Oliver Wyman’s Three Steps to Sustainable Procurement

More companies are weaving sustainability goals into procurement, with four in five now translating ambitions into tangible objectives, according to Oliver Wyman’s Sustainable Procurement Survey. 

While progress is evident, gaps remain as the survey found more than half of companies have yet to define broad environmental targets beyond carbon emissions for their procurement teams.

CPOs, who oversee sourcing and supplier relationships, hold the power to steer supply chains towards sustainability. 

A business’s ESG impact isn’t just about its own practices; it depends on its suppliers.

 A consumer goods company’s footprint is shaped by packaging manufacturers, a food brand by agricultural practices, and a railway operator by train manufacturers. Each link in the chain matters, making supplier engagement a critical piece of the sustainability puzzle. 

To embed sustainability in procurement, Oliver Wyman suggests CPOs should focus on three key steps: assessing suppliers, engaging with them and providing the tools to enable change.

Assess: Setting the baseline for sustainable partnerships

Large companies often work with thousands of suppliers, making individual assessments impractical.

Instead, leading organisations take a “mass balance” approach - prioritising key suppliers while evaluating the broader network through standardised methods. This ensures suppliers meet baseline ESG criteria without overwhelming procurement teams.

A responsible sourcing policy, signed by all suppliers, is a common starting point. Many companies supplement this with questionnaires or automated checks using external databases, such as CDP’s carbon, water and forestry ratings or EcoVadis’ supply chain assessments.

Suppliers failing to meet minimum benchmarks, such as Science Based Targets initiative goals or renewable energy usage thresholds, risk exclusion from supply chains.

Engage: Balancing pressure and incentives

Once key suppliers are identified, companies must strike a balance between demanding action and offering incentives. Leading businesses go beyond compliance, creating systems that reward sustainability progress.

One sportswear brand, for example, ranks suppliers using a bronze, silver and gold system. While the first two levels ensure compliance, gold status brings added business opportunities and visibility. Suppliers reaching this tier demonstrate commitment in areas like employee benefits and responsible resource use.

This engagement model requires more effort than broad assessments, focusing on a smaller group of 50 to a few hundred suppliers. The aim is to build long-term partnerships where suppliers see tangible benefits from investing in sustainability.

Enable: Providing support for long-term change

Beyond monitoring and incentives, some companies take an active role in helping suppliers make sustainability improvements. Financial support, knowledge-sharing and coalition-building play a role in accelerating change.

Access to financing: Some businesses, particularly in retail and beverages, are working with banks to offer supply chain finance programmes linked to sustainability criteria. Suppliers meeting ESG goals benefit from improved cash flow, loans or early payments.

External funding support: Companies can also help suppliers tap into public funds and pooled financial resources. Germany’s €4bn (US$4.3bn) subsidy programme, which supports energy-intensive industries moving towards greener production, is an example of how external funding can aid sustainability efforts.

Industry coalitions: Collaboration can be a powerful tool. By joining sustainability-focused groups, suppliers gain access to shared expertise from businesses, NGOs and government bodies, making ESG improvements more achievable.

Knowledge-sharing initiatives: Many businesses now offer training and workshops to help suppliers implement ESG principles. Supplier development units go beyond offering resources, providing guidance that empowers suppliers to take meaningful action.

Sustainable procurement isn’t just about compliance; it’s about embedding sustainability into the supply chain. As companies push their suppliers to step up, the most effective strategies combine clear expectations, incentives and support.

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