The Dangers of Neglecting Sustainability in Procurement
In this article, Gerard Chick discusses the dangers of ignoring sustainability in procurement practices and the benefits of incorporating sustainability into business decisions. He provides real life cases demonstrating the catastrophes of companies who failed to comply and the prosperity of companies that got it right
Although the frequency of dialogue around sustainable procurement is increasing, the activity itself is not new. Sustainability goals can be met merely through adhering to good and efficient procurement practices. Those organizations that have these practices in place will harvest the benefits of future-proof efficient supply chains. Those that don’t will be exposed to the catastrophes and unpredictable forces outside their control.
Mitigating the risk of supply chain failures and fluctuating prices for raw materials; and being aware of political, environmental and cultural changes in the global environment, gives businesses an advantage. Those businesses putting sustainability at the top of their corporate agenda will have a competitive advantage, as well as an increased chance of survival when the going gets really tough. It also helps businesses attract the best staff possible, with candidates increasingly looking to work for organizations with the highest ethical and sustainability standards.
Many organizations have already understood this message and are making proactive efforts to protect their businesses and the environment. Young’s Seafood recognized the effect that unsustainable fishing would have in any long-term goals, as fish stocks dwindled and the quality of those catches plummeted. Their implementation of the ‘Fish for Life’ sustainable fish procurement policy made several demands of their suppliers to provide evidence of adherence to strict management protocols approved by Young’s as well as showing a commitment to constant improvement.
By making these demands themselves, Young’s found that their own business also had to change and they had to implement some key developments. They stopped purchasing North Sea cod because of the poor condition of fish stocks. Their obligations also developed into other areas of the business, such as policy, where they lobbied for more robust management of European fisheries so their sustainable approach has far-reaching consequences.
Adnams, the Suffolk brewer, took something which started as an impetus for a corporate social responsibility policy and developed it into a cost-saving initiative. Their lightweight bottles saved on raw materials and eventually transportation costs, as the lighter-weight bottles took less energy to deliver. Their East Green beer, marketed as ‘the first carbon-neutral beer produced in the UK’ is produced using locally produced high-yield quality barley. Their choice of hops is a variety that is more pest-resistant, reducing the need for chemicals, and so protecting the environment and reducing costs. Their energy-efficient brewing methods have enhanced their brand, as well as any promise that remaining CO2 emissions will be offset.
All in all, businesses must have a positive impact on people, profit and the planet: the ‘triple bottom line’. The need to measure and prove effectiveness and the influence of sustainable procurement is vital. For this reason, the CIPS Sustainable Procurement Review tool was recently launched, to enable businesses to measure the sustainability of their supply chain and for suppliers to demonstrate this to customers. The tool helps to benchmark purchasing performance and progress towards putting sustainable procurement at the heart of their organizations; and understand their own standards and procedures across all aspects of environmental, social and economic policy.
Procurement and supply chain management professionals have a huge role to play in how this debate rumbles on. Supply chains are a key component in organization structure and so influence the health of every economy. A recent survey of our members found that 55% now have a sustainability policy with the pressure from public sector customers and stakeholders being the most popular reason why one was implemented. One in five stated their driver was the need to conserve natural resources. Our members are increasingly aware of the benefits of sustainable procurement, not just to meet the needs of regulations, but as a strategic contributor in planning for future innovation and profit.
In the global economy, businesses are becoming much sharper at developing and coordinating suppliers in the battle for sustainability. Sustainable procurement is a commercial necessity, not a diversion, but of course has wider benefits to the environment and communities across the globe. Those who ignore this, increasingly risk being left behind. Become sustainable or go out of business!
Sustainability presents a risk to companies that are unprepared but also an opportunity for companies willing to embrace the challenge. But, companies cannot tackle sustainability by themselves: implementing sustainability requires systemic change, especially radically overhauled supply models. Paradoxically, the trend towards outsourcing, particularly to low cost countries such as China or India, has exacerbated the sustainable procurement and supply chain management challenge. One of the negative results of global sourcing has been that companies have lost sight of what goes on within their extended supply chains and low cost country sourcing sometimes comes at an unexpected price.
Consider for one moment the problems of the BP oil spill in the Gulf of Mexico in 2010: it shows that companies cannot simply blame its suppliers when environmental disasters happen in the supply chain. Similarly the collapse of a garment factory in Bangladesh in April 2013 killing over 1100 factory workers; this was a supplier of Western fashion companies and retailers looking for low cost sourcing. Companies such as IKEA and Apple have had to completely rethink their purchasing strategies due to damaging reports of ethical sourcing problems such as the use of child labour and suicides in supplier factories.
Again, a key message of my book - The Procurement Value Proposition - is that a company is no more sustainable than the suppliers it sources from, putting purchasing right at the heart of sustainability implementation. New innovative purchasing strategies and methods are required not only to avoid the risks of unethical purchasing, but also to fully take advantage of the opportunities posed by sustainability.
You can read more about Gerard Chick’s perspective on sustainability in his new book, The Procurement Value Proposition, co-authored by Robert Handfield.