Extreme weather, rising temperatures, and resource scarcity directly impact business continuity, supply chains, and communities. With ever-increasing concerns about climate change, all stakeholders now want to see how companies are mitigating climate risks and preparing for a low-carbon future. Apple, a multinational technology company known for its consumer electronics, software, and services, publishes an Environmental Progress Report every year to showcase a comprehensive overview of its environmental performance, progress, and strategies. Its 2025 report outlines in great detail how the conglomerate has cut its overall emissions by more than 60 percent since 2015. Milestones like this are achievable only when companies embed Environmental, Social, and Governance (ESG) principles across their operations, especially in procurement.
However, it is a known fact that ESG doesn’t come easy or cheap. There is a considerable investment that companies need to make in order to ensure ESG practices are ingrained in their DNA.
Let us look at some of the implications of ESG in procurement:
premium pricing for sustainable inputs
When companies choose sustainable materials, they often end up paying more. These higher prices come from the extra effort needed, whether it’s cleaner farming practices, safer working conditions, or the cost of getting certifications that prove the product is truly sustainable. For procurement teams, this creates a challenge. On the one hand, businesses want to keep costs low. On the other hand, using sustainable inputs is a key part of meeting ESG goals. If a company decides to skip sustainable materials because they cost more, it risks falling behind on its ESG commitments, losing trust with customers, or even facing penalties from regulators. This means companies have to find a balance. Paying a premium for sustainable inputs may increase short-term costs, but it helps build stronger supply chains, reduces environmental impact, and improves brand reputation in the long run.
increased supplier vetting and onboarding
Procurement teams must evaluate suppliers against extensive ESG criteria such as environmental impacts, labour practices, governance policies, and more. This detailed supplier vetting demands time, resources, and often specialised external support such as ESG screening platforms. The onboarding process becomes lengthier as buyers seek transparency and verification, often involving rigorous audits and contractual stipulations that translate to higher operational costs.
compliance and reporting costs
As ESG regulations expand across the globe, organisations are increasingly required to invest in compliance, documentation, and detailed reporting. These regulations often demand that companies disclose data on emissions, resource usage, labour practices, diversity, governance, and supply chain sustainability. Preparing such reports is not a one-time exercise—it involves building ongoing systems for data collection, validation, and monitoring. This, in turn, involves close coordination across multiple departments. Organizations might need to rely on external consultants or auditors to align their reporting with international frameworks. Non-compliance could expose a company to fines and penalties; hence, compliance and reporting costs should be considered essential investments by organisations.
organisational change and training
Procurement professionals often need training to integrate sustainability criteria into sourcing decisions, use new ESG tools effectively, and manage supplier relationships with ESG in mind. Rolling out such programs across an organisation involves time and budget but is key to long-term ESG success.
Since companies today have little choice but to incorporate ESG, the question becomes: how can they manage its costs effectively?
prioritise ESG early in supplier selection
Choosing ESG-aligned suppliers right from the outset reduces the need for costly retrofits later. It helps avoid repeated audits, contract renegotiations, and compliance gap remediation. Early prioritisation streamlines onboarding, accelerates evaluation cycles, and improves overall supplier compliance rates, ultimately lowering transaction costs.
adopt technology for transparency
Companies today are under great pressure to show that their ESG practices are real and measurable. One of the best ways to do this is by adopting and embracing technology. When businesses invest in ESG data platforms and supply chain visibility tools, they can track suppliers more easily and spot risks early. Technologies like blockchain make supply chains more transparent by allowing every step of a product’s journey, from raw materials to the final product, to be recorded and verified.
Take the case of Walmart. The company has implemented blockchain technology to strengthen its food supply chain. Using this system, the company can trace items within seconds instead of days or weeks, greatly improving transparency, safety, and trust in product sourcing.
collaborate and build strong supplier relationships
Close collaboration with suppliers encourages shared ownership of ESG goals and often generates innovative, cost-saving solutions. Long-term contracts or incentive programs for ESG-compliant suppliers motivate ongoing investments in sustainability. Engaging suppliers in continuous improvement initiatives can uncover efficiencies and risk reduction opportunities that benefit both parties financially.
building ESG-savvy procurement teams
If procurement teams are trained regularly and given access to helpful resources and tools, they’ll see sustainability not as “extra work” but as a part of smart buying. With this approach, they can make better choices that balance both cost and responsibility, by avoiding risky suppliers and finding long-term value instead of just short-term savings.
It is increasingly clear that companies are under intense scrutiny with regard to their ESG practices. The real opportunity lies in balancing adoption with cost control. The higher price tag can make ESG adoption harder at first, but it is often worth it for long-term business growth and sustainability. Making concerted efforts to adopt ESG and control its costs ensures that sustainability becomes both achievable and impactful. Such actions will, no doubt, help create a thriving planet and safeguard the well-being of generations to come.
how Infosys BPM can help
At Infosys BPM, we serve as your end-to-end partner in streamlining and optimising procurement operations. With deep expertise across services and technology, we support you at every stage of your procurement outsourcing journey. Our industry-leading solutions harness the power of Artificial Intelligence (AI) to bring greater efficiency, intelligence, and impact to all your procurement activities.
