Rising Climate Pressures on Businesses
The impact of climate change has moved beyond government mandates, becoming a core priority across corporate sectors. As temperatures rise and natural disasters intensify, businesses are increasingly expected to take the initiative. Yet, the study reveals that progress on net-zero targets has not only stagnated but, in some cases, slipped. Notably, the percentage of companies without formal net-zero commitments has actually grown since last year, marking a regression that underlines the challenges in advancing corporate sustainability.
The disparity between large firms and SMEs is especially significant. Large organizations are under greater regulatory and public pressure to demonstrate progress on climate goals, while their smaller counterparts often lack the resources and expertise necessary to establish, let alone achieve, ambitious sustainability targets. Robert Waalder, a partner at Sourcing Champions, stated, “SMEs struggle more often with implementing net-zero strategies due to limited financial resources, lack of expertise, and insufficient access to technology and support.” As SMEs represent a substantial share of global economic activity and often act as suppliers to larger corporations, their slower adoption of sustainability practices poses systemic risks.
The Scope 3 Challenge: Supply Chains and Emissions Tracking
One of the starkest findings of the report centers on Scope 3 emissions, the indirect emissions that occur along a company’s value chain. Unlike Scope 1 and 2 emissions, which relate directly to a company’s operations, Scope 3 is often beyond direct control, as it originates from suppliers, distributors, and consumers. For procurement leaders, these emissions represent both a critical challenge and a tremendous opportunity for reducing overall carbon footprints.
Waalder noted that “larger organizations are more likely to have formal targets, driven by regulations, greater resources, access to sustainability expertise, and advanced technologies.” Yet many SMEs, which are critical links in the supply chains of larger firms, continue to rely on outdated, manual systems to track sustainability metrics. According to the report, 25% of surveyed companies still use tools like Excel to manage procurement and emissions data, underscoring a significant barrier to efficient emissions reduction.
The study reinforces that up to 90% of a company’s total carbon footprint can stem from its supply chain, placing procurement teams at the heart of net-zero ambitions. While the urgency of addressing Scope 3 emissions is now widely recognized, the lack of robust digital systems and expertise has hindered meaningful progress.
Extending Deadlines Amid Operational Challenges
The year-over-year comparison indicates a growing trend toward companies extending or even retracting their near-term sustainability targets. For example, an increasing number of companies have either pushed back their 2025 goals or shown reluctance to commit to a 2030 net-zero target, likely a response to operational and economic challenges.
This shift reflects a cautious approach, diverging from the ambitious 2023 outlook when many firms actively pursued net-zero objectives. Pressures such as rising costs, labor shortages, and fluctuating macroeconomic conditions are reportedly prompting companies to reevaluate timelines, prioritizing immediate business stability over long-term sustainability goals. While understandable, this cautious stance raises questions about whether net-zero goals will remain realistic amid future economic downturns or crises.
Digitalization and Automation: The Next Frontier for Procurement
One of the report’s notable insights is the digitalization gap in procurement, which could hinder progress toward net-zero goals. Only 19% of companies surveyed had “somewhat digitalized” their Scope 3 emissions tracking, and just 1% to 6% reported full digitalization across all sustainability categories. In a world increasingly driven by data, this reliance on manual tracking tools presents a stark inefficiency.
Sourcing Champions advocates digital solutions as crucial for streamlining procurement processes and reducing emissions. Automation and digital tools could cut costs and unlock new efficiencies, allowing companies to monitor their progress in real-time, standardize data collection, and make data-driven decisions. The shift to digitalized procurement would likely yield gains in compliance, transparency, and emissions tracking—factors pivotal for meeting climate goals and managing complex supply chains.
Regulatory Pressure as an Accelerator for Green Transformation
While the cost of digitalization and the training required for green skills are hurdles, regulatory changes are increasingly motivating companies to take action. Governments worldwide are embedding green targets in their regulatory frameworks, making sustainability a legal requirement rather than a discretionary target. This shift places pressure on companies to make sustainable investments, not only in their operations but also in their supply chains.
Reflecting on these challenges, Waalder added, “The challenges are significant, but so are the opportunities. As regulatory requirements become more stringent, businesses have a unique chance to transform these obligations into drivers of innovation and leadership in sustainability.” He emphasized that firms which succeed in embedding sustainable practices into their operations will not only meet legal standards but also gain competitive advantages in a market that increasingly values green innovation.
A Pivotal Role for Procurement Leaders in Achieving Net Zero
For businesses committed to sustainability, the findings of the Sourcing Champions report reinforce the need to prioritize procurement as a driver of emissions reduction. Procurement leaders are uniquely positioned to influence supply chain sustainability, making the digital transformation of this function an imperative for meaningful progress.
As the urgency of climate action grows, companies must overcome these setbacks by investing in resources, expertise, and digitalization. If they succeed, they stand to play a pivotal role in achieving net-zero targets—pushing beyond mere regulatory compliance to establish themselves as leaders in the global green economy.