What’s the Value in Sustainable Procurement? Insead, Ecovadis and PWC Chip In … (Part 1)

I recently had the chance to catch up with former FreeMarkets co-worker, Pierre-François Thaler, whose business, Ecovadis, which he founded with fellow procurement industry colleagues, is going, as we say in the States, gangbusters.  Ecovadis sells enrichment data and tools to help procurement and supply chain organizations track CSR behaviour, credentials and general activity in their supply chain.  Given the booming interest throughout the EU and UK in sustainable procurement practices – especially relative to the US, which is still very much dipping its toes in the green waters – it’s no surprise that Ecovadis has exceeded many of the targets it set out for itself in recent years.

I’ll provide a specific update on Ecovadis' progress, offerings and a general view on driving sustainable procurement programs and related cost savings / cost avoidance in the New Year, but I did not want to wait to share some of the results from a recent study they conducted, in conjunction with Insead and PWC, which provides a quantitative analysis of value drivers associated with sustainable procurement.

According to the results of the study examining Global 2000 companies which Pierre shared with me, the payback from investing in risk reduction activities in the supply chain targeting the financial impact on “brand value from bad supplier practices (e.g., child labour, local pollution); economic cost of supply chain disruptions (e.g., noncompliance with environmental regulation,” etc. is eighty-five times the cost associated with the initial risk reduction investment. Yes, you read that correctly – the payback is 85x the investment.

From a revenue growth perspective, by targeting “additional revenue through innovation of eco-friendly products/services” due to new product introductions, price premiums or “income on recycling programs” the payback, according to the joint study, is fifty-eight times the initial investment.  As one example that Pierre- François shared with me, Bovis Lend Lease conducted a CSR assessment of 329 suppliers that directly led to the submission of a winning bid for a £2.4bn schools contract.  According to the CPO of the company, Nigel McKay, “we won that bid based on the sustainable supply chain policies because we had all of this in place and could demonstrate it”.

In the second part of this post (to come soon), I’ll share some additional findings from the study as well as some recommendations we’ve made to colleagues and readers over the years in the sustainable supply chain as well (we'll also get more specific on where some of the above-referenced payback numbers are coming from).  Clearly, even though the UK and Europe are ahead of the US in many procurement CSR areas, I’d argue that since we’re still in the early stages overall with these programmes in general, there’s much we can all learn from individual examples and case studies, as much as larger scale survey results.

Voices (2)

Discuss this:

Your email address will not be published. Required fields are marked *