By Jordan Sampietro (Principal Consultant, Sustainable Procurement Strategies) & Shaun McCarthy (Managing Director, Action Sustainability).
As the global financial crisis of the last two years becomes a passing but painful memory for many and the green shoots of economic recovery slowly emerge globally, many organizations' sustainability efforts have also been through a period of change and adaptation as well. In procurement, sustainable procurement seemed to have taken a back seat for the short-term as many organizations acted quickly to find ways to stay afloat and weather an unrelenting economic storm but this is now quickly changing. Economists tells us that by economic measures, both in the USA and the UK, recent PMI indices show a sharp jump in manufacturing activity, and GDP growth shows a strong rebound. With the dust settling it's looking more clear now that strong sustainability efforts have not only proven their mettle through these volatile economic times they look even more attractive as organizations try actively to shed and manage risk; an attribute that's core to sustainability and corporate social responsibility (CSR). In particular, sustainable procurement has continued with it's leading role in resource waste reduction and renewable sourcing initiatives in all their forms which has the valuable benefit of slashing costs and perhaps more importantly, also giving organizations more direct control of future costs. Everybody knows that if you know the cost of XYZ commodity 5-10 years ahead you've predicted your long-term cost basis - that's just one example of a competitive advantage concept gaining more prominence in the sustainable procurement crucible. In this article, we've identified two major sustainable procurement trends that we think are not only of interest but also useful for you and your organization while you plan to endure and flourish no matter the volatile economic setting ahead.
One trend we're seeing is what could be called the "green blind spot". It goes something like this. You've gathered all your senior executive stakeholders, held many sessions to determine your organization's sustainability vision and it happened just as you imagined: People were responsive, wonderful ideas bloomed, strategy took shape, and a priority matrix was constructed and helped everyone focus on the identified areas of energy-efficiency, better labor practices overseas, and a new generation of green products. One problem: The sewer-sized pipe in your remote manufacturing operations has been overlooked and gallons of toxic waste pours out into a stream used by other people and animals as drinking water, an unfortunate fact overlooked in a process that over-emphasized the big picture as the only thing that's mattered. This is an example of a "sustainability blind spot" where good intentions miss an important issue that could destroy all reputational benefits of the other sustainability efforts combined. This trend is emerging as organizations quickly ramp up sustainability programmes and might be tempted to try shortcuts or they fail to provide adequate resources supporting a comprehensive sustainability approach. At HP, the global high technology company with a long tradition of environmental stewardship, they approach their sustainability initiatives with the same detailed focus that mirrors their engineering culture. This engineering-style thoroughness gives them the ability to get the "entire picture" and not just the "big picture" helping them avoid such blind spots. So while the big brand-name strategy consultancies add "sustainable procurement" overnight to their product range, as always, it pays to work with professionals who can offer genuine insight and, perhaps more importantly, experience.
Another trend that has gotten a lot of our attention has to do with the length and complexity of global supply chains and an opportunity to reap large cost savings by considering another important dimension in supply chain decision-making. Put simply: Supply chains do not react well to surprises. Most organizations inherently know that unanticipated events reduce confidence and invariably lead to increases in an organization's costs. Companies who manage their supply chains well are highly-aware of this danger and treat sustainability objectives using similar risk management strategies avoiding this possibility of higher costs. There are a handful of companies seizing upon this area as an untapped opportunity to reduce costs. In the UK, examples of best practice has been exemplified by Marks & Spencer and United Utilities. They suggest, in partnership with suppliers, that the supply chain are taken on a journey with key objectives set 5-6 years into the future. This long-term approach allows suppliers to understand what the company will value in the future and enables them to innovate around these themes. The UK subsidiary of US energy technology company FMC has even more ambitious plans, setting out a programme of work with milestones in 2020 and 2050 to first establish an ultra-low carbon supply chain and then to explore product offerings that support a low carbon economy in the future. Most companies that already have a track record in sustainability have reaped a great deal of the benefits and they know it works They now continue to use sustainable procurement as a strategic contributor in planning for future profits. They recognize that the time-tested business adage that "if you fail to plan, you plan to fail" still rings true specifically in sustainability efforts.
In closing, as we write this article concerns over Greece's looming public debt problems has knocked off-balance some of the newly restored confidence in global economic recovery. Seeing riots and fires in Athen's streets remind us that while the world decides whether this is big or small news, rest assured this won't be the last global economic event to test the toughness of your global supply chain's resilience and the robustness of your organization's sustainable procurement practices. Many say that volatility in these new economic times is here to stay and sustainability is growing as one of the important tools for countering these unpredictable forces. More and more, sustainability is being viewed a little less about saving the world, and more and more about outwitting your competitors and stealing market share and making more profits. By the way, thanks for saving the world, too.