Is Green Procurement Really a “Key Competitive” Factor or CSR Window Dressing?

Supply and Demand Chain Executive recently ran a story covering a "Green Procurement Day" held at the European Business School. The article covers a number of the higher-level tactics (e.g., supplier development) that companies are taking to move down a green supply chain path. But it would appear that the participants in the green day did not focus on what I believe is still the primary driver of green behind the scenes: cost reduction. Through such activities as "network optimization" and reducing packaging footprints, companies are saving significant sums – often more than they can drive through other means. Yet the article suggests that cost reduction was a secondary factor among participants: a "surprising discovery was that only a few of the conference attendees made the link between green procurement and cutting costs in procurement." Personally, I believe that any green procurement that does not put cost and risk reduction at the core will, pardon the pun, fail to sustain itself.

During the proceedings, the consultancy BrainNet shared what it describes as "eight procurement dimensions" with green examples. These include "supplier codes of conduct" as part of an overall supplier commodity approach, "supplier assessments" that tie to risk management and "green KPIs" that link with overall procurement performance and measurement. Having looked at a high-level cut of their research, I'm left wanting for the fundamental aspect of what successful organizations like Vodaphone have been able to do with green procurement. To wit, successful and sustainable green sourcing and supplier management strategies require a fundamental rethink of how to put CSR at the core of supply chain strategy to save money (often on a total cost basis), reduce supply risk and avoid scandalous PR headlines. Anything less is just CSR window dressing designed for the marketers rather than the shareholders.

In my view, all companies approaching green procurement should prioritize three things to start. First, expand the definition of what green and sustainable means -- sustainable relationships with suppliers built on trust and mutual development certainly factor into the sustainability equation, yet are rarely discussed as a priority. Second, make any green program pay for itself out of the starting gate. Focus on savings and cost reduction and leverage high profile initial efforts to convince other stakeholders and suppliers to make further investments (e.g., product redesigns that leverage sustainable designs and materials that may cost more on a unit cost basis, but that deliver significant cost reduction over the product lifecycle). Third, focus on program measurement from the start by embedding technology at the core to automate the collection, management and sharing of information. In this regard, supplier information management (SIM) platforms should play a key role in driving green supply chain efforts from upfront certification, credentialing and qualification to ongoing auditing and program management.

Jason Busch

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