Since the onset of the global pandemic that introduced supply chain disruptions like never seen before, the Chief Procurement Officer (CPO) has ascended the C-suite ranks to a more dignified status, boasting a more elevated role as ‘trusted strategic advisor’, a coveted title sought out by CPOs (and supply chain officers) for over a decade.
Overseen in some organizations by the CFO, while in other organizations, they work in close proximity to the CFO and other C-suite executives to directly impact key financial and buying decisions, CPO priorities have shifted drastically, according to a recent study by Deloitte.
What’s interesting about this study is that survey findings imply that enterprises are no longer as concerned with the recurring motifs of supplier cost savings and ensuring supply continuity as top priorities as they were before, but instead, are honing in on ways to collaborate with suppliers to enhance ESG and CSR, along with driving operational efficiency and digital transformation initiatives.
“The study showed a slight de-prioritization of enterprise margin improvement via cost reduction as a “top 3” issue compared to the last study (a 7% drop of firms citing) to the number 4 spot in terms of overall prioritization, according to Deloitte analysts.
This is in stark contrast to Deloitte’s traditional survey findings spanning the last 12 years, where supplier cost savings or cost reduction efforts were leading enterprise priorities, while enhancing ESG was ranked 7th on the list in 2021. Correspondingly, the Hackett Group recently performed a similar study where findings were also in favor of ensuring supply continuity and reducing spend as leading priorities for procurement in 2023.
However, Costas Xyloyiannis, a supplier data specialist from Imperial College London and co-founder/CEO of HICX, a supplier experience platform, begs to differ.
“The results give me hope that CPOs are setting up their businesses for success. I’m encouraged to see ESG elevated as a business priority, in combination with supplier collaboration and digital transformation as top strategies. Because raising how we work with suppliers will lay the best possible data behind ESG.”
Despite the responses of various procurement leaders from more than 40 countries, Deloitte analysts still agree that cost is a central component of procurement and that CFOs still view cost control and reduction as top priorities in the next 12 months.
“Any CPO who thinks cost competitiveness can be parked while they ride the new wave of exciting priorities is in for a shock”, according to Deloitte analysts.
This reported paradigm shift in traditional enterprise priorities comes at a time where CFOs are feeling increasing pressure to improve profitability and quality of revenue, according to a Forrester survey commissioned by Model N, which evaluated the state of channel revenue processes in high-tech, semiconductor, and electronic manufacturing industries.
“The complex nature of the global supply chain, coupled with the absence of direct relationships between manufacturers and retailers, makes it crucial for manufacturers to have a clear understanding of their inventory’s location, distribution and end customers”, says Chris Shrope, who heads up semiconductor solutions at Model N.
According to those survey results, 48% of CFO respondents felt that making accurate decisions in real time was very important to the success of their organization’s sales operations and overall profitability, while another 41% of respondents felt that improving the experience of end customers impacted their organization’s profitability. The study also found that most companies are not well equipped with consistent solutions to manage their channel revenue processes to drive profitability and business growth through data accuracy.
“With ESG now a top priority, executive suites need supplier data. Best placed to lead the journey are CPOs, whose functions are responsible for supplier relations”, says Costas Xyloyiannis.
But is clean supplier data really the prevailing drawback to shifting enterprise priorities around ESG?
A recent Wall Street Journal story suggests otherwise.
While stating that 70% of C-suite executives believe that their company’s ESG programs improve their financial performance, WSJ also reported a new trend of CFOs becoming increasingly quiet about their ESG and CSR efforts, perhaps due to pressure from investors who want brands to focus more on financial and operational performance as opposed to social and green issues.
CFOs at U.S. companies mentioned ESG on 93 calls from April 1 to June 5, a 30% decrease from the prior year. Similarly, executives mentioned “environmental, social and governance,” “ESG,” “diversity, equity and inclusion,” “DEI” or “sustainability” on 575 earnings calls from April 1 to June 5, down 31% from the same period last year, according to data WSJ pulled from AlphaSense.
Nonetheless, companies are still publishing annual ESG reports as a means to build better trust, collaboration, and bottom-line results.
That, in addition to new SEC rulings and corporate ESG requirements, suggests that there’s little indication of companies cutting back on ESG despite this new trend of “green-hushing”.
This places the focus back on supplier data.
According to Deloitte, CPOs can use ESG to their advantage by revamping their approaches to engaging and collaborating with suppliers to create a balance between cost, resiliency, ESG, and other factors to improve long-term resilience while uncovering unseen supply continuity risks by mapping out their nth-tier supply chain.
“Armed with reliable supplier data, CPOs can drive value right across the business”, says Costas Xyloyiannis. “Encouragingly, CPOs are noticing this information blockage and that they can ease it. Doing so will demand that they resolve to collaborate with suppliers and transform digitally.”
