Smashing budgets and ESG goals with Spend Management Technology

ByChris Holmes, Vice-President of Spend Management at Advanced

UK businesses are facing increasingly challenging trading conditions as the cost of doing business continues to rocket skywards. Added to that, recent political uncertainty and ever-shorter change cycles now require increased agility in managing suppliers and contracts to ensure the supply base is set at the right cost. 

Against this backdrop, Environmental, Social and Governance (ESG) concerns may seem like a luxury. However, since 5th April this year, over 1,300 of the largest UK companies have been mandatorily required to disclose climate-related financial information. Even those as yet unbound by this legislation are being encouraged to set climate targets, for themselves, their contracts and relationships. The UK has a net zero target to decarbonise all sectors of the domestic economy by 2050, so it is only a matter of time before all businesses and non-profits will be included.

Far from being the final straw for organisations under pressure, adopting ESG principles into daily business practice is a sure-fire strategy to improve efficiency and maximize profit.At their heart, ESG initiatives drive more effective and efficient use of resources. Implementing environmentally friendly, ethical and socially acceptable changes can, and does, make sound business sense, helping to reduce spend and waste to increase overall return on investment (ROI) and profitability.

Supplier and Contract Management functions include activities that are deeply entrenched in strategy, regulations and standards that are intended to protect all parties while encouraging best practice. Strong collaboration with suppliers is key in measuring and tracing ESG impact, with an organisations’ supplier footprint being a huge opportunity for influencing change. The inclusion of ESG metrics alongside financial reporting raises the bar on transparency and traceability in the supply chain, helping businesses better manage their ESG risks and meet increasing customer demand for more sustainable products and services.

Traceability is increasingly important for consumers. They care about the environmental, ethical and social impact of the goods and services they purchase and as people begin to tighten their belts in anticipation of an economic recession, there is no indication that this will change. If they are buying less, and care about ESG, then it makes sense that they will focus spend on items that make them feel better about their purchase. 

Documenting and reporting on ESG metrics matters to investors too. Some funds are only available now to organisations that can demonstrate this. Up and down the supply chain, businesses are seeking to trade with others with more ethical, green and socially responsible values and practices. Within ESG metrics, Scope 1 carbon emissions include direct emissions from a company’s owned or controlled sources, including buildings and vehicles. Scope 2 refers to indirect emissions from purchased energy, such as greenhouse gases (GHG) generated by an electricity supplier. Crucially, Scope 3 covers all indirect emissions within the supply chain, and these are further categorised as Upstream (from suppliers) and Downstream (with customers). Hence, everyone is affected by everyone else in the chain. Strong collaboration with suppliers is therefore key to driving business value and achieving ESG goals.

Some of the simplest environmentally friendly strategies such as reducing paper use and printing volumes have a clear correlation with cost. You buy less paper, print fewer copies, and have less waste to dispose of. Others are a little more complex to measure, such as migrating data systems from on-premise servers to the Cloud, where emissions fall under Scope 3. Overarching principles such as reduce, reuse, and recycle can be applied at all levels of business activities, so that ESG principles are naturally integrated into all decision-making and practice.

Powerful digital solutions can drive business efficiencies in supplier management and contract control, seamlessly enables organisations in all industries and sectors to work in collaboration with their suppliers towards ESG goals, reducing spend and environmental impact, while increasing ROI. These can include smarter stock control management in manufacturing using practices such as Just In Time ordering, and First In, First Out, which can be arduously time-consuming when done manually, and are transformed into seamless activities using a digital solution. By automating workflows, from the HR department to the sales team, less time is wasted on tactical processes and more time can be devoted to strategic goals and value creation.

One additional benefit to giving ESG a higher profile within a business is the positive impact it can have on employees. With almost unprecedented numbers of unfilled job vacancies in the UK, employers are having to work hard to attract good talent and keep hold of the people they already have. Everyone wants to feel good about their job. It takes up a large proportion of their waking hours and job satisfaction, with a feeling that they are contributing to something worthwhile really matters. Procurement professionals may understand that ESG equals cost-savings and efficiencies, but having and communicating a commitment to being a more environmentally friendly, ethical and socially aware organisation can position a business as an employer of choice, giving it a welcome competitive boost in these trying times.

Advanced provides world-class spend management technology solutions for business customers through a suite of solutions, including Supplier Management, Contract Management, Data Automation and Marketplace. Advanced Supplier Management is a stand-alone performance, relationship and risk management software enabling teams to make faster, more informed and more strategic decisions. This software helps organisations ensure they are not using suppliers who support modern slavery, that they better understand the carbon footprint of its supply chain, the country of origin of an organization’s materials, the owning bodies of their business partners, assurance that their contractors have the appropriate certifications and are adequately insured, how their suppliers are managing the data and the personal details of their customers and service users.

Advanced Contract Management provides automated, intuitive contract management features that equips organisations with visibility of real time data points enabling better tracking of key milestones, renewals and contract satisfaction surveys.