IS YOUR BUSINESS DOING GREEN PROCUREMENT?

Green procurement involves evaluating your supply chain and looking at where the products come from, what they are made of and what happens to them once they have been used. In today’s climate, the most important aspect is considering if the purchase needs to be made at all and — if it does — ensuring quantities are accurate and there is little wastage.

“Before an organization can go green, it has to want to go green”

The belief that a company can benefit by balancing the concerns of economics, the environment and society in its procurement processes and operations — is not a new development. Companies realized long ago that efficiency in energy usage, waste generation and water consumption could lower costs.But growing economic pressures, rising expectations of customers and other key stakeholders, and evermore stringent government regulation are increasing the focus on “green” procurement for many companies.

An organization wanting to maintain profitability while taking on responsibility for the environment and looking after its consumers must reach beyond merely using recycled materials and reluctantly complying with government regulations.

“Sustainable Development” was the key concept of the 1992 Earth Summit in Rio, as governments and international organizations committed themselves to take action to protect the environment as in integral part of long-term economic development. Environmentally-responsible consumption and production is seen as an essential part of the strategy to improve environmental quality, reduce poverty and bring about economic growth, with resultant improvements in health, working conditions, and sustainability. In particular, organizations were called upon to exercise leadership in the promotion of environmentally sound goods and services.”

Procurement organizations that are deeply committed to sustainability and want to attain the full value from it share common traits and practices:

• Transparent, formalized measurement and metrics of sustainability across the entire supply chain;
• Focused product and process innovation emphasizing reduction of the overall total cost of ownership;
• Sustainability leadership focused on maintaining strong supplier partnerships.

Procurement’s integral role in a company’s operations makes it the central touch point for all stakeholders, customers, suppliers, subcontractors and service providers to effectively collaborate and build sustainability across the entire supply chain.

Using a holistic approach, a sustainable procurement organization addresses the economic, social and environmental elements of every procurement decision. Careful evaluation of the components within these three elements results in outcomes that benefit the rest of the company and creates the framework for sustainable procurement.

“A business’ green procurement policy should strive to purchase products and services that have less negative impact on the environment. Environmental considerations forms part of the evaluation and selection criteria, which could cover, depending on goods and services to be purchased, their manufacture, transport, packaging and disposal.”

Two Approaches to Green Procurement

Business has evolved two approaches to integrating environmental considerations into procurement decisions. These can be termed a “Product Approach”, which examines goods and services and attempts to rate them according to environmental impacts, and a “Supplier Approach”, which looks at the supplier (preferably a manufacturer or service provider) and rates the organization as a whole.

Companies employ both approaches with differing degrees of thoroughness. Some devote considerable resources to environmental “policing”, sending environmental auditors to carry out in-depth examinations of suppliers, operations and supplies, whilst for others it is little more than a token gesture.

A Product Approach typically uses the tools of life-cycle analysis and total cost analysis to attach an environmental rating to a proposed purchase. Supplier Approaches seek ways to rate companies and suppliers according to their overall environmental performance, typically using questionnaires and outside audits and rating systems, such as Environmental Management Systems.

Both approaches have associated advantages and disadvantages, depending on the procurement patterns of the organization involved and the degree of centralized oversight that a particular funding or UN agency wishes to exert.

Integration with existing procurement regulations

Green procurement does not seek to re-write the book on procurement, but merely to add an environmental dimension to the decision-making process. The standard purchasing criteria, of price, quality and availability, remain paramount. The environmental impacts of a good or service procured can be seen as part of the “quality” criterion.

Whilst every organization should establish a “de minimus” — a list of items which they will not purchase, green procurement should not normally be seen as being prescriptive, and restrictive to procurement staff. There will be occasions where a product’s exceptionally competitive price will be an over-riding factor in a procurement decision, despite negative environmental factors. On the other hand, there will be occasions where a product’s negative environmental impact, or particular environmental advantage, prove to be decisive in a procurement decision.

The importance of a green procurement policy is that procurement staff are asked to consider environmental impacts, and are allowed to make decisions accordingly. It can make a significant difference to an organization’s environmental performance, as well as send a powerful message to businesses that the environment is taken seriously.

Five Benefits of Green Procurement

Below are five benefits of becoming a green procurement organization:

1. Brand Image: An organization that has gone green is seen as a good corporate citizen. This increases its image in the eyes of the public.
2. Customer Satisfaction: An organization that goes green in response to customer concerns increases its levels of customer satisfaction, a key point in customer retention.
3. Reduced Risk: Not only is any company that does not go green risking a run in with the law by failing to comply with green regulations, which are multiplying at the rate of Fibonacci’s rabbits around the world, but it is also maintaining more liability than it needs to. Hazardous chemicals are just accidents, and lawsuits, waiting to happen. With green purchasing, you can offset financial and environmental risk, rather than just inheriting it from your suppliers.
4. Cost Reduction: Going green doesn’t cost more. Most of the time it actually saves money, especially when the new products use less energy, generate less waste, and last longer. Plus, sometimes green products work better than their toxic counterparts! Going green can reduce the following costs, among others:
   • hazardous material management costs
   • operational costs
   • repair and replacement costs
   • disposal costs
   • health & safety costs (which often come in the form of liability insurance and expensive settlements)
5. Increased Shareholder Value: A better brand with happy customers who keep coming back and drive up sales while costs keep falling results in significant ROI and EPS, and this makes investors as giddy as school-girls — which is every company’s #1 goal, whether they admit to it or not.

Planning is key

Green procurement involves evaluating your supply chain and looking at where the products come from, what they are made of and what happens to them once they have been used.

As you will have a better idea of exact cost of a commodity, you will be able to accurately predict expenditure for the future. But while a long-term sustainable procurement approach will also allow you to have a much better idea of your long-term costs, planning is key to delivering green objectives.

You need to be able to accurately anticipate stock levels and equipment usage over a period of time. Suppliers and your own staff need to be well informed and trained about any changes you are making to your procurement procedures to maximize the benefits.

Conclusion

Market prices fail to provide accurate information about the ecological and social impacts of products and services. This makes it difficult to generate purchasing decisions consistent with reliable prosperity. Green procurement policies seek to provide the same level of quality while continuously decreasing destructive environmental and social impacts. They do this by increasing purchases of products and services compatible with reliable prosperity.