Strategic procurement leadership influences profitability, risk management, innovation, and sustainability.
Research shows that companies with mature and strategic procurement functions achieve significantly stronger financial performance. According to McKinsey, such companies can reach up to +5 percentage points higher EBITDA margins than comparable organizations with less mature procurement processes. External purchasing of goods and services typically accounts for 50–80% of the cost base, and managing this share directly impacts profitability.
Sources: McKinsey (2023), Hackett Group (2024)
Strategic procurement leadership is about shifting capacity from transactions to strategy. The Hackett Group documents that so-called “world-class” procurement functions operate 21% more cost-effectively, with 32% fewer full-time equivalents (FTEs), and 20% more of total spend under management. This is achieved through digitalization, standardization, and cross-functional collaboration.
Source: Hackett Group, Digital World Class Procurement Advantage (2024)
After several years of geopolitical and supplier instability, risk has become a top priority for CPOs. The Deloitte Global CPO Survey (2023) shows that more than 70% of procurement leaders experienced increased risk over the past 12 months, and 43% described the increase as “significant.” Strategic CPOs establish cross-functional control towers to monitor suppliers, prices, and capacity risk.
When the CPO takes a strategic role, the focus shifts from price negotiations to value creation. Supplier relationships become arenas for innovation — an area McKinsey (2024) points to as directly linked to higher revenue growth and stronger margins. Through co-development and joint planning, procurement can contribute to new products, better quality, and faster time-to-market.
The CPO has become a key player in sustainability work. Procurement accounts for the majority of a company’s indirect emissions (Scope 3). According to McKinsey (2023), procurement now holds some of the most important levers for reducing climate risk and strengthening the company’s license to operate. Strategic CPOs collaborate with suppliers to reduce emissions, improve reporting, and ensure compliance with international standards.
Characteristics of a strategically mature procurement function include:
When the CPO is given a strategic mandate, the organization shifts from cost focus to value creation. The company achieves stronger margins, lower risk, better supplier collaboration, and a faster pace of innovation. Strategic procurement therefore becomes not just a support function — but an engine for growth, sustainability, and competitiveness.