GLOBE-Net - September 26, 2008 - Offshoring - The Wal-Mart effect - Corporate Responsibility - These are some of the drivers behind the trend line towards more green and sustainable purchasing.
More and more organizations are adopting sustainability or Corporate Responsibility (CR) commitments - public declarations that the firm is integrating environmental, ethical, and social factors throughout their business strategies, operations, products and services, and in how they relate to their employees, communities, and suppliers.
The Sustainability Purchasing Network in British Columbia, sponsored by Vancity Credit Union, MEC, Bell, Grand & Toy, and Mills Basics, amongst others, recently published a study on the trends and drivers of sustainability purchasing, which points out the tendency for firms to adopt sustainable purchasing policies on the heels of adopting sustainability commitments.
The study also identifies the ripple effect of large purchasers like Wal-Mart. Wal-Mart seeks to use their marketplace influence to persuade their 60,000 suppliers to use less energy and reduce product packaging. Another trend that has raised the ire of activists concerned about sweatshop conditions overseas is offshoring, which is arising from the globalization of the supply chain. Offshoring and supply chain globalization are bringing to the fore issues of factory conditions and workplace human rights overseas.
Sustainable Purchasing Defined
Sustainable purchasing is the selection and acquisition of products and services that generate positive social and environmental outcomes. In addition to traditional purchasing criteria such as price, quality, availability, and functionality, sustainable purchasing takes into account factors like the environment, the social and ethical aspects of products and services, as well as the supplier’s own sustainability performance.
In their Guide to the Business Case and Benefits of Sustainability Purchasing the Sustainability Purchasing Network compiled a number of financial and management benefits to organizations that adopt sustainable purchasing practices, along with a host of positive environmental and socio-economic outcomes.
Among the financial and management benefits:
- Cost reductions in material and utility expenditures, waste disposal, health and safety costs, and legal and insurance costs;
- Attracts customers and helps meet their expectations for sustainably produced goods;
- Simplifies compliance with environmental, health and safety regulations, and reporting;
- Improves access to capital;
- Helps suppliers better understand purchaser needs and promotes product innovation; and
- Helps attract and retain talent and improve employee productivity.
The environmental benefits are myriad; sustainability purchasing reduces waste, resource use, pollutions and toxins, and greenhouse gas emissions, and maintains biodiversity. Integrating social and ethical criteria into the purchasing decision can generate benefits such as better wage levels, working conditions, human rights, and health and safety. It can also support vulnerable groups and provide community services, promote a strong local economy and economic opportunity for indigenous people, and improve conditions in the developing world.
Of course, not every benefit is catalyzed with every purchase. However, as you can see there are innumerable opportunities awaiting those firms who consider the environmental, social, and ethical dimensions of their purchases.
Sustainability purchasing is for all organization types. It’s not just companies that are following this approach. Vancouver’s Organizing Committee for the 2010 Olympic and Paralympic Winter Games (VANOC) has adopted a program they call "Buy Smart," which includes goals to:
- Increase their social, ethical, and environmental performance;
- Support the growth of Aboriginal and minority-owned businesses and the sustainable enterprise sector;
- Increase jobs for socially and economically disadvantaged groups;
- Build higher performance venues and operations to support an excellent Games;
- Support the local and provincial economy;
- Increase sustainability purchasing leading to innovation, trade, and investment in the sustainability sector; and
- Create a best practice model for sustainable purchasing.
VANOC’s 2006/07 Sustainability Report reveals that 99% of their total contracts in that year went through a Buy Smart process. It also states that 80 audits of their licensees were conducted and six factories banned from producing merchandise until critical assessments were addressed.
Looking ahead Lest one think the fascination with sustainable purchasing is going away any time soon, a recent TerraChoice report, EcoMarkets 2008 Summary Report, says otherwise. They surveyed over $78 billion of purchasing power in Canada and the U.S. and found that 68% of North American organizations increased their green purchasing in the past 12 months. They also note 91% of purchasers believe they will become more active green purchasers over the next two years.
More retailers are jumping on the bandwagon of ethical sourcing. An AT Kearney 2007 report revealed that over half of U.S. Fortune 100 corporations are addressing the social aspects of their supply chains, with 54% tracing metrics on supplier labour practices and 32% tracking metrics on supplier wages.
What does the crystal ball foretell for the future? Most purchasers find that the real value of sustainability purchasing lies in supplier engagement. While the early years saw buyers screen out suppliers for poor sustainability performance, procurement professionals are starting to work collaboratively with their firm’s sustainability departments and their loyal suppliers-and generating win-wins for both sides. Purchaser-supplier collaborations are turning out to be a gold mine of product and service innovation, improved social and environmental conditions, and long-term economic benefits for both parties.
Testimonials at the 2008 GLOBE conference from sustainable purchasing professionals from Nestle, Steelcase, SC Johnson, and Cadbury Schweppes were united in their praise for this approach to embedding their firms’ CSR programs. Their stories chronicled the business, social, and environmental benefits of a sustained commitment to sustainable supply chain management.
Firms that overlook the strategic opportunity of engaging their suppliers in their quest to serve new markets, satisfy growing government regulations, manage diminishing resources, and build their corporate reputations are missing a key business opportunity...and the opportunity to leverage improved social and environmental conditions for a straining planet.
For more information on the Sustainability Purchasing Network, go to http://www.buysmartbc.com/
By Coro Strandberg
Coro Strandberg is an Advisor with the Sustainability Purchasing Network