Proxima recently released its latest CPO report in which the industry’s leading voices share their insights on the year ahead. In this article, Proxima outlines the key trends impacting the commercial environment.
Resilience
The macro landscape in 2023 is volatile and shows no sign of letting up. From the drawn-out conflict in Ukraine to surging Covid-19 cases in China, to extreme climate events, departments must start to work within the ‘new normal’ and get used to operating in a world that is filled with uncertainty. Building resilience is key and for the public sector this is even more important given the essential services being delivered.
Commercial teams’ ability to build strong relationships with suppliers to get in-depth analysis of complex change is key to building up a bank of knowledge and insight through the supply chain. Better engaging with suppliers will help predict the challenges on the horizon for both supply and demand and can be your greatest knowledge-source, due to their proximity to the key drivers of snarled supply chains.
Resilience can also be built through a thorough internal analysis within the organisation, assessing the rate at which services and products are being used and delivered. For an organisation to be resilient in 2023, it’s crucial that they identify risks in their supply chain and act quickly to mitigate them.
Cost optimisation
The economic storm clouds are gathering. It may well be the case that economies such as the UK are already in recession and there is a significant possibility that other major economies will follow this path in 2023. That is likely to bring a renewed focus onto an area that CPOs will be very familiar with: cost. This focus must be driven not just by short-term needs, but with a view to achieving long-term goals.
As our Getting Recession Ready report recently highlighted, there is no simple solution for a CPO to draw on. Every Commercial Leader will be facing a different challenge depending on the organisation they are in, and the right approach will be to tailor to your sector and your unique ‘organisational context’.
There is however a straightforward way to look at those challenges you face. It’s about understanding why you spend (objectives) and testing it against organisational contexts, and then applying procurement thinking and approaches. What is the business value behind each new and current supplier relationship? What do you expect to achieve from every purchase order or contract lifecycle? Why spend it now, like this, and how to gauge success?
As costs rise back to the top of the agenda in 2023, this is an area where great Commercial Leaders can play a real leadership role across their departments in the year ahead.
Sustainability
With the challenges we are facing, commercial professionals will be increasingly torn between balancing the need to manage short-term costs with the pressure to deliver on what are often perceived as long-term goals like sustainability targets.
Organisations have begun taking control of their Scope 1, 2 and 3 emissions but there’s much still to be done as we look at the year ahead. For those overwhelmed by the challenge, Scope 3 emissions account for 90% of an organisation’s total carbon footprint, so there’s no better place to start. Contributing to the broader net zero efforts is a central part of the role of commercial teams in the public sector, even beyond the requirements of PPN 06/21 – asking suppliers for carbon reduction plans, and therefore needs to be a central focus.
Collaborating to share skills and resources will be key. This is why we announced the Scope 3 Maturity Benchmark and will be developing it further in 2023 – the benchmark helps organisations to learn from each other’s progress in this space. Commercial professionals have a key role to play in tackling Scope 3 emissions in order to deliver on ambitious sustainability targets. They are uniquely placed to understand their Scope 3 baseline – and working together with stakeholders from across their organisations and industry to assess where carbon emissions can be driven down.
Commercial teams must have a handle on their data, to be able to pinpoint exactly where emissions are. Without clear data, it’s difficult to create solutions and present a business case for investing in addressing the biggest emitters.
Ultimately, in 2023 commercial leaders must assume and expect volatility, ambiguity, and complexity. A somewhat daunting task but one that reaffirms the critical role played by commercial leaders across the public sector. Adapting to this challenging environment will be down to having the right people focusing on an innovative, more sustainable future.