Is the Environment Part of a Total cost Sourcing Equation? EU Consumers Think So

In a corporate setting, we're all taught in procurement to think about sourcing as a total cost decision, factoring in unit cost and non-unit cost factors (e.g., quality, inventory carrying costs, service levels, supply risk, supplier diversity, etc.) This is often -- or at least should be -- a question of weighting both the soft and hard factors into what is ultimately a quantitative decision process. In contrast, most customers aren't as analytically rigorous in determining their own total cost equation in individual sourcing decisions. Yet, despite the economy, which is driving many to prioritize low cost, they most certainly consider a range of factors in evaluating their options. Recent evidence over on 2Sustain suggests just how this is playing out when it comes to personal procurement decisions and the environment.

According to the above-linked post, "A new Eurobarometer survey finds that four out of five Europeans consider the environmental impact of the products they buy. 83% of EU citizens polled said the impact of a product on the environment plays an important aspect in their purchasing decisions. The percentage was even higher among Greeks (92%); it was lowest among Czechs (62%)... 72% thought that a label indicating a product's carbon footprint should be mandatory." Also interesting is the notion of a type of product carbon tax on items that don't fit in within the idealized green consumer products vision. Consider that the survey also revealed "46% [of respondents] said they thought that the best way to promote environmentally-friendly products would be to increase taxes on environmentally-damaging products and decrease taxes on environmentally-friendly products."

When it comes to total cost sourcing decisions closer to home in the US, it would seem from all of the anecdotal and quantitative consumer products research I've read of late that cheap, private label goods are winning out over environmentally friendly ones (or at least those marketed as environmentally friendly). And retailers are ramping up private label sourcing efforts to support this demand, focusing first on what they know consumers will buy versus what they necessarily want if they had more pennies in their pocket book. Which is not exactly good news for stores like "Whole Paycheck" that make their margin when customers prioritize the soft factors in their sourcing decisions.

Jason Busch

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