Environmental, social and governance (ESG) initiatives are important strategy drivers for an increasing number of organisations worldwide. This is no longer only about responsibility to the environment and community we operate in (though that is motivation enough); these initiatives are now considered key drivers in the effort to gain greater market share and competitive advantages.
But all efforts in this area amount to nothing if they can’t be measured and reported on.
Why is ESG important?
Diversify and strengthen the supply chain.
Many ESG initiatives involve diversifying the supplier base to include minority-owned vendors or vendors that are kinder to the environment. These suppliers come with their own goals, whether it be employing disadvantaged people from the community or reducing their carbon footprint.
Typically smaller, these suppliers compete hard for contracts and focus more on innovation than larger, less agile companies. Not only do they promote competition within your supply chain, they also provide resilience and flexibility.
Promote culture, attract the best.
By pursuing ESG initiatives, you align your values with those held by an increasing number of individuals and organisations. When you make it publicly known that you care enough about the world to do something about it, like-minded groups will seek to engage with you on a number of strategic initiatives.
This aspect of your business will also be attractive to prospective employees who hold the same values, and retain those already on staff.
Grow your customer base.
The modern buyer is a discerning customer. What they look for in a product goes beyond the product itself; they want to know that the manufacturer holds the same values they do. They want to know that the product or service has been made or provided in a responsible manner.
This customer is willing to pay more for the good or service if it algins with their values. Their loyalty is hard-won, but worth it.
Improve compliance and financial performance.
Tracking and reducing key metrics such as energy consumption and waste treatment leads to smaller energy bills and other cost reductions. On top of this, though, is the fact that those companies who pursue ESG initiatives also reduce compliance costs in the manner of fines and penalties.
And the companies that are already acting accordingly will be better placed to face evolving restrictions which are generally growing tighter.
Don’t promise what you can’t give
The benefits of ESG initiatives have been well explored and established. However, the last thing any organisation wants to do is make it known that they are pursuing such initiatives without having the ability to demonstrate tangible success.
Those who pay only lip service in this area are likely to suffer reputational damage worse even than the companies who do nothing at all. Lenders, investors and customers have long memories. If a company appears to be promoting itself based on environmental and social concerns but fails to show that these concerns have influence in strategic decision-making, that company will
So, how does an organisation track and measure their ESG initiatives?
Track and report on ESG initiatives with Spend Analytics
The business world has many mantras, one of which is: if it can’t be reported, it never happened.
Many organisations worldwide are philosophically aligned with ESG initiatives. Aligning their business strategy, though, is often a step too far. Again, this is about visibility. You need to be able to track certain metrics and report on your success.
Cutting-edge spend analytics software like ProcureTRAK grants this ability.
Here’s a for instance.
Spending more with local suppliers is a common ESG initiative. With ProcureTRAK’s dashboards, an organisation can track a number of useful local supplier metrics, such as:
- Overall spend, quarter by quarter
- Spend for the current FY against target spend
- Previous FY spends
- The top categories for local supplier spend
- The top categories’ performance compared to previous FYs
- New local suppliers
- Local suppliers with declining spend
- Categories with declining spend
With this level of detail, an organisation gets the whole story. If local supplier spend is falling below target, they can hone in on the ‘why’. Which categories are underperforming? Have they lost certain suppliers? Was the category manager unaware of the local supplier spend targets? Is that category not appropriate for this particular ESG initiative?
It’s only with this level of detail that an organisation can report on its efforts to meet specific ESG targets – to management, stakeholders, shareholders and customers.
Demonstrate your ESG commitment with Spend Analysis
ESG is playing a larger role every year within organisations around the globe. While our ambitions once extended beyond our abilities, contemporary spend analysis is now making tangible gains in this area possible – and reportable.
Demonstrate and report on your commitment to ESG initiatives with ProcureTRAK’s bespoke suite of dashboards.