Addendum... | ESG in South African Procurement is a Balancing Act for CPOs

In this article we draw from insights shared at a discussion event we sponsored earlier in 2025, which explored the unique ESG pressures and opportunities in the South African procurement space.

The event, called CPO Connect, forms part of Addendum’s broader campaign in partnership with Smart Procurement World, South Africa’s leading platform for procurement thought-leadership. As co-sponsors of all their flagship events for 2025, we are creating spaces for senior procurement officers and finance leaders to connect, share knowledge, and unpack how tools like Supply Chain Finance can empower Chief Procurement Officers (CPOs) to drive resilience, impact and profits.

With unemployment rates hovering around 33% and widespread poverty, procurement strategies are increasingly tailored to drive job creation, support small and medium enterprises (SMEs), and uplift communities.

Chief Procurement Officers navigate a complex landscape

In South Africa, Chief Procurement Officers navigate a complex landscape where Environmental, Social, and Governance (ESG) principles collide with pressing economic realities.

Unlike their European counterparts, who prioritise reducing carbon footprints through measures like choosing trains over airplanes, South African CPOs face unique challenges rooted in the country’s socio-economic context. The urgency of addressing poverty, unemployment, and inequality often overshadows environmental and governance concerns, creating a distinct ESG dynamic. This opinion piece, informed by a recent discussion forum with top South African CPOs, explores the multifaceted challenges they face, highlights innovative approaches, and examines how Supply Chain Finance (SCF) offers transformative solutions.

South Africa’s ESG reality means survival over sustainability

In Europe, ESG is often synonymous with environmental initiatives like cutting CO₂ emissions. In South Africa, however, the reality is different. With unemployment rates hovering around 33% and widespread poverty, procurement strategies are increasingly tailored to drive job creation, support small and medium enterprises (SMEs), and uplift communities. This shift reflects a pragmatic reality. For many South African corporates, survival and economic stability are immediate priorities, relegating environmental goals to a secondary role.

This tension creates a significant challenge for CPOs. How do they align procurement with ESG goals when societal needs demand urgent attention? The answer could lie in redefining ESG to fit the South African context, where social impact is not just a component but the cornerstone of sustainable procurement. 

Strategies and struggles from SA’s corporate leaders

Insights from leading South African corporates reveal both the depth of ESG integration and the hurdles CPOs face. Some companies in the mining industry, for instance, has embedded ESG into its procurement and supply chain strategies, going beyond compliance to act as a de facto financial institution for local economies. By investing in community development around its mining operations, the company supports business growth in surrounding areas. However, this approach is not without challenges. Navigating social and political complexities requires significant resources, and balancing these efforts with profitability remains a constant struggle.

An often-raised dilemma is around the question “what takes priority?” – is it return on investment (ROI) or ESG? The fact is sustainable procurement, and social responsibility must coexist with financial viability, but achieving this balance is fraught with difficulty.

Many South African CPO leaders are aware that long-term strategies are needed for effective ESG adoption. The thinking is that ESG cannot be implemented overnight; it requires an ongoing, proactive search for opportunities within South Africa’s unique context.

A common theme does arise, and this is, while ESG is a strategic priority, its execution is hampered by competing priorities and resource constraints.

Does ESG Starts with empowerment and community support?

SMEs are critical to South Africa’s economy, yet they face significant barriers, particularly access to funding. CPOs recognise that integrating SMEs into supply chains is essential for job creation and economic empowerment, but the financial risks are substantial. The challenge persists, in that without adequate funding, SMEs struggle to scale and meet corporate procurement standards.

This funding gap highlights a critical issue for CPOs. Traditional procurement models prioritise cost and efficiency, often sidelining smaller suppliers. Transitioning to a “total cost view” that incorporates long-term sustainability, and social impact requires a fundamental shift in mindset. CPOs must weigh the immediate costs of onboarding SMEs against the broader benefits of resilient, inclusive supply chains – a calculation that is both complex and resource-intensive.

Supply Chain Finance as a bridge to ESG impact

Supply Chain Finance (SCF) emerges as a powerful tool to address these challenges. By providing early payment solutions and improving cash flow, SCF enables SMEs to participate in corporate supply chains without the burden of delayed payments. This financial support is crucial for small businesses that lack the capital to scale operations or meet ESG-related requirements, such as adopting sustainable practices or investing in community initiatives.

SCF also facilitates long-term supplier partnerships, a key consideration for ESG success. By offering extended payment terms or order financing, corporates can secure 5 to 6-year contracts with suppliers, building stability and encouraging investment in sustainable practices. For example, SCF platforms can connect funders to SMEs, streamlining due diligence and reducing investment risks. This approach not only strengthens supply chain resilience but also aligns with the social focus of South African ESG by empowering local businesses and creating jobs.

Moreover, SCF can support the adoption of green bonds, which are gaining traction in South Africa’s finance sector to fund sustainable projects. By integrating SCF with green bond initiatives, CPOs can channel capital into environmentally friendly procurement practices, bridging the gap between social and environmental priorities. However, the high cost of funding remains a barrier, and CPOs must navigate rigorous due diligence processes to ensure investments are viable.

The ESG roadmap, opportunities and obstacles

Innovative approaches to ESG implementation offer hope, but they also underscore persistent challenges. One suggestion from the forum forum was to tie ESG deliverables to specific product categories, making compliance measurable and enforceable. This approach could streamline procurement decisions but requires robust data and supplier collaboration-resources that many companies lack.

Another solution offered, was to continuously engage suppliers and evaluate them on ESG commitments. This way companies ensure that procurement decisions reflect long-term ESG goals. Yet, this level of integration is resource-intensive, and not all companies have the capacity to emulate it.

The shift to a “total cost view” further complicates procurement. While factoring in sustainability, resilience, and compliance costs is essential, it challenges traditional metrics focused on immediate savings. CPOs must justify higher upfront costs to stakeholders, a task made difficult by South Africa’s economic pressures. Without clear metrics or industry-wide standards, this transition remains a work in progress.

Collaboration is the answer

South African CPOs stand at a crossroads. The urgency of addressing social inequality, coupled with the need for economic viability, creates a procurement environment unlike any other. While challenges like SME funding, cultural transformation, and balancing ROI with ESG persist, solutions like Supply Chain Finance offer a path forward. By leveraging SCF to empower SMEs, secure long-term partnerships, and support sustainable projects, CPOs can align procurement with South Africa’s unique ESG priorities.

However, success requires collaboration. Corporates, funders, and suppliers must work together to create platforms that connect capital to opportunity, ensuring that ESG initiatives are both impactful and financially sustainable. As South Africa’s procurement landscape evolves, CPOs will play a pivotal role in shaping a future where social impact and economic resilience go hand in hand.