DHL: How to Integrate ESG into Procurement Processes

Organisations big and small are grappling with rising expectations from partners, government bodies and consumers relating to supply chain transparency and their alignment with evolving sustainability standards. 

Here, Katharina Tomoff, SVP for Global ESG at DHL Supply Chain, discusses the value of sustainability and why businesses must prioritise investments in their ESG strategies today. 

Why is it more important than ever for businesses to invest in ESG strategies, particularly within the supply chain space?

One of the key reasons for me is resilience. 

First, climate change is having undeniable negative effects. These often devastating impacts are also affecting businesses worldwide, from operational disruptions due to adverse weather events to shortages of essential raw materials. The more and quicker we decarbonise, the more we will mitigate these negative effects on businesses, people and planet.

Second, we see that our sustainable solutions are more resilient e.g. if we look at solar powered warehouses with electric vehicles: they operate independent of grid shortage or power outages.

Fortunately, many of our customers see it the same way: Even with economic pressures, both B2C and B2B customers are choosing brands that prioritise ESG goals and are sincere and transparent about their efforts.

As DHL Supply Chain, we can be the connector between our customers, infrastructure providers, manufacturers and other partners. 

Finally, regulators are catching up to consumer demand. This is an interesting development because regulation tends to lag consumer trends. But now businesses must navigate a growing web of new regulations to ensure they comply with these emerging regulatory changes related to environmental protection, carbon reporting and responsible business practices.

How does DHL Supply Chain help companies improve supply chain transparency?

Visibility is crucial for sustainability and often underestimated as carbon reporting for example comes along less attractive than an electric truck you can see and drive. But, you can't manage what you don't measure. To know where we emit, how much and what’s the potential (at what cost) is key to make the best decarbonisation plan.

That's why we offer transparent, best-in-class, externally audited and certified carbon reports. Our reporting portfolio shows key performance indicators related to carbon hotspots, energy use, sustainable technologies and areas for improvement. This gives actionable insights for our customers' overall strategies.

What common challenges do businesses face when trying to prioritise supply chain sustainability? How can they be overcome?

While most of our customers make sustainability a core part of their strategy, we see the biggest challenge in connecting their sustainability ambition with the procurement process which is usually mainly cost-oriented. And while sustainable solutions pay off over time, they might have an initially higher cost. 

At DHL, we approach environmental sustainability from a burn less, burn clean perspective. Driving optimisation through burn less levers like driver training or route optimisation can drive significant efficiency gains and generate cost savings. Where it can become more investment-heavy is burn clean lever, where we deploy sustainable fuels and technologies in our vehicle fleet. Globally, the costs are declining, but there are still wide differences in terms of availability and cost. Our GoGreen Plus Insetting solution allows customers to claim carbon savings from within the wider DHL Supply Chain road transport operations at a competitive cost, overcoming exactly the beforementioned access barriers. So innovation in the industry is also making sustainability more affordable. 

Finally, to also put on my ESG glasses, it’s important to consider the costs that are avoided by working with responsible partners with the same ESG values. Gaps in the value chain can easily cause disruptions, which can be much higher in cost than the sustainable investment to begin with. So from my view, there are no excuses. 

Can you share examples of ESG investments leading to measurable business value? 

Our new Strategy 2030 - Accelerate Sustainable Growth integrates ESG into DHL Group's strategic framework showcasing it’s an integral part of how we do business, not a side initiative.

We drive investments in all areas of ESG. In the context of environmental sustainability, our Green Transport Policy governs investments into sustainable fuels and technologies in our biggest markets with own fleet. For example, in the UK we’ve replaced on-site diesel fuelling stations with hydrotreated vegetable oils, having deployed 20 million litres in 2024 in UK alone. And we can make bold investments, because we look at the total cost of ownership, not just the upfront investment. Yes, an electric truck is usually 1.5-3x more expensive than a traditional diesel truck from what we observe, but can break even after 3-6 years depending on the use case and electricity prices, according to NACFE. 

Internally, we’ve defined a cost threshold to abate one tonne of CO2e, anything that is below that threshold will be an investment mandate, given that the technology and infrastructure is available in the respective market. Only when sustainable investments and decisions are standardised can you can move from pilots to deployment at scale.

Amid increasing pressure, how can companies ensure ESG commitments are not just a box-ticking exercise?

The key for companies is to look at sustainability beyond the lens of compliance and as the crucial catalyst for long-term value creation. Therefore, you need to move it from being a side programme you do after profit to it becoming a part of your core product.

Green is the new yellow for DHL. Seriously, we will keep our brand colour, but what I’m trying to say is, we need to: make it a part of the business; account for it like we do for money; use it in our procurement process as a criteria; and have it part of our incentives, strategies, operational standard procedures and, most importantly, our products and services.