The latest research from global management consulting firm McKinsey & Company emphasises that procurement in construction companies will play a pivotal role as they navigate uncertainty and try to achieve sustainability targets.

In its latest report 'The strategic era of procurement in construction', the firm notes that 40% to 70% of a construction company’s total spending stems from procurement and that many chief procurement officers (CPOs) in the industry believe consistent application of best-in-class procurement practices could contribute to up to 12% in cost savings.

Despite this, and the significant margin impact, the construction industry is far behind others in implementing these best practices, McKinsey points out.

It highlights that the role of procurement is also rapidly elevating in strategic importance.

The construction industry is directly and indirectly impacting 25% of global carbon dioxide (CO₂) emissions, mainly through the production processes of input materials and the energy efficiency of the structure through its lifecycle.

As 90% of emissions for construction companies are Scope 3, the report highlights that procurement, as the main interface with the construction value chain, should be key to reducing the carbon footprint of construction projects and meeting corporate sustainability targets.

McKinsey points out that procurement will play a pivotal role in making cost and sustainability trade-offs, identifying the most sustainable suppliers, and securing access to many sustainable materials and technologies that will be in short supply.

That requires new skill sets, data and insights, and new decision-making processes and involvement in the construction projects by procurement professionals, it notes.

In the near-term, procurement teams of construction companies will need to create transparency and estimations for the CO₂ footprint across the value chain, gain granular perspective on costs and emissions from different materials and available suppliers, and work with engineering and project management teams to manage trade-offs of cost / value versus emissions to prioritise solutions that can drive both profits and sustainability, McKinsey avers.

McKinsey says these actions will be enabled by three key themes, namely talent and expertise; roles and mandates; and data and market intelligence.

“The role of the CPO in construction companies is at an inflection point. Those who act now will position themselves as attractive partners to leading developers in the future in making cost and sustainability trade-offs, identifying the most sustainable suppliers, and securing access to many sustainable materials and technologies that will be in short supply.

This strategic element will put construction company CPOs in the driver’s seat as they navigate the dual mission of improving profitability in volatile times while decarbonising construction,” says McKinsey partner Erik Sjödin.