This article is the third 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 has gained significant prominence, especially among Business and Digital Transformation Teams in the Middle East, where governments, investors, and customers are placing strong emphasis on its strategic significance. The Business and Digital Transformation Team’s role has shifted to crafting and executing robust strategies to transform their companies sustainably. The supply chain’s pivotal role in this cannot be overlooked, as according to SBTi, the supply chain generates emissions 11.4 times higher than operations. This has led to the adoption of sustainability initiatives by many Business and Digital Transformation Teams, who often also actively involve suppliers in their sustainability agenda. This growing trend is reshaping the business landscape, positioning Business Transformation Teams as drivers and guardians of sustainability within the region.
Business Transformation Teams Supporting ESG in the Middle East
The Role of Business Transformation Teams in the Middle East’s Sustainability Movement
The trajectory towards sustainable purchases and investments in the Middle East is wielding a profound impact on the landscape and this is a growing concern to Business and Digital Transformation teams. These teams, traditionally focused on enhancing efficiency, fostering innovation, and managing change, are now compelled to pivot their strategies to incorporate sustainability topics.
80% of emissions originate across a company’s supply chain
This transition is catalyzed by a confluence of factors, including the growing recognition of the supply chain’s colossal contribution to a company’s sustainability footprint—approximately 80% of emissions originate there, as indicated by McKinsey. This underscores the need for business and digital transformation teams to not only streamline operations but also to foster sustainability across the entire value chain, aligning with market trends.
Investors and external stakeholders are at the forefront of driving this paradigm shift. According to PwC, investors are increasingly considering sustainability as a crucial criterion for funding decisions, as such, 70% of surveyed companies in the Middle East already engaged in Environmental, Social, and Governance (ESG) reporting. Investors now recognize the potential risks associated with neglecting sustainability, which could lead to reputational damage, regulatory penalties, and dwindling investor trust. Business and digital transformation teams are therefore tasked with aligning their goals with the growing investor preference for sustainable business strategies. Additionally, the Nielsen report’s revelation that 66% of MENA consumers are willing to pay more for sustainable products underlines the consumer-driven nature of this shift, further accentuating the role of business and digital transformation teams in steering their organizations toward holistically sustainable processes that cater to evolving consumer preferences.
Shifting the Business and Digital Transformation Teams’ Mindset
In the swiftly evolving landscape of sustainability within the Middle East, Business and Digital Transformation Teams are experiencing a profound and visionary shift in their mindset, driven by the CEO’s strategic vision and the guidance of dedicated sustainability teams. Traditionally focused on enhancing operational efficiency and technological innovation, these teams are recalibrating their approach to incorporate sustainability as a foundational pillar of their strategy. This evolution goes beyond token gestures; it reflects a broader understanding that sustainability should be interwoven into every facet of a business.
One major avenue these teams are discovering to embed sustainability in their strategies cost-effectively is by focusing on the supply chain. The supply chain plays a monumental role, contributing to approximately 80% of emissions, managing your supply chain sustainably can reduce your overall environmental impact by up to 90%. This realization has prompted Business and Digital Transformation Teams to view sustainable procurement as not just an option but a strategic imperative. Strategic sustainable procurement entails actively partnering with suppliers who share their sustainability goals, thus extending their sphere of influence far beyond internal operations. This approach aligns with the growing emphasis on holistic sustainability and serves as a means to substantially reduce emissions and enhance sustainability across the entire value chain.
This transformation in mindset underscores the recognition that sustainability is not merely a standalone initiative but an intrinsic aspect of business, shaping its competitive edge, stakeholder relationships, and long-term viability. The impetus for this transformative change extends beyond internal organizational mandates. Driven by the CEO’s vision and the directives of dedicated sustainability teams, Business and Digital Transformation Teams are embracing sustainability as an essential element in their decision-making process. From process innovation to technology adoption, from risk management to cultural shifts, sustainability is becoming the cornerstone on which Business and Digital Transformation Teams build their strategies.
Difficulties Facing Business and Digital Transformation Teams
Business and Digital Transformation Teams in the Middle East find themselves at the nexus of challenges and opportunities within the rapidly evolving landscape of sustainability. As these teams propel the region’s sustainability movement, their role is underscored by the complexities they navigate.
This surge in sustainability is placing heightened pressure on these teams to integrate sustainability seamlessly into their operational fabric. This shift necessitates a thorough reassessment of processes, the embedding of sustainable methodologies, and the swift assimilation of sustainable practices throughout the organization. Furthermore, the emphasis on sustainable purchases and investments has altered the collaborative dynamics of business and digital transformation teams, requiring them to reevaluate their company’s procurement strategies and supplier relationships.
The adoption of Environmental, Social, and Governance (ESG) practices in the Middle East is happening at a faster pace than many anticipated. This acceleration increases the pressure and expectations on these teams to deliver quick results. They must swiftly adapt to the changing landscape and find ways to incorporate sustainability seamlessly into their operations.
There are around 600 sustainability reporting standards globally
However, the incorporation of sustainability assessments into the supply chain is often more complex than anticipated, leading to increased workload and complexity for Business and Digital Transformation Teams. The process of executing supplier assessments presents significant hurdles, and coordinating and communicating between teams can be daunting and time-consuming. These challenges can have a significant impact on business and digital team managers, who may find themselves overburdened, pushing them beyond their capabilities and negatively impacting their work-life balance. The resulting frustration and apparent lack of progress can stymie their capacity to rally their team, jeopardizing their ability to lead effectively.
The complexity of sustainability reporting standards is another challenge, with approximately 600 standards existing across global, regional, and local contexts. Harmonizing these standards into actionable strategies is formidable and requires significant effort. Additionally, technology and cost barriers can hinder supply chain transparency efforts. This complexity is why only a fraction of CEOs currently tie executive remuneration to sustainability targets. The challenge of managing multiple stakeholders internally further complicates the transformation process.
… embracing sustainability practices can lower overall business costs by 5-10% and increase profit margins by 10-20%.
Despite these complexities, the urgency for seamless coordination and communication is fueled by the compelling cost savings associated with implementing a sustainable supply chain. The International Finance Corporation (IFC) also states that embracing sustainability practices can lower overall business costs by 5-10% and increase profit margins by 10-20%.
Navigating these challenges within the backdrop of the rapidly approaching COP28 and the global sustainability agenda is no small feat. However, it is these very challenges that highlight the pivotal role of Business and Digital Transformation Teams in steering their organizations toward meaningful and resilient sustainability transformations in the Middle East. As these teams tackle these intricacies head-on, they embody the essence of adaptability and innovation, poised to lead their organizations toward a future that champions sustainability at its core.
Getting Ahead of the Upcoming Difficulties
In the dynamic landscape of sustainable business transformation, Business and Digital Transformation Teams in the Middle East are embracing proactive approaches to navigate the substantial challenges ahead, particularly in anticipation of COP28. The intricate terrain they navigate prompts these teams to seek strategic solutions that not only simplify the interface between different departments but also ensure that sustainability processes are effectively implemented throughout the organization.
One major avenue that Business and Digital Transformation Teams are exploring to streamline sustainability processes is sustainable procurement. Following on from the 80:20 rule, departments are looking to focus most of their efforts on the areas with the largest impact. This approach holds the potential to revolutionize the way organizations operate, aligning their procurement practices with sustainability goals. According to the International Labor Organization (ILO), global supply chains face sustainability risks, with modern slavery and environmental impacts potentially costing companies $120 billion by 2026. Therefore, integrating sustainability into procurement practices becomes crucial for organizations aiming to not only mitigate these risks but also uncover substantial revenue opportunities.
Sustainable procurement extends beyond compliance and addresses pressing global challenges, providing an opportunity for Business and Digital Transformation Teams to uncover a major revenue driver for the company. The significance of procurement spending cannot be overstated, as companies globally spend trillions of dollars annually. By embracing sustainable procurement practices, these teams can tap into a potential cost-saving avenue – up to 16% of procurement costs, as highlighted by the World Economic
Their efforts have resulted in avoiding 2,363 tCO2e of emissions, and increased EBITDA by an impressive 30%.
In some cases, such as MTN Group’s sustainable procurement initiatives, companies are able to foster tangible benefits for the societies they serve. Robust supplier engagement, and a focus on Scope 3 emissions, have significantly reduced MTN’s impact. Their efforts have resulted in avoiding 2,363 tCO2e of emissions, and increased EBITDA by an impressive 30%. MTN has successfully elevated its reputation as South Africa’s most valuable brand, demonstrating the immense value of integrating sustainability into procurement practices. Additionally, with sustainability becoming a priority for consumers, as emphasized by IBM, integrating these approaches into procurement strategies can significantly enhance brand value, fostering increased customer loyalty and demand.
Fostering strategic partnerships with suppliers who share their commitment to sustainability, Business and Digital Transformation Teams can leverage the power of sustainable procurement to drive revenue growth and enhance their organizations’ reputation. This approach aligns with the rapid adoption of Environmental, Social, and Governance (ESG) practices in the Middle East, as investors and stakeholders increasingly seek evidence of ethical and sustainable business practices.
Furthermore, by harnessing the potential of new data-driven tools, these teams can enhance the effectiveness of their sustainable procurement efforts. Advanced analytics, artificial intelligence, and machine learning can provide valuable insights into supplier performance, risk assessment, and sustainability compliance. These tools enable proactive identification of potential issues and opportunities within the supply chain, allowing for more informed decision-making and risk management.
By forging resilient supply chains, harnessing data-driven tools, and contributing to the region’s broader sustainability agenda, Business and Digital Transformation Teams position themselves as leaders in steering meaningful sustainable transformation in the Middle East.
The Shift Towards Sustainable Purchases and Investments in the Middle East
Why CEOs Will Make this Change Necessary
From a CEO’s perspective, the sweeping trend towards sustainable purchases and investments in the Middle East dramatically reshapes the business landscape. Unlike Business and Digital Transformation Teams, CEOs primarily deal with external investors. A CEO’s focus is on aligning the company’s strategic goals with the region’s sustainability agenda and ensuring that internal operations reflect these priorities.
As a result, CEOs increasingly view sustainability as a fundamental requirement for maintaining competitiveness and long-term success. The imperative for CEOs to integrate sustainability into their strategic vision is underscored by the potential risks associated with neglecting sustainability. The Boston Consulting Group estimates that companies ignoring sustainability could experience up to a 30% EBITDA downside risk due to regulatory and market changes. These risks include reputational damage, regulatory penalties, and a decline in internal stakeholder trust.
One of the driving forces behind this transformation is the evolving perception of sustainability by internal stakeholders. Employees, suppliers, and customers are increasingly valuing companies that demonstrate a commitment to sustainability. This shift has a direct impact on CEOs’ strategic decision-making, as they must align their organizations with the evolving expectations of these external stakeholders.
CEOs understand that sustainability is not merely a moral imperative but also a strategic advantage. Sustainable companies have been shown to deliver significant positive financial performance. By embracing sustainability, CEOs can create value for their internal stakeholders, enhance their organization’s reputation, and improve employee morale and engagement. Moreover, they can ensure alignment with the company’s values and long-term goals.
In essence, the shift towards sustainability from a CEO’s perspective reflects the necessity to integrate sustainability seamlessly into internal operations, ensuring that the company’s strategic vision aligns with the region’s sustainability agenda. By doing so, CEOs through their Business and Digital Transformation Teams can lead their organizations towards a more sustainable future, meet the expectations of internal stakeholders, and contribute to positive societal impact.
Conclusion
In summary, the Business and Digital Transformation Teams play a pivotal role in advancing sustainability in the Middle East. By adopting and championing sustainable practices, these teams become agents of transformative impact, positioning their organizations at the forefront of the industry. To effectively address challenges and harness the momentum of sustainability, collaborating with a reliable platform such as Oscar can prove to be advantageous.
Oscar, MENA’s pioneering automated sustainable procurement platform, offers a solution that helps CEOs 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.