PwC’s Digital Procurement Survey

ESG climbs the priority list for CPOs in 2024

Globally, ESG has climbed the rankings to become a priority for chief procurement officers (CPOs) in 2024. This demonstrates the procurement function’s key role in adapting to regulatory challenges (such as CSRD or CS3D, for example) that impact direct and indirect suppliers. Sourcing, a key driver for procurement performance and risk management, remains a priority year after year. Meanwhile, efficiency gains are the main driver for procurement digitalisation as they are easily quantifiable and contribute directly to return on investment (ROI), but they sometimes come in below expectations.

In UK and Irish companies, source-to-contract (S2C) digitalisation is a priority on the transformation roadmap (44%, ahead of the global average of 30%). It is also the leading digital use case on the 2027 roadmap. If procurement functions can get this right, there are huge cost and risk benefits from driving better compliance while linking S2C and procure-to-pay (P2P) with areas like operationalised contracts. There is also significant emphasis on contract lifecycle management and risk management, two key areas that can help procurement become a business differentiator and strategic function for companies.

Data analytics and S2C are the key use cases for ensuring procurement performance in both process and content. Most companies already have P2P tools and, therefore, have a lower need in this area than before. Lower priority is given to use cases less directly linked to performance and regulatory compliance (such as traceability, ecosystems and marketplaces). Meanwhile, companies seek to strengthen their management and prevention capabilities across the spectrum of procurement risks. And the obligation to monitor Scope 3 emissions is being extended to an increasing number of companies through France’s greenhouse gas emissions assessment (BEGES).

The use of collaborative supplier solutions and platforms is growing rapidly. Security risk management (SRM) solutions are key to streamlining relations with Tier 1 suppliers. Large companies often have very extensive supplier panels, some with more than 5,000 suppliers. In such cases, SRM tools increase efficiency when it comes to managing supplier relations, maintaining visibility of supplier performance and managing risks. For these tools to be effective, securing supplier buy-in is key in terms of organisation and internal processes.

There are also new use cases for improving visibility and collaboration in the supply chain. For example, collaborative platforms are designed to streamline transactional processes and help companies meet regulatory requirements such as e-invoicing and e-reporting. The need to ensure supply chain continuity in response to supply chain disruption and rapidly evolving regulations in the area of ESG means that companies must improve visibility beyond their Tier 1 suppliers and streamline data-sharing between stakeholders.

Respondents reported an intermediate level of maturity for each of the three ESG issues—environmental, governance and social—with a slightly higher level of maturity for governance issues. For several years, the management of corporate governance issues has been governed by national regulations, which explains why the level of maturity is higher in this area. For social and environmental issues, the wider variety of topics to be addressed means that achieving a high level of maturity is more challenging and complex.

The varying level of maturity also depends on company size due to different regulatory pressures. Very large companies have a higher level of maturity as they have to comply with regulatory requirements and have the resources to do so. Most medium-sized and large companies have an intermediate level of maturity. Small companies have to deal with ESG issues but do not have the resources to achieve a high level of maturity and are still subject to non-binding regulations.

Contract lifecycle management (CLM) tools are on the rise: 50% of companies intend to invest in or improve their CLM tools. The three main benefits of using a CLM tool are as follows:

1. Save time: by improving processes and digitalising contracts/templates, the act of drafting and negotiating contracts and conducting research and analysis is much quicker.
2. Reduce costs: thanks to carefully prepared CLM tool templates, high-quality contracts and the ability to manage contract terms more easily, there is a lower risk of contract claims and, therefore, potential additional costs.
3. Improve compliance: a CLM tool can be used to manage contractual obligations and standardise contract clauses.

Key actions businesses can take today

1. Focus on organisational and human aspects

Putting people first matters. As we’ve all seen, the importance of cooperation continues to rise in hybrid work models, making organisational and human aspects critical to success in any digital transformation project. In our survey, more than 57% of procurement professionals reported “involvement of stakeholders” as the most important success factor for digital transformation.

2. Enable efficient processes and practices

Again, taking a human-led, tech-powered perspective is the way to go, so be sure to consider any new processes from your users’ perspective, while relying on best practices, to successfully and sustainably implement change. More than 71% of respondents identified process optimisation and efficiency as critical to digital transformation.

3. Carefully consider your vendor and integrator selection

Technical aspects, such as the integrator or the chosen solution, are also important, though they are often seen as secondary success factors. However, the focus on the previous two factors—namely process reengineering and stakeholder buy-in, instead of solution features and capabilities—also reveals that CPOs expect solutions to be implemented well from a technical perspective.

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Companies’ main external support needs concern all phases of the digitalisation project. Activities requiring technical and business expertise are most likely to be outsourced, as maintaining these skills in-house is not an option due to low project volumes.

The upstream phases of digitalisation projects will have significant differences depending on the company’s size. Large and very large companies require less external support when adapting existing systems, as they can choose to adopt standard solutions and because the choice of solution is less critical. Medium-sized companies, meanwhile, have a strong need for support in adapting their existing systems. These companies still seem to be in an ‘adapt’ rather than ‘adopt’ frame of mind, which is the current principle in SaaS and cloud-based solutions. Finally, small companies have a greater need for external support when choosing which digital solution to implement as they lack expertise. They are also typically more focused on a one-off solution than how it can be used and developed.