How committed is construction to sustainable procurement?
We’re here to understand whether businesses are truly committed to the targets they have set for themselves. Accountability is a critical part of sustainable business, but the real progress comes from undying commitment to the cause.
Previously, businesses would have made their commitments based on subjective assessments, but with investors hot on their tails to achieve their sustainability targets in order to be considered for backing, the onus is on businesses to really ensure they do what they say they will.
McKinsey & Company is keen to share intelligence that holds companies accountable for their actions to limit climate change to 1.5 degrees as per the Paris climate agreement. While words can be powerful, the real source of insight is data, and McKinsey’s latest report shares some key insight into responsible procurement among businesses.
The report looks into the construction industry specifically, which impacts around 40% of GHGs directly, and 25% of global carbon emissions indirectly. The report uncovers that firms are aligning up to 70% of their spend to sustainable goals.
“The role of the CPO in construction companies is at an inflection point. Those who act now, will position themselves as attractive partners to leading developers in the future in making cost and sustainability trade-offs, identifying the most sustainable suppliers and securing access to many sustainable materials and technologies that will be in short supply,” says Erik Sjödin, Partner at McKinsey.
According to the study, construction scores low in procurement leadership in comparison to other industries, such as telecommunications, global energy and materials, and transport and logistics. While some construction companies have been able to overcome sourcing barriers, the majority are still unable to fulfil demands for sustainably sourced materials.
The industry is one of the many commercial sectors that is seeing extended disruption from supply chain delays, which Alasdair Reisner, Chief Executive of the Civil Engineering Contractors Association (CECA) says is impacting procurement management.
"There are many drivers and costs to procurement but when we speak to our members we wouldn't see sustainability as the overwhelming driver of cost. Typically the overwhelming driver of cost is delay. Say a project is supposed to be built over a period of 'X' but things get eaked out, teams aren't as efficient as they could be,” says Reisner.
"Sustainability is a substantive part of whether you are successful in winning a tender but it hasn't come across as the number one cause of the cost of procurement at all. If you are spending 40% to 70% of your spend with suppliers, you will use procurement to ensure that you are buying sustainable solutions."
Discussing the importance of the McKinsey report, Andrew McGregor, Sustainable Procurement Lead at Turner & Townsend—a global professional services organisation, says:
“This report sheds a welcome light on the often overlooked but critical role procurement plays in delivering better outcomes.”
"Procurement is really the thread that brings together the whole supply chain to work towards the same goals. This is critical to help drive decarbonisation and net zero targets where Scope 3 emissions have long been seen as too difficult to tackle.”
