When it comes to green, I'll be the first to admit that I'm a skeptic when it comes to defining, measuring and managing success metrics in the RFQ and supplier management process. But a presentation at ISM led by DHL's Wayne Evans (SVP of Procurement) and JVKellyGroup's Jim Kelly (CEO and Managing Principal) did a great job providing background details that I was able to immediately put into practice from a recommendation standpoint. I liked the argument that Wayne and Jim made because they tied sustainability both to overall environmental impact and cost savings -- not simply going green for green's sake. In this two-part post, I'll highlight some of the suggestions and pragmatic advice that Jim and Wayne provided during their session at ISM.
DHL (a division of Deutsche Post) and its parent company collectively have over 520,000 employees. The portion of spend that that the DHL group manages amounts to spend of over $10 billion euros in the areas of telco, fleet, services network supplies and production equipment (in addition to $10 billion in transportation in process). 500 professionals and 6 regional procurement heads manage these efforts. This is important when it comes to the overall company charter and focus on corporate responsibility around green initiatives with a stated goal to improve carbon efficiency by 10% by 2012 and 30% by 2020 (including sub-contractor spend).
But efforts such as these in the current environment are easier said than done. During the presentation, Wayne recommend first developing an understanding of baseline carbon efficiency (something DHL did overall). Then, he suggested starting with defining a savings-based argument because "presenting your strategy as going green [alone] is not going to work" with the business. Next, align with the goals of corporate initiatives as well as government certifications and regulations. Only then should companies look at the overall environmental impact of the proposed agenda.
As one example of working with its supply chain partners to go green and save money, the Exel division of Deutsche Post / DHL retrofitted lighting for a client's distribution center. DHL replaced 417 HID and HPS lamps/fixtures with T5 HO fluorescent technology and also "sensored every other lamp in aisles to activate lights based on movement". While the initial investment costs were $185K including labor and installation, DHL was able to partially offset the costs with a local utility (a supplier) incentive of $79K. Within the first year of operation, the savings greatly exceeded the investment, surpassing $181K.
But how does DHL monitor and manage green programs with its suppliers in general (versus just in targeted initiatives). DHL suppliers must sign "a code of conduct adhering to minimum standards in the area of CSR". Next, DHL has a standard green section contained within all of its RFIs that asks questions such as:
Does your company employ an environmental and/or green supply chain policy?
Please explain which type of policy does exist in your company (e.g, in-house, ISO 14001, EMS, etc?)
Based on your policy do you have qualitative or quantitative measure or targets to greener your supply chain? If yes, please explain
Do you publish any environmental reports (e.g., sustainability development reports, audit reports) If yes, are they audited by 3rd parties? Please provide details
Do you have a proactive approach to reduce your C02 emissions or your carbon footprint? If yes, please provide details
Can you offer DPWN alternative products, services or solutions that can help DPWN to reduce or minimize environmental exposure or C02 footprints? If yes, please provide details; if no: Do you intend to work proactively to implement an environmental policy in the future?
Stay tuned for Part 2 of this post next week when we explore how DHL is targeting sub-contractor spend to improve carbon efficiency and how the organization is changing the overall mindset and approach of its procurement organization to green initiatives.
Interested in learning about the intersection of green and cost savings? Read the Spend Matters Perspectives: Redefining Sustainability: Saving Money, Reducing Risk and Going Green and Have You Got the Total Package? Combining Sourcing and Engineering to Drive Packaging Savings and Innovation