This article is an excerpt from the Digital Procurement & Spend Management Insider report published in May 2022 which is available to download here.

The market for supply chain sustainability and ESG solutions has been a fascinating one to observe in recent months. In the final quarter of 2021, the demand from the growing number of exciting software companies with an ESG/sustainability focused solution for the supply chain remained strong with growth in headcount across the sector, particularly in the UK, Germany and Nordics. These regions appear to be the main locations for start-ups and scale-ups in the ESG world.

Circulor continued to strengthen its sales capability by hiring Rhys Mason from Givewith and Christian Jones from Authenticate IS into its team based in the UK. It also added Jon Hughes to lead its expansion in America and Werner Busenius as VP of Sales in Germany, but has since lost both Paul Clayton (formerly COO) and Veera Johnson (Co-founder) from the leadership team.

Vizibl has been gradually adding critical mass to its team as it builds its sales and delivery capabilities, something we’ve seen from a select group of leaders in this market. However, overall the flurry of hiring activity in this market has slowed noticeably from last year in the early months of 2022.

A popular theory is that, with the exception of a handful of leading organisations such as Unilever and Bayer, putting ESG and sustainability at the heart of supply chain strategy is still viewed as desirable rather than essential.

So, whilst the procurement profession and particularly members of the Sustainable Procurement Pledge are doing an admirable job of raising awareness, profile and the importance of their mission, the heat does appear to have gone out of that market a little, or to put it another way, this market is still more about talk than action.

We asked Simon Geale, who plays a lead role in Proxima’s work on ESG, what he is hearing from the market. He told us: “You can look at sustainability through a glass-half-full or glass-half-empty view right now. On one hand there’s never been so much positive intent as there is now; it genuinely feels like many are past the tipping point.

On the other hand, progress is at a fraction of where it needs to be, and most organisations are being side-tracked by battling supply availability and inflation. Day-to-day reality is trumping progress on long-term strategy in lots of cases.

“In many ways the narrative on sustainable procurement seems to be some way ahead of the reality, but we need to use this as a means of inspiration rather than frustration. The pieces of the jigsaw are falling into place around us (such as the recent SEC Climate Disclosure announcement) but with no real common standards, progress is different across different organisations in different sectors, feeling different pressures.

“There also are lots of competing priorities on the CFO’s table right now, all putting pressure on the bottom line. A lot of the big-ticket sustainability programmes need short-term investment to harvest long-term benefit, and this short-term ROI challenge, or an inability to sell the case, may be hindering immediate progress, but probably not long-term ambition.

“Perceived inaction is exacerbated by the fact that it is a difficult market to make sense of, if [you are] not in it day to day. Green bottlenecks are appearing in supply markets, marketing messages are flooding the communications channels, tech start-ups are appearing every day making all sorts of claims, and a lack of precedent means there is a gap in skills and literacy to address. At the same time procurement teams are generally facing up to a number of other fires to fight.

“But there is progress. If you want inspiration look no further than World Sustainable Procurement Day earlier this year. Thousands of procurement and sustainability professionals coming together to collaborate and share ideas. There wasn’t a big-event machine behind WSPD, it was passion, collaboration and word of mouth. And it was huge! It also pointed towards another trend likely to come from more purposeful business strategies — collaboration. I’ve never seen collaboration on this scale, and that’s really exciting.”

How long will it take for the growth in this market to mirror that of the wider procurement and supply chain tech markets is an interesting question, one that we will continue to observe through our ongoing work in the sector.