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A Big Green Idea: How Procurement Can Balance Profitability and Sustainability

10/01/2018 By

External forces — from climate change to shifts in generational expectations — are causing businesses to take a hard look at the sustainability of their supply chains, and procurement organizations are uniquely positioned to effect environmental and financial change for the greater good, speakers said at Procurious’ 2018 Big Ideas Summit on Thursday in Chicago.

In presentations from leading procurement professionals and supporting technology providers, speakers encouraged attendees to reconsider what was possible in the supply chain, including common misconceptions about sustainability.

Executives, for example, are often reluctant to put sustainability at the heart of their operations strategies, as they believe such initiatives will raise production costs, harming profitability. Speakers, however, set out to prove the opposite: Sustainability, innovation and effective supply chain management can work together to deliver better outcomes for the business and the planet.

“Stakeholders, including end consumers, B2B customers and shareholders, are demanding that businesses take responsibility for practices all the way into their value chain,” said Daniel Perry, global alliances director at EcoVadis, a provider of third-party corporate social responsibility (CSR) and sustainability ratings. “They’re driving transparency and, ultimately, a positive impact by working with high-integrity partners. And it’s procurement teams that are in the ideal place to meet these higher stakeholder demands.”

What’s Driving the Green Wave

Interest in sustainability is not new. Most major corporations publish annual reports detailing their CSR and environmental cleanup efforts. But what has changed is sustainability’s shift from a “nice to have” element to a requirement of doing business.

Oliver Campbell, director of worldwide procurement and packaging at Dell, said the global population is forecast to grow to 8.5 billion people by 2030, in effect adding another China or India to the planet. That kind of growth in just over 10 years will create a considerable strain on resources, including a 55% increase in water demand compared with the year 2000.

Between resource constraints and the potential effects of climate change on highly populated coastal areas, these trends are expected to restrict access to materials, increased migration and higher political volatility — all potentially bad for business.

Compounding this is a trend among consumers to select companies that know about these challenges as both brands of choice and as employers. Younger generations in particular are now shopping for businesses that “align with their values,” Perry said. Sustainability is not just an existential threat; it’s a cost of doing business in the modern world.

Large companies are moving to address these challenges — albeit slowly — yet they only comprise a portion of the total supply chain. The real challenge comes down to small and medium-sized businesses, which Perry said are struggling to bring leading CSR practices into their supply chains. He shared the following statistics to illustrate his point:

  • 71% of SMBs have no greenhouse gas (GHG) or energy policy
  • 65% of SMBs have no anti-corruption policy
  • 57% of SMBs have taken no data security measures
  • 74% of SMBs have no policy to handle anti-discrimination actions

In light of these hurdles, Campbell provided a powerful case study on how one OEM at the end of the supply chain can drive meaningful change globally. 

Combining Sustainability and Profitability: The Dell Example

By 2050, there will be more plastic than fish in the ocean. Humans dump 8 million tons of plastic in the ocean every year, 60% of which is land-based from South Asia. And that rate will grow to 80 million tons by 2025 if nothing changes.

To Campbell, this situation is untenable. As a company that has in the past contributed to the flow of plastic into the ocean, he saw a moral imperative to contribute a solution to the problem. Doing so would require rethinking everything from the materials used by Dell to supply chain design, but Campbell saw both an ethical and a business payoff in doing so.

Dell began working on the ocean plastic problem in 2015, after forming a partnership with Lonely Whale, an incubator dedicated to improving ocean health. The two began performing feasibility studies and assessments to determine where the company should focus.

By 2017, Dell had launched its first pilot program, using ocean bound high-density polyethylene (HDPE) in packaging for its XPS 13 notebooks. The initial effort collected recycled plastics from waterways and beaches to use in the product’s packaging tray, ultimately preventing 16,000 pounds of plastic from reaching the ocean that year.

What surprised Dell the most, however, was that the initiative also resulted in savings. The plastic procured from recycled sources — whether post-consumer plastics like CD cases and water bottles or repurposed carbon fiber from aerospace scrap that replaced magnesium-based parts — actually cost less than the original method.

Committing to sustainability also allowed Dell to find innovative new ways to approach problems of packaging. In addition to ocean-bound plastics, the manufacturer now uses molded paper pulp, mushrooms and bamboo to improve packaging sustainability. This diversity of materials has made the packaging supply chain less dependent on any one material, giving packaging designers more options for how to approach a product from a cost forecast and sustainability perspective.

In keeping with its vision to create meaningful change in global supply chains, Dell is not keeping these innovations to itself. The company was a founding member of NextWave, a working group of businesses that have committed to 10 principles designed to “decrease the volume of plastic and nylon litter and waste before it enters the ocean,” according to the group’s website.

Dell, along with GM, is by far one of the larger companies in the group, but it sees its leadership in this area as a way to pull other companies, including smaller supply chain participants, into a common goal around sustainability. Building scale into the solutions for not only ocean plastics but environmental sustainability in general will require companies large and small to adopt common goals.

“We need a solution that is commensurate with the size of the problem,” Campbell said.