Sustainable Procurement in the Middle East: Sustainability and CSR Perspective

Introduction

This article is the fourth in a series discussing the importance of sustainable procurement for different roles within a company. This series is being developed by the Oscar team in the months leading up to COP28 in the UAE. For more information, please visit Oscarsdg.com.

?Sustainability and CSR (Corporate Social Responsibility) departments have long championed the importance of sustainability across operations, and now, they have a unique opportunity to influence the broader business landscape. In recent years, sustainability and CSR departments in the Middle East have witnessed an increased emphasis on sustainability from governments, investors, and consumers, transforming it into a strategic imperative. These departments have assumed a central role in formulating and implementing sustainable strategies within their organizations. The significance of the supply chain in sustainability cannot be underestimated, as it can account for emissions that are 11.4 times higher than those from operations, as indicated by SBTi. Consequently, many sustainability and CSR departments have enthusiastically embraced sustainability initiatives, often actively involving their suppliers in these efforts. This transformative trend is reshaping the corporate arena, establishing sustainability and CSR departments as the driving force behind sustainability in the region.

Sustainability and CSR Departments Supporting ESG in the Middle East

The Role of Sustainability and CSR Departments in the Middle East’s Sustainability Movement

For years, sustainability and CSR departments in the Middle East have been advocating for change but often encountered resistance. However, the tide is turning, and the rest of the business world is catching up, providing these departments with a unique opportunity to take the lead. These departments, who have persistently championed sustainability, are now poised to drive transformative change within their organizations as the broader business landscape embraces sustainability.

Despite their current limited role, sustainability and CSR departments hold the key to addressing the environmental impact of supply chains. McKinsey's findings reveal that nearly 80% of emissions can be traced back to the supply chain. This eye-opening statistic underscores the pivotal role of sustainability and CSR departments in implementing sustainable practices that extend well beyond internal operations, reaching deep into supplier relationships.

As the Middle East anticipates the outcomes of COP28, sustainability and CSR departments are facing the critical task of ensuring compliance.

As the Middle East anticipates the outcomes of COP28, sustainability and CSR departments are facing the critical task of ensuring compliance. It's essential to recognize that regulations will be shaped by the outcomes of the upcoming COP28 meetings. Failing to comply with these future regulations can result in severe legal repercussions, including penalties and the suspension of licenses. In this evolving legal landscape, sustainability and CSR departments play a vital role in guiding their organizations towards adherence and sustainability excellence.?

Shifting the Sustainability and CSR Departments’ Mindset

Traditionally, sustainability and CSR? departments have focused on corporate social responsibility and philanthropic initiatives. However, they are now undergoing a fundamental shift in mindset. This evolution transcends superficial commitments and signifies a broader recognition that sustainability must be seamlessly integrated into every facet of an organization's operations, culture, and strategy.

One pivotal avenue through which sustainability and CSR departments are embracing this new paradigm is by directing their attention towards the supply chain. The supply chain, accounts for approximately 80% of global greenhouse gas emissions and 90% of overall environmental impact, especially in the consumer sector. This awakening has led sustainability and CSR departments to view sustainable procurement not as an optional endeavor but as an essential strategic imperative.

Strategic sustainable procurement involves establishing proactive partnerships with suppliers who share aligned sustainability objectives. By doing so, organizations extend their sphere of influence well beyond internal operations, aligning with the escalating emphasis on holistic sustainability. This approach serves as a powerful means to significantly reduce emissions and enhance sustainability across the entire value chain.

This transformative shift in mindset underscores the fundamental recognition that sustainability is not an isolated initiative but an intrinsic aspect of every facet of an organization. It shapes competitive advantage, fosters stronger stakeholder relationships, and ensures long-term viability. This paradigm shift is not merely a result of token gestures; it signifies a profound understanding that sustainability must be interwoven into the fabric of an organization. From process innovation to technology adoption, from risk management to cultural shifts, sustainability is evolving into the cornerstone upon which sustainability and CSR departments build their strategies for a more sustainable future.

Difficulties Facing the Sustainability and CSR Departments

Amidst the transformative global context, sustainability and CSR departments in the Middle East find themselves at the nexus of challenges and opportunities, echoing their persistent efforts to champion sustainability over the years. However, the context is shifting rapidly, with sustainability and CSR departments now leading the charge as the rest of the business catches up. Their pivotal role is underscored by the complexities they navigate, having long advocated for sustainable practices.

...further compounded by the multitude of sustainability reporting standards, numbering approximately 600 across global, regional, and local contexts.

One of the primary hurdles these forward-thinking departments have encountered is the integration of sustainability principles into their organizations' operational fabric. This task is exceptionally challenging due to the deeply entrenched traditional processes within many organizations that have resisted change for years.

Incorporating sustainability into these established processes is further compounded by the multitude of sustainability reporting standards, numbering approximately 600 across global, regional, and local contexts. For years, sustainability and CSR departments have championed the need for standardized reporting, but the fusion of these standards into actionable strategies remains formidable. As highlighted by the Wilson Center, this complexity, coupled with technology and cost barriers, has long hindered supply chain transparency efforts. The fact that only 33% of interviewed CEOs tie executive remuneration to sustainability targets indicates a historical gap in commitment that sustainability and CSR departments have been striving to close.

Another significant challenge that these departments have been addressing for years lies in managing multiple stakeholders within the organization. They have emphasized the importance of transparency and visibility required for informed decision-making and risk management; a challenge highlighted by Proxima. The difficulties in navigating these complex stakeholder dynamics have been an ongoing concern for sustainability and CSR departments.

In addition, the swift embrace of Environmental, Social, and Governance (ESG) practices in the Middle East adds another layer of intricacy, as noted by PwC. Sustainability and CSR departments have been at the forefront of advocating for ESG integration, and the accelerated pace of adoption accentuates the necessity for rapid innovation while simultaneously emphasizing the significance of sustaining well-considered sustainable change, a perspective they have long championed.

In essence, the call from sustainability and CSR departments can no longer be overlooked. As we delve deeper into these prevailing dynamics, the implications for sustainability and CSR teams within various sectors become more apparent. It’s undeniable that the pressure is intensifying from various angles: upper management, procurement, suppliers, partners, and even sales. Moreover, indirect stakeholders such as investors and end-users also exert their own degree of pressure. The workload is forecasted to increase significantly, standard departmental workflows may be notably disrupted for an extended period, potentially leading to longer working hours.

Furthermore, there’s a growing trend of regulatory authorities holding companies accountable for non-compliance publicly, which can have an adverse effect on the sustainability and CSR team's morale. Such instances can potentially tarnish confidence within the company, hinder career growth opportunities, and mar reputations within the broader sustainability community. The resistance faced by these departments in the past is gradually giving way to recognition, and the time has come for them to lead the sustainability charge in the evolving landscape.

Getting Ahead of the Upcoming Difficulties

In the midst of the transformative global landscape, sustainability and CSR departments in the Middle East are confronting a series of intricate challenges, most notably in preparation for the forthcoming COP28. As they navigate this complex terrain, one of the primary hurdles they face is the integration of sustainability principles into their operational fabric. This challenge is exacerbated by deeply entrenched traditional processes within many organizations. To proactively address this issue and stay ahead of upcoming difficulties, sustainability and CSR departments are increasingly turning to sustainable procurement as a strategic solution.

Sustainable procurement plays a pivotal role in advancing the sustainability agenda for sustainability and CSR departments in the Middle East. This strategic approach aligns with global trends and offers numerous benefits that contribute significantly to the overall sustainability of organizations in the region. One of the key advantages lies in mitigating environmental and human rights impacts. Europe has been at the forefront of mandatory due diligence laws, such as France's Duty of Care Law, Norway's Transparency Act, Germany's Supply Chain Act, and the EU's CSDDD. The CSDDD, in particular, targets companies with 500+ employees and €150 million+ turnover in Europe to identify, mitigate, and report environmental and human rights impacts. Embracing sustainable procurement helps companies in the Middle East get ahead of such regulations and mitigate potential environmental and human rights risks.

Beyond risk mitigation, sustainable procurement can result in revenue uplift and enhanced brand value. Sustainable procurement practices can lead to a revenue uplift of 5-20%. As per a McKinsey report, companies that adopt sustainability often experience a brand value increase of 15-30%. This is particularly evident as McKinsey research reveals that consumers are willing to pay more for environmentally friendly products. Approximately 70% of surveyed consumers would pay an extra 5% for green products that perform as well as non-green alternatives. Sustainable procurement aligns with consumer preferences, enhancing brand loyalty and demand.

In addition to these benefits, sustainable procurement enhances supply chain resilience, promotes ethical business practices, and establishes companies as industry role models in terms of sustainability. It also aligns with the growing emphasis on ESG factors in investment decisions and meets the evolving expectations of consumers. By incorporating sustainable procurement into their strategies, sustainability and CSR departments in the Middle East can effectively address the impending challenges and complexities they face. It not only helps tackle these difficulties head-on but also positions organizations as leaders in the sustainable business landscape, appealing to consumers, investors, and regulators while contributing to global sustainability goals.

The Shift Towards Sustainable Purchases and Investments in the Middle East

How Does this Shift Impact Sustainability and CSR Departments?

The profound shift towards sustainable purchases and investments in the Middle East has a substantial impact on sustainability and CSR departments, shining a well-deserved spotlight on these unsung heroes who have long foreseen this transformation. Over the years, they have been tirelessly advocating for sustainability, trying to show that this shift will inevitably happen. Now, as it unfolds, it necessitates a reevaluation of their roles and strategies, positioning them as leaders in this evolution.

...potential costs of up to $120 billion by 2026 due to modern slavery and environmental impacts.

This transformation places heightened pressure on sustainability and CSR departments to seamlessly integrate sustainability into their operational fabric, a vision they have championed for years. The evolution is further underscored by Europe's pioneering mandatory due diligence laws, which set rigorous standards for sustainable practices that sustainability and CSR departments have long been advocating for.

The International Labor Organization (ILO) warns of significant sustainability risks in global supply chains, estimating potential costs of up to $120 billion by 2026 due to modern slavery and environmental impacts. To address these risks, sustainability and CSR departments are compelled to integrate sustainability into the supply chain, a concept they have been emphasizing for years. These changes in consumer behavior are further reflected in Nielsen's research, which indicates that 66% of MENA consumers are willing to pay more for sustainable goods, placing a new emphasis on sustainable procurement, a concept sustainability and CSR departments have long been promoting.

The swift acceleration of Environmental, Social, and Governance (ESG) practices in the Middle East, as noted by PwC, adds another layer of complexity to sustainability and CSR departments' responsibilities. They must respond with agility to foster rapid innovation and sustainable change, adapting to this dynamic landscape, a path they have been advocating for years.

Furthermore, sustainability and CSR departments must consider the insights from McKinsey, which highlight the importance of integrating sustainability into operations to improve supply chain resilience. In the face of supply chain disruptions, this becomes a pressing concern, and sustainability and CSR departments are tasked with ensuring their organizations are prepared, a concept they have long been advocating for.

In essence, the shift towards sustainable purchases and investments reshapes the role and responsibilities of sustainability and CSR departments in the Middle East. They must navigate regulatory changes, consumer preferences, and the acceleration of ESG practices while ensuring seamless integration of sustainability throughout their organizations. The impact is profound, affecting not only their strategies but also their organizations' resilience, competitiveness, and profitability, as supported by data and statistics from authoritative sources. The recognition of their foresight and dedication is finally coming to fruition as they lead their organizations into a more sustainable future.

Why Will CEOs Make This a Requirement?

CEOs are increasingly recognizing the strategic significance of sustainable procurement for their organizations. This shift towards making sustainability a requirement reflects a broader understanding that sustainability should be an integral part of every aspect of an organization's operations and strategy. Sustainability and CSR departments have played a pivotal role in advocating for this shift over the years.

The Boston Consulting Group's estimation of up to a 30% EBITDA downside risk for companies ignoring sustainability highlights the financial implications of neglecting sustainability. This reinforces the idea that sustainability is not just a moral consideration but a strategic advantage in today's business landscape.

In the Middle East, the adoption of Environmental, Social, and Governance (ESG) practices is on the rise, with 70% of companies engaged in ESG reporting, according to PwC. This aligns with the growing trend that sustainability and CSR departments have been observing. The inclusion of sustainability in investment assessments, including ESG factors, further emphasizes its importance in evaluating a company's performance.

Consumer sentiment also plays a significant role in this shift, as consumers increasingly prioritize sustainability. This aligns with the idea of catering to consumer preferences, a principle that sustainability and CSR departments have been promoting.

Furthermore, the evolving regulatory landscape, including fines for non-compliance, underscores the importance of sustainability in business operations. Sustainability and CSR departments have been at the forefront of addressing regulatory concerns and ensuring compliance.

In essence, sustainability is now recognized as integral to an organization's resilience, competitiveness, and positive societal impact. CEOs are making sustainable procurement a requirement to ensure that sustainability and CSR departments contribute to the long-term success of their companies. Sustainability and CSR departments must continue to integrate sustainability seamlessly into their operations and collaborate across different teams and departments. Focusing on high-impact areas such as supply chain management, energy efficiency, and waste reduction will help organizations thrive in an increasingly sustainability-focused marketplace.

Conclusion

In summary, sustainability and CSR departments in the Middle East have emerged as unsung heroes who foresaw and advocated for the transformative shift towards sustainability, even when resistance prevailed within their organizations. Their steadfast commitment to this cause has been instrumental in reshaping various industries across the region.

By advocating and championing sustainable practices, these departments have become agents of transformative impact, positioning their organizations at the forefront of the sustainability movement in the region. To effectively address challenges and harness the momentum of sustainability, collaborating with a reliable platform such as Oscar can prove to be advantageous. This platform can further amplify the efforts of sustainability and CSR departments in driving their organizations towards a more sustainable and prosperous future.

Oscar, MENA's pioneering automated sustainable procurement platform, offers a solution that helps sustainability and CSR departments mitigate supply-chain risks and ensure trustworthy supplier collaborations. Seamlessly integrating with your workflow, Oscar delivers immediate results without disruptions, providing comprehensive vendor sustainability assessments without overburdening your team or budget. Leveraging Oscar's capabilities, CEOs can effectively incorporate sustainability into their operations and drive meaningful change towards a more sustainable future.

To learn more about our Oscar Platform, please visit our website at Home - Oscar (oscarsdg.com) or contact us through our email [email protected] or our telephone number at +971 50 910 3217.

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