Sustainability has shaped supply chain priorities for decades. However, a persistent myth suggests responsible procurement began with the introduction of net-zero targets, Scope 3 emissions and environment, social and governance (ESG) reporting. In reality, conglomerates and small businesses alike began embedding sustainability into operations more than 50 years ago.
While sometimes used interchangeably, it’s important to differentiate sustainability and ESG. Sustainability is how procurement creates long-term value through everyday decisions like reducing waste, managing risk, improving cost and ensuring supply continuity. ESG is how sustainability outcomes are measured, governed and reported.
Long before ESG became formalized, procurement teams pursued lean principles. These efforts naturally reduced emissions, minimized resource use, strengthened labor practices and diversified development. Sustainability was not a separate initiative; it was embedded within operational excellence.
Procurement has not changed what it does. The evolution is how it is measured and reported.
There’s no such thing as sustainable procurement versus traditional procurement; it’s just procurement. The list of core procurement functions — including supplier selection, contracting, risk management and performance measurement — is incomplete without evaluating suppliers’ sustainability practices and the formalization of quantifying and communicating sustainability impact.
This is where ESG enters the conversation. ESG frameworks — combined with long-standing operational levers such as waste, water and energy (WWE) — provide a common language for measuring outcomes. The objective is not tied to the politics of sustainability. Rather, it is to demonstrate business value. Successful procurement programs reduce risk, strengthen resilience, and create shared value for stakeholders.
Despite headlines suggesting a retreat, companies continue to set sustainability targets and report ESG performance. For globally operating firms, this is not just unavoidable, but an opportunity to outperform competitors. Organizations with embedded sustainability have expanded margins, improved products and access to new markets. True progress focuses on measurable business outcomes.
Procurement: Sustainability’s Center of Gravity
Procurement is uniquely positioned to lead this journey. The typical organization spends over 60% of its total spend on third party goods and services. As a result, supply chains account for most of the business’ sustainability impact. Approximately 75% of emissions occur in the supply base, according to MIT’s State of Supply Chain Sustainability 2025 report.
The result: ESG progress is inseparable from how procurement selects, contracts with and manages suppliers. It also requires collaboration across all teams and stakeholders, from product design to finance to customers. Procurement must break down silos and become a central orchestrator of enterprise-wide sustainability.
Regulation is accelerating this shift. The EU’s Corporate Sustainability Due Diligence Directive, Germany’s Supply Chain Act, and California’s ESG disclosure requirements 253 and 261 are raising expectations for supplier-level transparency and traceability. Even companies without direct regulatory exposure are preparing to comply, as today’s supply chains rarely align with national borders.
As a result, supplier onboarding now requires verifiable proof of labor practices, environmental permits and safe working conditions. Performance reviews emphasize mandatory reporting over voluntary participation. Risk assessments scrutinize whether ESG claims align with operational reality.
A more practical form of ESG is emerging, grounded in transparency and accountability rather than aspiration. By 2026, ESG credibility will hinge on the completeness, reliability, and auditability of supplier data rather than messaging.
Enforcing ESG with Contracts and Collaboration
Contracting is one of the most valuable tools to meet this goal. ESG clauses now set performance baselines, and require demonstrable improvement for criteria such as emissions reporting, labor standards and waste reduction. However, contractual mandates alone are insufficient. Accountability without collaboration fails.
Many sustainability challenges are technical, capital-intensive, or not yet fully solvable. In advanced manufacturing, for example, hydrogen or electric furnaces cannot meet the melting-point requirements of certain superalloys. Compliance, in these cases, depends on collaboration with both upstream and downstream suppliers, and rethinking design, materials or processes, rather than imposing unrealistic requirements.
When collaboration works, the results can be transformational. One industrial manufacturer replaced lubricated bearings with magnetic bearings, eliminating environmentally harmful lubricants, reducing components, lowering total cost of ownership and improving performance across WWE metrics.
Information is Power
The largest barrier is lack of data. The top sustainability and procurement challenge is tracking Scope 3 specifically, according to MIT and California Management Review. And the issue is not just collection, but also usability.
To bridge this gap, procurement must address three challenges: awareness, access and analytics.
First, education is essential. Many suppliers and internal teams do not fully understand Scope 1, 2 and 3 definitions or reporting expectations. Second, access to consistent methodologies, formulas and data sources must be established. Procurement is often best positioned to drive this, through supplier engagement and enabling technology.
Finally, data collected solely for compliance delivers limited value. Real power lies in analyzing that information to reduce risk, inform strategy and improve supplier performance. This is where the true business case for sustainability emerges.
Increasingly, procurement teams are linking incentives to ESG performance: preferred supplier status, contract extensions, payment terms and access to innovation partnerships. Similarly, penalties for non-compliance, up to and including disqualification, are becoming standard. When suppliers are critical, robust supplier development programs often convert compliance gaps into operational improvements, cost savings and performance gains.
Vague expectations create risk and squander opportunity. A performance-based supplier ecosystem depends on clear contract terms and measurable requirements.
Historically, sustainability efforts stalled beyond tier-one suppliers, relying on self-reported data that was difficult to verify. Today, analytics, digital twins, supplier collaboration platforms and AI-driven risk tools are changing that equation.
These tools enable deeper supply chain mapping, earlier risk detection and better validation of supplier claims. Procurement teams have unprecedented visibility, enabling them to shift from indirect influence to direct accountability by applying consistent standards across all tiers of the supply base.
The link between procurement and sustainability is reshaping how companies create value. The path forward is embedding sustainability goals into core strategies. Organizations that invest in data, contracts, collaboration and supplier development will ultimately be those best positioned to meet regulatory demands, reduce disruption, and build resilient supply chains.
Katie Martin is director, sustainability and innovation at Avetta & Caldwell Hart is principal, procurement and supply chain management at Avetta.