Analyst Insight: Procurement’s role within the organization has continued to increase in importance. In recent years, most companies have faced waves of supply chain challenges, and are actively engaged in reaching a mature level of digital transformation. 

According to a report by Accenture, structure, technology, and strategy are the three most significant barriers to building a more mature procurement operation. Chief procurement officers (CPOs) are in the best position to move companies forward on all three fronts, and serve as the driving force of efforts to overcome these barriers and establish a more agile procurement process.

A recent research report from third-party research partner WBR Insights, surveying procurement, supply chain and risk management leaders from across the U.S. and Canada, dug into the CPO’s role in shepherding changes within the procurement function and the rest of the organization. Following are some highlights of the report, including progress on ESG reporting and monitoring throughout supply chains.

Previously, the CPO’s primary role was simply to acquire goods and services while saving the company on costs. While this is definitely still part of the job description, many CPOs have stepped into an expanded role of making decisions revolving around finance, sustainability, technology and risk management. Four out of 10 respondents to the survey said their CPO has played a larger role in high-level decision-making over the past two years.

Additionally, respondents highlighted the importance of so-called “soft skills,” such as communication and interpersonal abilities, as necessary for CPOs to be successful in 2023. Half of survey takers agreed that those skills were necessary, the most of any of the given options, followed by regulation and compliance knowledge (47%) and flexibility or adaptability (42%). This underscores the new role in which CPOs have found themselves. Flexibility and knowledge of broad compliance areas are becoming crucial for decision-making and liaising with other departments.

Since developing strategies for implementing process improvements is a key aspect of the CPO’s role, the researchers dove into the top strategic areas that those in the position would be focusing on in the following 12 months. Unsurprisingly, given the economic climate, mitigating the effects of inflation was most commonly cited as one of the top areas of focus — 41% of respondents put it in their top three — followed by technology implementation or transformation (39%) and delivering bottom-line savings (36%).

All three of these focus areas suggest today's procurement leaders are highly cost-conscious. Even the emphasis on technology is likely driven by increased costs, the report says. While bringing new technologies to a workplace has been a constant focus for many years, those technologies can be used to improve efficiency and more easily identify savings opportunities.

Another top-line focus for many corporations is ESG initiatives and how they’re being implemented. Procurement departments have long had a hand in launching and supporting ESG programs, and that trend is continuing strong: Two-thirds (66%) of the professionals taking the survey said that their procurement leadership takes a moderate role in ESG decision-making, with an additional 16% describing procurement’s role in those decisions as “large.” Together, that’s 82% of respondents who say their procurement teams have a significant hand in ESG initiatives.

While most companies (59%) have a good view of supplier ESG metrics, at parity with their competitors, a large portion (33%) either said that their visibility into those numbers was in need of improvement or practically nonexistent — four times more than those who feel that their visibility is excellent (8%). There’s still more room for improvement, though the authors of the study point out that this is “noteworthy progress” in ESG policy enforcement. The researchers cite new developments in ESG monitoring tools that have made it easier to monitor how suppliers’ activities affect their overall carbon footprint and report on these ESG metrics.

Encouragingly, the percentage of respondents who said their procurement key performance indicators were linked to larger corporate goals has increased from the previous year’s research. The prior year, that number was 55%. The results this year suggest that companies have made progress in linking KPIs with ESG goals, with 79% of respondents saying they are somewhat closely linked, and an additional 7% reporting that they were very closely linked. 

The study concluded that while CPOs still have a large focus on goals such as cost reduction and process efficiency, they’ve begun to have a hand in digital transformation and the implementation of new technologies, as well as a larger role in the very critical negotiation steps with suppliers.

This year will see CPOs continuing to take on leadership roles in ESG, though less focused on the setting of ESG strategy than leading those initiatives within the procurement function. That’s not to say that there isn’t a great deal that procurement leaders can add to ESG programs, the authors point out — CPOs’ involvement with technology adoption, automation, supplier negotiations and data governance are all central to an ESG strategy.