Sep 12, 2025
Mastering the Cost-Quality-Sustainability Triangle
With these requirements in place to make responsible sourcing a core priority, companies are increasingly turning to digital tools when choosing suppliers, to help find partners who share similar values.
Originally posted on Procurement Magazine By Tom Chapman, September 12, 2025
Responsible sourcing is reshaping procurement as ESG shifts from obligation to opportunity, driving innovation, resilience and long-term value
The integration of environmental, social and governance (ESG) criteria into sourcing decisions requires a significant shift in procurement strategy.
Organisations are discovering that responsible sourcing is not just a moral imperative but a business necessity that drives long-term value creation whilst maintaining competitive advantage.
It calls for procurement teams to fundamentally rethink their evaluation criteria, expanding beyond traditional cost and quality metrics to include sustainability, labour practices and broader social impact considerations.
Balancing cost and sustainability
The fundamental challenge in responsible sourcing lies in achieving the optimal balance between cost, quality and sustainability—what many procurement leaders describe as the "triple bottom line" of modern sourcing decisions. Traditional procurement focused primarily on cost reduction and quality assurance, but today's successful organisations have learned to view sustainability not as a cost burden but as a value driver.
To get to a point where ESG is made a priority through the business, its suppliers and its suppliers' suppliers, companies are increasingly turning to consulting firms.
One of those is McKinsey, whose ESG methodology centres on generating measurable value through a comprehensive framework, leveraging proprietary analytics and data-driven insights to guide organisations through every phase of their ESG transformation.
One of those helping to deliver solutions is Peter Spiller, a Partner at McKinsey based in Frankfurt.
"More and more companies explicitly include ESG criteria in their sourcing decision making, and many are specifically focused on reducing both carbon emissions and costs simultaneously,” he says.
"This dual mission approach is not just a strategic choice, but a necessity driven by rising carbon costs, such as those from Europe's Carbon Border Adjustment Mechanism (CBAM) and the European Trading Scheme (ETS, now extended under ETS2).
“What we are also seeing is that introducing a carbon lens to more classical sourcing cost reduction programmes provides a crucial shift in perspective that can open up a wealth of new opportunities for creative problem-solving around de-specification and waste reduction."
Schneider Electric exemplifies how leading organisations successfully integrate ESG criteria without sacrificing commercial performance.
Ard Verboon is Chief Procurement Officer at Schneider Electric, where he manages €18bn (US$20bn) in annual procurement spend. His team supports Schneider Electric’s 153 factories and 79 distribution centers across the globe.
Ard has helped the company weave ESG into its procurement DNA, with its global procurement mission centring on three pillars: enabling growth, creating competitive advantage and crucially, sourcing sustainably and responsibly.
"Sustainability is part of our everyday work ethic and embedded in our operational plans, complete with clear performance targets," says Ard.
"We take a structured approach through our Sustainable Procurement Framework, which focuses on risk reduction, regulatory compliance and transformative initiatives."
One of those initiatives is the Zero Carbon Project partners with its top 1,000 suppliers to halve their carbon operational emissions by 2025, providing them with digital tools, training and expert support.
Schneider helps to conduct regular strategic reviews of its sourcing impact and update the interventions accordingly. While its Supplier Code of Conduct sets clear sustainability expectations, every new supplier goes through rigorous sustainability screening before onboarding.
"At Schneider Electric ESG is a fundamental part of how we do business, it is in our DNA, every day, everywhere," Ard adds.
The role of digital tools
With these requirements in place to make responsible sourcing a core priority, companies are increasingly turning to digital tools when choosing suppliers, to help find partners who share similar values.
These tools are helping to map out a supply chain and identify any high-risk areas that might need extra attention.
LightSource is one such tool, providing an AI-powered SRM system, that includes supplier performance and score-carding, while also extracting data from across broader contract and data sources.
While the tech can certainly help to build consistency into decision making, by itself it cannot drive change.
Spencer Penn, CEO of LightSource, explains: "If you tell an individual, 'hey, make a reasonable judgement between cost and ESG', everyone will make their own decisions, that may be inconsistent…
"However, if you have a platform and a process that codifies those tradeoffs, it gives management the ability to think about environmental strategy from the 10,000 ft view."
LightSource helps companies "turtles all the way down" as Spencer says.
As a multi-sided platform, not only can procurement teams use it for interfacing with suppliers, but the suppliers themselves can use it to collaborate with the Tier 2's.
"In doing so, if ESG matters at the OEM level, it can be instilled through technology upstream through the tiers."
Overcoming implementation challenges
However, being successful isn’t as simple as implementing a tool or starting discussions around the importance of ESG. Ard recognises that there are hurdles in overcoming the mindset that sustainability is too costly or not relevant to the core business.
"There's also a lot of jargon and complexity out there," he adds. "Sometimes, experts know the theory but not the practical side, or vice versa. The real progress happens when we find common ground between sustainability know-how and procurement expertise.
"Similarly, not all suppliers are at the same stage, so we've built a support system that meets them where they are. We offer hands-on training, resources, and ongoing support, all tailored to local realities.
“Getting accurate emissions data was another challenge, so we invested in digital tools to help suppliers track and report their numbers. With a global supply chain, complexity is always a factor, but by regionalising operations and staying agile, we've been able to adapt quickly, even when disruptions hit."
Supply chain visibility and traceability
When companies come to McKinsey looking for ways to improve their supply chain visibility and traceability to support ESG risk management, it recommends Tier-n supply chain visibility on ESG parameters including carbon emissions, circular material shares or labour conditions, the holy grail of end-to-end supplier management for sustainability.
"Typically, companies have a reasonably good view on what their tier-1 suppliers are doing—but when it comes to tier-2 or further down the chain, where typically no contractual relationships exist, this gets increasingly difficult," Peter adds.
"When it comes to carbon, we recommend companies look into WBCSD's Partnership for Carbon Transparency whose goal is to make product level carbon transparency happen along any multi-staged value chain."
Measuring long-term value creation
The true test of responsible sourcing lies in its ability to generate measurable long-term value. Schneider Electric demonstrates this through its comprehensive approach to tracking both financial and sustainability outcomes.
"Our Schneider Sustainability Impact program tracks progress on clear KPIs such as emissions, responsible sourcing and decent work impact so we know we're moving the needle," Ard adds.
The company also gathers feedback from suppliers, customers and local communities to understand real-world impacts. But the value extends far beyond compliance metrics: "sustainability is a must-have for our customers, shareholders and investors, and it's a big driver of supplier resilience and efficiency," Ard continues.
"By using resources more wisely and reducing waste, we make our operations leaner and better prepared for any shocks in the business environment.
"Taking a sustainable approach also gives us a head start on future trends and regulations. It lets us spot risks and opportunities early, so we can innovate, develop new solutions and stay ahead of the curve. Plus, it opens doors to new technologies and partnerships with customers who share our ambitions."
Regulatory landscape – A rod for procurement’s back?
The shifting regulatory environment that Ard mentions is proving challenging for some in the profession.
Peter says McKinsey hears that many companies are struggling with what they consider 'excess regulatory demands' to report on ESG.
"My sense is that regulators have started to recognise this, and reporting schemes will become more harmonised, standardised and simplified
"In our conversations with clients, we stress to identify the potential upside and investigate whether there are any potential business opportunities coming from stricter ESG adherence."
The future of responsible sourcing
Responsible sourcing will continue to be a critical pillar for almost every organisation operating today. With new tools like agentic AI transforming procurement by bridging the data-to-action gap and offering enhanced decision orchestration.
Spencer believes that AI, which he describes as the "biggest technology shift since the advent of the internet" will continue to revolutionise everything that we do.
"Great applications in SCM haven't yet landed. IoT can be helpful, small sensors and computers can help with things like early promotion of risk, but adoption isn't universal."
Ard believes that, in the next five years, responsible sourcing will be a true competitive edge.
"We're at a tipping point: with most planetary boundaries already breached and climate impacts happening more often, the risks for businesses are real and immediate," he adds.
"The World Economic Forum's global risk report makes it clear that ecological challenges and their ripple effects are now top business risks.
Science tells us human actions are speeding up these changes, so companies can't afford to sit on the sidelines. Customers, investors, and regulators are all raising their expectations. It's about survival, resilience and shaping the industry for the better."
Originally posted on Procurement Magazine By Tom Chapman, September 12, 2025
Responsible sourcing is reshaping procurement as ESG shifts from obligation to opportunity, driving innovation, resilience and long-term value
The integration of environmental, social and governance (ESG) criteria into sourcing decisions requires a significant shift in procurement strategy.
Organisations are discovering that responsible sourcing is not just a moral imperative but a business necessity that drives long-term value creation whilst maintaining competitive advantage.
It calls for procurement teams to fundamentally rethink their evaluation criteria, expanding beyond traditional cost and quality metrics to include sustainability, labour practices and broader social impact considerations.
Balancing cost and sustainability
The fundamental challenge in responsible sourcing lies in achieving the optimal balance between cost, quality and sustainability—what many procurement leaders describe as the "triple bottom line" of modern sourcing decisions. Traditional procurement focused primarily on cost reduction and quality assurance, but today's successful organisations have learned to view sustainability not as a cost burden but as a value driver.
To get to a point where ESG is made a priority through the business, its suppliers and its suppliers' suppliers, companies are increasingly turning to consulting firms.
One of those is McKinsey, whose ESG methodology centres on generating measurable value through a comprehensive framework, leveraging proprietary analytics and data-driven insights to guide organisations through every phase of their ESG transformation.
One of those helping to deliver solutions is Peter Spiller, a Partner at McKinsey based in Frankfurt.
"More and more companies explicitly include ESG criteria in their sourcing decision making, and many are specifically focused on reducing both carbon emissions and costs simultaneously,” he says.
"This dual mission approach is not just a strategic choice, but a necessity driven by rising carbon costs, such as those from Europe's Carbon Border Adjustment Mechanism (CBAM) and the European Trading Scheme (ETS, now extended under ETS2).
“What we are also seeing is that introducing a carbon lens to more classical sourcing cost reduction programmes provides a crucial shift in perspective that can open up a wealth of new opportunities for creative problem-solving around de-specification and waste reduction."
Schneider Electric exemplifies how leading organisations successfully integrate ESG criteria without sacrificing commercial performance.
Ard Verboon is Chief Procurement Officer at Schneider Electric, where he manages €18bn (US$20bn) in annual procurement spend. His team supports Schneider Electric’s 153 factories and 79 distribution centers across the globe.
Ard has helped the company weave ESG into its procurement DNA, with its global procurement mission centring on three pillars: enabling growth, creating competitive advantage and crucially, sourcing sustainably and responsibly.
"Sustainability is part of our everyday work ethic and embedded in our operational plans, complete with clear performance targets," says Ard.
"We take a structured approach through our Sustainable Procurement Framework, which focuses on risk reduction, regulatory compliance and transformative initiatives."
One of those initiatives is the Zero Carbon Project partners with its top 1,000 suppliers to halve their carbon operational emissions by 2025, providing them with digital tools, training and expert support.
Schneider helps to conduct regular strategic reviews of its sourcing impact and update the interventions accordingly. While its Supplier Code of Conduct sets clear sustainability expectations, every new supplier goes through rigorous sustainability screening before onboarding.
"At Schneider Electric ESG is a fundamental part of how we do business, it is in our DNA, every day, everywhere," Ard adds.
The role of digital tools
With these requirements in place to make responsible sourcing a core priority, companies are increasingly turning to digital tools when choosing suppliers, to help find partners who share similar values.
These tools are helping to map out a supply chain and identify any high-risk areas that might need extra attention.
LightSource is one such tool, providing an AI-powered SRM system, that includes supplier performance and score-carding, while also extracting data from across broader contract and data sources.
While the tech can certainly help to build consistency into decision making, by itself it cannot drive change.
Spencer Penn, CEO of LightSource, explains: "If you tell an individual, 'hey, make a reasonable judgement between cost and ESG', everyone will make their own decisions, that may be inconsistent…
"However, if you have a platform and a process that codifies those tradeoffs, it gives management the ability to think about environmental strategy from the 10,000 ft view."
LightSource helps companies "turtles all the way down" as Spencer says.
As a multi-sided platform, not only can procurement teams use it for interfacing with suppliers, but the suppliers themselves can use it to collaborate with the Tier 2's.
"In doing so, if ESG matters at the OEM level, it can be instilled through technology upstream through the tiers."
Overcoming implementation challenges
However, being successful isn’t as simple as implementing a tool or starting discussions around the importance of ESG. Ard recognises that there are hurdles in overcoming the mindset that sustainability is too costly or not relevant to the core business.
"There's also a lot of jargon and complexity out there," he adds. "Sometimes, experts know the theory but not the practical side, or vice versa. The real progress happens when we find common ground between sustainability know-how and procurement expertise.
"Similarly, not all suppliers are at the same stage, so we've built a support system that meets them where they are. We offer hands-on training, resources, and ongoing support, all tailored to local realities.
“Getting accurate emissions data was another challenge, so we invested in digital tools to help suppliers track and report their numbers. With a global supply chain, complexity is always a factor, but by regionalising operations and staying agile, we've been able to adapt quickly, even when disruptions hit."
Supply chain visibility and traceability
When companies come to McKinsey looking for ways to improve their supply chain visibility and traceability to support ESG risk management, it recommends Tier-n supply chain visibility on ESG parameters including carbon emissions, circular material shares or labour conditions, the holy grail of end-to-end supplier management for sustainability.
"Typically, companies have a reasonably good view on what their tier-1 suppliers are doing—but when it comes to tier-2 or further down the chain, where typically no contractual relationships exist, this gets increasingly difficult," Peter adds.
"When it comes to carbon, we recommend companies look into WBCSD's Partnership for Carbon Transparency whose goal is to make product level carbon transparency happen along any multi-staged value chain."
Measuring long-term value creation
The true test of responsible sourcing lies in its ability to generate measurable long-term value. Schneider Electric demonstrates this through its comprehensive approach to tracking both financial and sustainability outcomes.
"Our Schneider Sustainability Impact program tracks progress on clear KPIs such as emissions, responsible sourcing and decent work impact so we know we're moving the needle," Ard adds.
The company also gathers feedback from suppliers, customers and local communities to understand real-world impacts. But the value extends far beyond compliance metrics: "sustainability is a must-have for our customers, shareholders and investors, and it's a big driver of supplier resilience and efficiency," Ard continues.
"By using resources more wisely and reducing waste, we make our operations leaner and better prepared for any shocks in the business environment.
"Taking a sustainable approach also gives us a head start on future trends and regulations. It lets us spot risks and opportunities early, so we can innovate, develop new solutions and stay ahead of the curve. Plus, it opens doors to new technologies and partnerships with customers who share our ambitions."
Regulatory landscape – A rod for procurement’s back?
The shifting regulatory environment that Ard mentions is proving challenging for some in the profession.
Peter says McKinsey hears that many companies are struggling with what they consider 'excess regulatory demands' to report on ESG.
"My sense is that regulators have started to recognise this, and reporting schemes will become more harmonised, standardised and simplified
"In our conversations with clients, we stress to identify the potential upside and investigate whether there are any potential business opportunities coming from stricter ESG adherence."
The future of responsible sourcing
Responsible sourcing will continue to be a critical pillar for almost every organisation operating today. With new tools like agentic AI transforming procurement by bridging the data-to-action gap and offering enhanced decision orchestration.
Spencer believes that AI, which he describes as the "biggest technology shift since the advent of the internet" will continue to revolutionise everything that we do.
"Great applications in SCM haven't yet landed. IoT can be helpful, small sensors and computers can help with things like early promotion of risk, but adoption isn't universal."
Ard believes that, in the next five years, responsible sourcing will be a true competitive edge.
"We're at a tipping point: with most planetary boundaries already breached and climate impacts happening more often, the risks for businesses are real and immediate," he adds.
"The World Economic Forum's global risk report makes it clear that ecological challenges and their ripple effects are now top business risks.
Science tells us human actions are speeding up these changes, so companies can't afford to sit on the sidelines. Customers, investors, and regulators are all raising their expectations. It's about survival, resilience and shaping the industry for the better."
Originally posted on Procurement Magazine By Tom Chapman, September 12, 2025
Responsible sourcing is reshaping procurement as ESG shifts from obligation to opportunity, driving innovation, resilience and long-term value
The integration of environmental, social and governance (ESG) criteria into sourcing decisions requires a significant shift in procurement strategy.
Organisations are discovering that responsible sourcing is not just a moral imperative but a business necessity that drives long-term value creation whilst maintaining competitive advantage.
It calls for procurement teams to fundamentally rethink their evaluation criteria, expanding beyond traditional cost and quality metrics to include sustainability, labour practices and broader social impact considerations.
Balancing cost and sustainability
The fundamental challenge in responsible sourcing lies in achieving the optimal balance between cost, quality and sustainability—what many procurement leaders describe as the "triple bottom line" of modern sourcing decisions. Traditional procurement focused primarily on cost reduction and quality assurance, but today's successful organisations have learned to view sustainability not as a cost burden but as a value driver.
To get to a point where ESG is made a priority through the business, its suppliers and its suppliers' suppliers, companies are increasingly turning to consulting firms.
One of those is McKinsey, whose ESG methodology centres on generating measurable value through a comprehensive framework, leveraging proprietary analytics and data-driven insights to guide organisations through every phase of their ESG transformation.
One of those helping to deliver solutions is Peter Spiller, a Partner at McKinsey based in Frankfurt.
"More and more companies explicitly include ESG criteria in their sourcing decision making, and many are specifically focused on reducing both carbon emissions and costs simultaneously,” he says.
"This dual mission approach is not just a strategic choice, but a necessity driven by rising carbon costs, such as those from Europe's Carbon Border Adjustment Mechanism (CBAM) and the European Trading Scheme (ETS, now extended under ETS2).
“What we are also seeing is that introducing a carbon lens to more classical sourcing cost reduction programmes provides a crucial shift in perspective that can open up a wealth of new opportunities for creative problem-solving around de-specification and waste reduction."
Schneider Electric exemplifies how leading organisations successfully integrate ESG criteria without sacrificing commercial performance.
Ard Verboon is Chief Procurement Officer at Schneider Electric, where he manages €18bn (US$20bn) in annual procurement spend. His team supports Schneider Electric’s 153 factories and 79 distribution centers across the globe.
Ard has helped the company weave ESG into its procurement DNA, with its global procurement mission centring on three pillars: enabling growth, creating competitive advantage and crucially, sourcing sustainably and responsibly.
"Sustainability is part of our everyday work ethic and embedded in our operational plans, complete with clear performance targets," says Ard.
"We take a structured approach through our Sustainable Procurement Framework, which focuses on risk reduction, regulatory compliance and transformative initiatives."
One of those initiatives is the Zero Carbon Project partners with its top 1,000 suppliers to halve their carbon operational emissions by 2025, providing them with digital tools, training and expert support.
Schneider helps to conduct regular strategic reviews of its sourcing impact and update the interventions accordingly. While its Supplier Code of Conduct sets clear sustainability expectations, every new supplier goes through rigorous sustainability screening before onboarding.
"At Schneider Electric ESG is a fundamental part of how we do business, it is in our DNA, every day, everywhere," Ard adds.
The role of digital tools
With these requirements in place to make responsible sourcing a core priority, companies are increasingly turning to digital tools when choosing suppliers, to help find partners who share similar values.
These tools are helping to map out a supply chain and identify any high-risk areas that might need extra attention.
LightSource is one such tool, providing an AI-powered SRM system, that includes supplier performance and score-carding, while also extracting data from across broader contract and data sources.
While the tech can certainly help to build consistency into decision making, by itself it cannot drive change.
Spencer Penn, CEO of LightSource, explains: "If you tell an individual, 'hey, make a reasonable judgement between cost and ESG', everyone will make their own decisions, that may be inconsistent…
"However, if you have a platform and a process that codifies those tradeoffs, it gives management the ability to think about environmental strategy from the 10,000 ft view."
LightSource helps companies "turtles all the way down" as Spencer says.
As a multi-sided platform, not only can procurement teams use it for interfacing with suppliers, but the suppliers themselves can use it to collaborate with the Tier 2's.
"In doing so, if ESG matters at the OEM level, it can be instilled through technology upstream through the tiers."
Overcoming implementation challenges
However, being successful isn’t as simple as implementing a tool or starting discussions around the importance of ESG. Ard recognises that there are hurdles in overcoming the mindset that sustainability is too costly or not relevant to the core business.
"There's also a lot of jargon and complexity out there," he adds. "Sometimes, experts know the theory but not the practical side, or vice versa. The real progress happens when we find common ground between sustainability know-how and procurement expertise.
"Similarly, not all suppliers are at the same stage, so we've built a support system that meets them where they are. We offer hands-on training, resources, and ongoing support, all tailored to local realities.
“Getting accurate emissions data was another challenge, so we invested in digital tools to help suppliers track and report their numbers. With a global supply chain, complexity is always a factor, but by regionalising operations and staying agile, we've been able to adapt quickly, even when disruptions hit."
Supply chain visibility and traceability
When companies come to McKinsey looking for ways to improve their supply chain visibility and traceability to support ESG risk management, it recommends Tier-n supply chain visibility on ESG parameters including carbon emissions, circular material shares or labour conditions, the holy grail of end-to-end supplier management for sustainability.
"Typically, companies have a reasonably good view on what their tier-1 suppliers are doing—but when it comes to tier-2 or further down the chain, where typically no contractual relationships exist, this gets increasingly difficult," Peter adds.
"When it comes to carbon, we recommend companies look into WBCSD's Partnership for Carbon Transparency whose goal is to make product level carbon transparency happen along any multi-staged value chain."
Measuring long-term value creation
The true test of responsible sourcing lies in its ability to generate measurable long-term value. Schneider Electric demonstrates this through its comprehensive approach to tracking both financial and sustainability outcomes.
"Our Schneider Sustainability Impact program tracks progress on clear KPIs such as emissions, responsible sourcing and decent work impact so we know we're moving the needle," Ard adds.
The company also gathers feedback from suppliers, customers and local communities to understand real-world impacts. But the value extends far beyond compliance metrics: "sustainability is a must-have for our customers, shareholders and investors, and it's a big driver of supplier resilience and efficiency," Ard continues.
"By using resources more wisely and reducing waste, we make our operations leaner and better prepared for any shocks in the business environment.
"Taking a sustainable approach also gives us a head start on future trends and regulations. It lets us spot risks and opportunities early, so we can innovate, develop new solutions and stay ahead of the curve. Plus, it opens doors to new technologies and partnerships with customers who share our ambitions."
Regulatory landscape – A rod for procurement’s back?
The shifting regulatory environment that Ard mentions is proving challenging for some in the profession.
Peter says McKinsey hears that many companies are struggling with what they consider 'excess regulatory demands' to report on ESG.
"My sense is that regulators have started to recognise this, and reporting schemes will become more harmonised, standardised and simplified
"In our conversations with clients, we stress to identify the potential upside and investigate whether there are any potential business opportunities coming from stricter ESG adherence."
The future of responsible sourcing
Responsible sourcing will continue to be a critical pillar for almost every organisation operating today. With new tools like agentic AI transforming procurement by bridging the data-to-action gap and offering enhanced decision orchestration.
Spencer believes that AI, which he describes as the "biggest technology shift since the advent of the internet" will continue to revolutionise everything that we do.
"Great applications in SCM haven't yet landed. IoT can be helpful, small sensors and computers can help with things like early promotion of risk, but adoption isn't universal."
Ard believes that, in the next five years, responsible sourcing will be a true competitive edge.
"We're at a tipping point: with most planetary boundaries already breached and climate impacts happening more often, the risks for businesses are real and immediate," he adds.
"The World Economic Forum's global risk report makes it clear that ecological challenges and their ripple effects are now top business risks.
Science tells us human actions are speeding up these changes, so companies can't afford to sit on the sidelines. Customers, investors, and regulators are all raising their expectations. It's about survival, resilience and shaping the industry for the better."
Ready to change the way you source?
Try out LightSource and you’ll never go back to Excel and email.
Ready to change the way you source?
Try out LightSource and you’ll never go back to Excel and email.
Ready to change the way you source?
Try out LightSource and you’ll never go back to Excel and email.
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