A benchmarking poll at the recent CASME Executive Forum revealed some surprising insights into CPO priorities for 2025. Given the ongoing global unrest, volatile economic conditions and overall market uncertainty, cost optimisation continues to be the primary area of focus for 73% of the poll respondents.  ESG considerations trail behind in third place at just 36%. This apparent de-prioritisation of sustainability raises questions about Procurement's role in driving corporate ESG initiatives. Conflicting pressures from the CFO and Finance (typically the function into which Procurement reports) means constant juggling between competing business priorities; such as achieving cost savings, improving working capital projects, ensuring compliance and sustainability projects.

Within ESG priorities, carbon emission reduction (62%) and DEI (15%) top the list in another poll. However, the focus on human rights is notably low, with only 8% of respondents highlighting it as a priority, while attention to the circular economy is non-existent at 0%. 

The key challenges for CPOs in the next 18 months

Source: CASME Benchmarking Poll, October 2024

This apparent distancing from sustainability as a primary objective for CPOs is particularly striking, given the recent surge in ESG-related regulations across Europe and the UK. The EU Corporate Sustainability Due Diligence Directive and the EU Forced Labour Regulation are set to introduce stringent requirements for companies to conduct human rights and environmental due diligence across their supply chains.

These regulations have the power to enforce significant penalties for non-compliance, including potential fines of up to 5% of global turnover and even the possibility of market debarment.

In the UK, the Modern Slavery Act 2015 already requires large companies to report on steps taken to address modern slavery in their supply chains. The Environment Act 2021 further introduces mandatory due diligence requirements related to forest risk commodities.

Given this regulatory landscape, the apparent lack of procurement leadership focus on ESG is concerning. Are other departments within organisations taking on the bulk of sustainability initiatives in the supply chain instead? Or does this reflect a broader challenge in balancing cost pressures with ESG imperatives?

It's crucial to recognise that good ESG practices are not just about compliance – they are good for business. Companies with strong ESG performance tend to see improved operational efficiency, enhanced brand reputation, and better risk management.

Recommendations for focus: 

To help Procurement leaders reconcile cost optimisation with ESG priorities, consider the following actionable suggestions:

1. Implement a Total Cost of Ownership (TCO) approach that factors in long-term sustainability benefits and potential regulatory compliance costs
2. Leverage technology solutions, such as AI-powered analytics, to identify cost-saving opportunities that align with ESG goals
3. Develop strategic supplier partnerships focused on joint innovation in sustainable practices, potentially leading to both cost reductions and improved ESG performance.

By integrating ESG considerations into core procurement strategies, CPOs and procurement leaders can deliver both cost optimisation and sustainability, positioning their organisations for long-term success in an increasingly regulated and environmentally-conscious business landscape.

Procurement must lead the way in corporate sustainability. Embracing this responsibility allows procurement leaders to demonstrate their strategic value and empower their organisations to thrive in an era of relentless global change.

For more ESG insights from CASME’s Global Procurement Community, contact us to request a Global Digest or enquire about our 2025 event programme. Members can access the full archive of insights and benchmarking data by logging into the Resource Centre.