% of respondents saying they are collaborating with suppliers on ESG initiatives.

As with costs, there’s some evidence that businesses are falling short of their ESG goals for procurement. In a separate study earlier by the consultancy Efficio, just 33% of business leaders said they were “very confident” in their goals of eradicating greenhouse emissions, though were somewhat more optimistic about goals on waste reduction, resource consumption and social impact. 

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