Part 5 – Procurement as a Driver of Innovation and Supply Chain Collaboration

As ESG becomes a core business priority, procurement leaders across Australia and New Zealand are being asked to drive innovation and enable the wider supply chain to transition alongside them.

Traditionally, procurement has operated within predefined requirements: contracting to specification, optimising for cost. But in an ESG-led economy, it’s no longer enough to passively receive innovation from suppliers. Procurement must actively facilitate it. Demand it even.

1. Enabling Supplier Decarbonisation To meet their own emissions targets, many large enterprises now recognise they must support their suppliers with decarbonisation pathways. According to the Australian Industry Group (Ai Group), capability-building and collaborative partnerships are essential, especially where Tier 2 and Tier 3 suppliers lack emissions reporting infrastructure or technical knowledge. (Ai Group, Climate and Energy, 2023)

Organisations have begun engaging directly with key suppliers to map carbon footprints and identify areas for joint improvement. The approach is less about audits, more about partnership.

2. ESG-Aligned Innovation in Product and Process Design Procurement’s influence is being felt earlier in the value chain—upstream in product design, packaging, logistics and service models. Companies such as Boral and BlueScope are now embedding sustainable design criteria into their procurement strategies, asking suppliers to propose alternatives with lower embodied carbon and reduced material waste. (BlueScope Sustainability Report 2023)

In construction and manufacturing sectors especially, ESG-led procurement is helping accelerate adoption of recycled materials, modular construction methods and circular economy inputs.

3. Collaborative Industry Models Some of the most promising developments are coming from cross-sector collaboration. The Climate Leaders Coalition, in partnership with groups like Supply Nation and ClimateWorks, is supporting initiatives to build ESG capability across supply chains through shared tools, standardised frameworks and capability uplift programs.

This reflects a broader global trend. According to the Ellen MacArthur Foundation, organisations that adopt circular, low-waste supply chain models through supplier collaboration achieve higher innovation ROI and stronger brand trust. (Ellen MacArthur Foundation, Circular Economy Procurement Playbook)

Takeaway: Procurement, when positioned correctly, becomes a force multiplier, and unlocks competitive advantage through innovation and deeper supplier alignment.

In Part 6, we’ll turn to execution: what the ESG-first procurement function of the future looks like and how to make it real through metrics, systems and leadership alignment.