Procurement Leaders Face New Risks as ESG Pressures and Global Disruptions Reshape Supply Chains

Procurement Leaders Adjust Strategies Amid ESG Rules and Global Challenges

Procurement is more complex now, with climate change, geopolitical tensions, and new regulations reshaping supply chains. Industry experts recently discussed how companies are weaving environmental, social, and governance (ESG) priorities into procurement to boost resilience and cut risk.

ESG regulatory demands are growing, and companies are turning to ESG data to maintain business continuity, avoid disruptions, and reduce reputational and compliance risks.

The Broadening Risk Landscape

Today's procurement challenges center on three main factors: artificial intelligence (AI), regulation, and tariffs. Over 90% of procurement executives use generative AI weekly, improving data-driven decisions but raising concerns about security and ethics.

Regulations are increasing worldwide, with a 155% rise in ESG policies over the last decade. While some federal governments consider easing rules, states like California and New York enforce stricter standards. This creates tension but compliance remains essential.

Tariffs also disrupt supply chains. Only about half of supply chain leaders rate their master data quality as adequate, limiting visibility into upstream risks and complicating risk management.

Corporate Approaches

Balancing cost control with ESG goals is challenging. For example, Cardinal Health is adopting hybrid and electric vehicles but struggles with full value chain visibility, which creates risk around accuracy of their data.

At Estée Lauder Companies, a risk-based approach guides responsible sourcing. The company verifies supplier compliance using audits and third-party assessments, constantly monitoring data for trends. Their global sourcing footprint demands attention to geopolitical events, weather, and conflicts that might affect human rights and environmental conditions.

Data, Collaboration, and Supplier Engagement

Companies are investing in tools to map ESG risks and engage suppliers more effectively. There’s a strong demand for validated, actionable data to support decisions.

Supplier maturity in climate preparedness is now a key consideration. Procurement teams prioritize partnerships with suppliers who demonstrate resilience and ESG progress. Estée Lauder helps its suppliers calculate carbon footprints, set science-based targets, and pursue emissions reduction projects. Sustainability is seen as a team effort focused on building long-term, mutually beneficial relationships.

From Greenwashing to Greenhushing

One emerging issue is how companies communicate their sustainability efforts. There's a shift from greenwashing—overstating sustainability—to greenhushing, where companies downplay their efforts due to political sensitivity. While this reduces misleading claims, it risks hiding genuine progress.

Looking Ahead

ESG integration must be a core part of procurement strategy. Estée Lauder aligns sustainability goals alongside traditional metrics like cost and quality. Measurement is crucial; focusing spend on preferred vendors helps optimize ESG outcomes and other priorities.

Collaboration remains vital. Progress depends on cooperation across buyers, suppliers, and peers to create shared value and advance sustainability in procurement.