What’s the Value in Sustainable Procurement? Insead, Ecovadis and PWC chip in.. (part 2)

In the first post in this series, I looked at the average payback associated with a range of sustainability initiatives within procurement, based upon a recent quantitative study by Ecovadis, INSEAD and PWC. Continuing to examine the findings from this research study today, I thought I would share three quick case studies that caught my eye in the report tied to what has become arguably the most frequent driver of CSR programs in North America (and increasingly in the UK and Europe): direct cost savings. The study suggests that there are three key areas of cost savings linked with sustainability: reduced internal costs, reduced specification costs and reduced compliance costs.

As examples of reduced internal costs, the study cites a number of company examples, including the case of Baxter International which through “water conservation, energy efficiency, green building projects” and related “eco-friendly” initiatives was able to save $11.9 million in environmental income, savings and cost avoidance.  Another example in the reduced internal cost area was UPS’ effort around route optimisation, which saved the company over $8 million per year and cut annual C02 emissions by 32,000.  Dozens of other similar case studies abound for companies looking to build procurement CSR business cases for reduced internal costs, usually around the direct savings of energy (often transportation) related initiatives.

Spend Matters has long covered the opportunity around reduced costs (and reduced environmental impact) through packaging and packaging systems redesign.  In January, I’ll share some examples from our research in this area.  Yet the Ecovadis, INSEAD and PWC study also offers a number of useful case studies in the European market specific to reduced costs through specification changes.  These include how Nokia saved “more than €100 million by placing a greater emphasis on the reduction of packaging”.  As another example Lafarge, a cement provider, “introduced one-ply cement bags instead of the standard double- or triple-ply bag,” reducing material costs and cutting down on packaging usage.

In the area of reduced compliance costs, the study raises the case of how companies in France that work with “social and solidarity organisations” to increase the number of disabled people employed in their company can receive a tax reduction of €3.2 million.  Organisations looking to build a rationale to invest in procurement-led CSR initiatives in areas outside pure "cost savings” can look to many regulatory areas to target, the subject of which I’ll tackle in a future column as well.

And in the last of this series tomorrow, we'll look at the potential costs when things go wrong in terms of CSR supply chain issues.

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