Nov
1
Key differences in businesses that implement green purchasing
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Corporate responsibility has recently garnered much interest amongst consumers. Of particular interest are strategies that focus on the environment and sustainability aiming at reductions in the environmental footprint of the corporation. As a result of this, the supply chain world has seen significant development of procurement strategies that support corresponding corporate goals.
However not all companies are focusing on sustainability and green buying. Does that matter? And what is the relevancy of non participation for those that work in those organizations supply chain teams.
Pressures behind corporate responsibility.
Firstly lets take a look at what drives corporate responsibility. It can be driven for a variety of reasons for example as a result of
• Philanthropy/Ethics
• Legislative
• Customer driven
• Shareholder driven
• Employee driven
Where there is not sufficient pressure in one of these (or other) areas to drive change or where there are more prominent pressures and priorities, focus on corporate responsibility or sustainability can be minimal (there may be a mission statement but little corresponding action). Where there is a lack of strategy there is likely to be minimal drive for change on the supply chain functions and in particular those of procurement.
But what are the key differences? For those companies that have adopted corporate responsibility strategies and sustainability targets they are likely to have developed
• Key targets to be achieved (i.e. CO2 reductions, recycling rates)
• Have key projects underway
• Have developed policies and processes
• Have measures in place to monitor success
• Have people in the organization who have responsibility for delivering the strategy
Buying is buying isn’t it?
Sustainability doesn’t necessarily turn procurement on its head. The key buying stages typically remain largely unchanged i.e.
• Identify the need
• Source a supplier
• Establish a contract/place an order
• Receive the goods
• Pay the supplier
However sustainability does bring with it changes on selection criteria at key stages. For example product specifications and supplier sourcing processes will place significant scrutiny and weighting on factors other than the typical Cost Quality and Delivery (QCD). Where sustainability targets exist commodity managers will need to place significant focus on
Total Life costs (as opposed to initial acquisition cost)
Establishing rules and policies?
Spotlighting suitable products (eg recyclable paper)?
Sourcing alternatives
Working closely with the end users to review requirements in line with sustainability criteria
Benefit measurement
Sustainable procurement requires closer attention to procuring against the corporate policy and rules rather than a particular focus on just cost and/or quality.
With greater significance being placed on green procurement there are understandably a greater number of roles becoming available that have an appreciation of the concept. It’s unlikely that an absence of sustainability on your resume will cause your career any detrimental effects but its probably a safe bet that it wouldn’t do it any harm to have them on it either.
Influencing your organization
Of course just because your company might not have a strategy doesn’t stop you from influencing your organization and suggesting it- there are many online tools you can use to get you started. Indeed of particular importance is the ability to use sustainability to facilitate cost reduction (check out how Indiana University saved money through CO2 reduction as an example).
Sustainability is hear to stay – sure some markets may be sheltered from this for a time but its likely that all markets will have to adopt sustainability practices to an extent at some stage in the future so now is as good a time as any to think about how your businesses will adapt.
Oct
11
Procurement can deliver on sustainability providing the business provides support
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Corporate responsibility objectives have driven many organizations to consider and deploy sustainable procurement strategies in order to help manage the environmental footprint of their business. The supply chain can have a considerable impact, from the materials that are selected through to their logistics choices.
Traditionally, when sourcing suppliers and materials, buyers would focus their selection criteria on a small number of variables: Cost, Quality and Lead time. These variables, set by the business, would equip the buyer when decision making. Many businesses would weight one of these variables, often cost, as a key criteria.
This framework would allow the buyers to function and for materials to flow in and out of the business – however in the absence of further policies (unless present in the material specification) little thought was given to environmental impact of what was being bought. These days, sustainability objectives mean that this mentality must change.
However, if they are to deliver on the promise of corporate responsibility, it is imperative that business considers how to equip those with responsibility for buying (both at a tactical and strategic level).
Rethinking the procurement process
One of the first and sometimes most challenging mindsets to change is to reconfigure the cost, quality and lead time sourcing criteria. Buyers need both training and policies that develop sourcing criteria supportive of sustainable procurement objectives. Once this criteria has been developed the business needs to support it (overcoming “cost is king” mindsets within budget holders).
Business also needs to consider re-engineering key buying processes taking time to consider how the company creates buy signals and what information is utilized by the tactical purchasing team. Consider:
a) Ensuring that the buy signal includes a specification that includes sustainable procurement criteria
b) How awareness of alternative products which meet sustainability criteria can be improved
c) How compliance of key contracts that meet sustainability standards can be sustained.
d) What policies exist which the procurement team should adhere to
Material Selection
Fuelled by both consumer awareness and government legislation, the growth of products that take into account environmental concerns has grown rapidly over the last 5-10 years.
This is great news for buyers as it presents real choice in the market. Sourcing these products doesn’t have to be overly challenging either as there are now various standards and measures that are in place which can assist. Consider, for example, energy star ratings on electrical equipment and CO2 Emission measures on transportation – standards like this can be applied allowing “side by side” reviews of products.
Product knowledge remains a key issue. As part of any sustainable procurement initiative it’s imperative that buyers and commodity managers have awareness of alternatives in the market and methods of comparison. Without this the task becomes ever more challenging.
Changes in supplier selection
Aside from the material – another key determinant is the selection of the supplier. An appropriate framework that allows suppliers to be evaluated on sustainability issues is crucial. Whilst this can be ably supported by suppliers utilizing standards such as BS EN ISO14000 and BS 8903- take up is not yet fully mainstream and so while important it may not be the only factor in the decision making process.
The terms and conditions within contracts being placed with suppliers is also a key consideration. Ensuring contracts include sustainability criteria can drive results towards corporate objectives. This is great for new suppliers whilst appropriately geared communication with existing long term agreements stating that sustainability will be a key factor in the next round of negotiations can start the ball rolling early to drive the market to deliver appropriate products and services.
Summary
The procurement team can be key stakeholders in helping to deliver on corporate responsibility. This does, however ,require the right support from senior management and a recognition that processes and policies will need to change and adapt. There is significant potential. Expertise must be developed, both within the sphere of commodity management and at the front line within the tactical buying teams. Finally, and this is perhaps key, for sustainable procurement to work the wider business must be educated in its corporate responsibility objectives and that cost alone is not a determining force that drives procurement decision making.