How are governance regulations changing for procurement teams, and how can Unit4’s Source-to-Contract solution simplify compliance?
Governance is no longer just a concern for struggling procurement teams but is becoming a critical priority across organizations due to increasing scrutiny from stakeholders and investors.
This increased pressure is the result of Environmental, Social, and Governance (ESG) reporting becoming a key focus for the whole organization since 2024.
As governance standards evolve, managing complex procurement processes requires modern solutions meaning those who are yet to transform will struggle with legacy approaches.
In this blog we will explore how governance standards are changing regionally, how procurement teams will face greater scrutiny, and how Unit4 Source-to-Contract’s procurement platform can help teams comply – keep reading to learn more.
What is Governance in Procurement?
In the framework of Environmental, Social, and Governance (ESG), Governance represents the systems, policies, and practices that ensure an organization’s supply chain operates ethically, transparently, and in compliance with regulations.
Within procurement, Governance focuses on creating a structured and accountable process for managing supply chains, aligning supplier activities with ESG goals, and ensuring legal and ethical standards are met.
Governance in procurement ensures compliance with both regional and global regulations, addressing critical areas such as anti-corruption laws, human rights protections, and environmental reporting requirements. This level of oversight helps organizations mitigate risks, safeguard their reputations, and avoid financial penalties.
Modern Governance also integrates technology, as procurement teams rely on data to analyze supplier performance, identify supplier risks, and ensure compliance. Advanced procurement platforms centralize supplier information, automate compliance processes, and provide detailed reporting to stakeholders, reinforcing trust and transparency.
Click to read Procure with purpose
How Governance is changing for modern procurement teams
Regional variations in procurement governance create challenges for organizations with outdated systems as differing regulations require tailored compliance approaches to simply comply, let alone to easily manage the workload that comes with basic compliance.
Legacy systems often lack the flexibility to track regional requirements, automate compliance processes, or provide real-time insights, leading to inefficiencies, higher risks of non-compliance, and difficulties in reporting across multiple jurisdictions.
Regional Governance Standards
Considering the regional and global variations in governance standards highlights the challenges faced by all organizations within these regions, as well as the complexity facing organizations whose supply chain operates globally across different regions.
Governance regulations in Europe:
Governance in Europe is driven by directives like the Corporate Sustainability Reporting Directive (CSRD) and the EU Green Claims Directive. These regulations require procurement teams to collect and verify supplier ESG data, prevent greenwashing, and conduct extensive due diligence.
With increasing data volumes and varying regulatory adoption across member states, organizations need scalable digital tools to simplify compliance, and must ensure these solutions are adopted swiftly, with the directive being effective as of January 2024.
Governance regulations in United Kingdom:
Post-Brexit regulatory changes, along with new laws such as the Procurement Act 2023 and amendments to the Modern Slavery Act, have significantly shifted the landscape for procurement in the UK. Additionally, climate-related reporting has become a key focus, pushing organizations to disclose their environmental impact and that of their suppliers.
These regulations place a strong emphasis on transparency, social value, and ethical business practices, reflecting a broader societal demand for greater accountability in how organizations operate and interact with their supply chains.
Procurement teams are now required to ensure that their processes are in full compliance with these regulations, which can involve rigorous supplier audits and the implementation of transparency measures to demonstrate responsible sourcing practices.
Governance regulations in United States:
Federal Supplier Climate Risks and Resilience Rule, the Uyghur Forced Labor Prevention Act (UFLPA), and the Foreign Corrupt Practices Act (FCPA) impose strict compliance requirements, particularly for organizations that operate as federal contractors or within high-risk industries such as manufacturing and electronics.
The Federal Supplier Climate Risks and Resilience Rule ensures federal government contractors disclose their climate-related risks and resilience strategies. This requires organizations to assess their entire supply chain for climate vulnerabilities and implement measures to mitigate effects with effective methods to report on this.
Similarly, the Uyghur Forced Labor Prevention Act focuses on preventing the use of forced labor from the Uyghur population in China's Xinjiang region. This act necessitates in-depth tracing of supply chains to ensure that no goods sourced from this area are used in U.S. markets.
The Foreign Corrupt Practices Act (FCPA) requires U.S. companies to adhere to anti-bribery and anti-corruption measures when conducting business with international suppliers. Organizations must invest in comprehensive compliance programs and technologies to ensure transparency and track supplier activities effectively.
How to Simplify Governance compliance for Procurement with Unit4 Source-to-Contract
Unit4 Source-to-Contract by Scanmarket provides a centralized platform to manage governance compliance seamlessly.
By enhancing data management across the procurement function and integrating seamlessly with a broader ERP system, Unit4 Source-to-Contract by Scanmarket facilitates effective collaboration with other key departments such as Finance and HR, a crucial factor in meeting ESG reporting and governance compliance requirements.
The Carbon Accounting module allows procurement teams to track, report, and analyze Scope 3 emissions, giving them the tools to measure and reduce carbon footprints within their supply chain.
Unit4 eRFx significantly optimizes the supplier vetting process through automation, streamlining supplier selection and allowing teams to assess both current and potential suppliers more effectively.
The Supplier Management module deepens visibility into the entire supplier base, improving risk management and safeguarding supply chains. It also supports compliance efforts by automating up to 65% of manual tasks, freeing procurement teams to focus on strategic activities that drive ESG objectives.
By adopting Unit4’s Source-to-Contract solution, procurement teams gain the tools they need to fulfill their role in compliance effectively. Explore the full capabilities on our product page, hear directly from our customers, or get in touch with our sales team today to learn more.
