ESG – three little letters that are assuming priority in public procurement – and for a good reason. As the pressure mounts for all organizations to move the needle on climate change, human rights, and equity and diversity, public sector procurement teams are more compelled than ever to make an impact within their roles.
“Over the last 20 years, we’ve seen a shift in the public sector procurement landscape from a traditional, transaction-based approach to something far more strategic in terms of offering value to an organization and its communities, and I think the growing focus on ESG is simply a reflection of that evolution,” says Jim Hadjiyianni, Director of Business Development with OECM.
Indeed, the desire to create sustainable supply chains and affect positive social change through the procurement process has public sector buyers thinking more about where, how, and even when they acquire goods and services. Finding the best price is still a factor, but so too is making purchase decisions that positively impact individuals, communities, and the planet.
Beyond the buzzword
At first glance, ESG may appear to be a more buzzworthy term for corporate social responsibility (CSR). And while these priorities share similar DNA, subtle distinctions set them apart.
“Corporate social responsibility is much more internally-focused in that it’s about how companies decide to be involved in their communities, and how their internal values and policies drive that,” explains Hadjiyianni. “ESG, however, is more externally-focused. It looks at external assessments of how your organization impacts society, and asks questions like, how do our customers see us? Are we good corporate citizens? What are we doing about key environmental and social issues?”
“And that’s where it ties back to public procurement,” he continues. “ESG is about applying that broader lens in how your company makes an impact on these important issues through procurement. It’s not a box you check off; it’s a consideration that has to be thoughtfully integrated into the overall procurement strategy and through the supply chain.”
Of course, different groups drive different priorities across the public sector. Therefore, it’s natural that their approach to embedded ESG will differ. There are also numerous societal issues wrestling for priority, be it environmental sustainability, social equity, ethical consumption, or Indigenous engagement, to name just a few. As such, what an organization prioritizes regarding ESG will naturally come down to who your customers are, what communities you’re working in, and what you have the power to change.
Bringing ESG to public procurement
Embedding ESG into public procurement is not something that happens overnight. The first move, says Hadjiyianni, is taking a step back to identify the ESG priorities that fit with your organization and the policies and levers that can be built into your procurement practices that promote those values throughout your supply chain.
More important still, says Hadjiyianni, embedding ESG into procurement is about pursuing your selected ESG goals meaningfully and not simply as a check-the-box exercise: “As an organization, you can’t just pay lip service to ESG across 20 different areas. That won’t result in any meaningful change, and your customers and partners will see through it. You really need to drill down and make meaningful impacts.”
It also pays to start incrementally. Rather than try to do too much at all once, focus on one or two ESG priorities in the first year to gain a stronger understanding of what it is you are trying to accomplish, hone your strategy, and measure the results before moving on to the next.
“Doing one [ESG initiative] really well goes a long way as opposed to doing five things halfway,” Hadjiyianni adds.
Putting words into action
OECM has been on its own journey to understand what ESG means for procurement. Recently, it completed a materiality assessment to explore the environmental, social, and governance issues it should be focusing on in its role as a collaborative sourcing partner for Ontario’s education sector, broader public sector, and other not-for-profit organizations.
“The emerging factors we identified are consistent with what we’re hearing our customers ask for and what we’re seeing across the public sector procurement landscape,” Hadjiyianni reports, explaining, “Specifically, we found there’s a focus on social responsibility, climate change, and human capital management in terms of promoting diversity, equity, and inclusion.”
Next, OECM plans to take the intelligence from their customer base and supplier community and take incremental steps to build it into the organization’s priorities.
“We’re not trying to boil the ocean,” Hadjiyianni insists. “To do this right and be a source of reliable guidance for our customers, we need to start small and scale reasonably to ensure we get this right.”
“We’re super excited about this journey because it’s something we can build into the DNA of this organization and, in turn, share with our partners,” he concludes.
This article was published in the April 2023 issue of the Ontario Public Buyers Association (OPBA) Caveat Emptor E-News.