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Sustainability Purchasing

Offshoring - The Wal-Mart effect - Corporate Responsibility - These are some of the drivers behind the trend line towards more green and sustainable purchasing.

More and more organizations are adopting Corporate Responsibility (CR) commitments to integrate environmental, ethical, and social factors in their business strategies, operations, products and services, and in how they relate to their suppliers.

The Sustainability Purchasing Network in British Columbia recently published a study on trends and drivers of sustainability purchasing, noting the tendency for firms to adopt sustainable purchasing policies on the heels of adopting sustainability commitments.

The study also identified the ripple effect of large purchasers like Wal-Mart, which uses its marketplace influence to persuade its 60,000 suppliers to use less energy and reduce product packaging. Another trend raising the ire of activists concerned about sweatshop conditions overseas is offshoring, which arises from the globalization of the supply chain.

In theirGuide to the Business Case and Benefits of Sustainability Purchasing the Sustainability Purchasing Network compiled a number of financial and management benefits to organizations that adopt sustainable purchasing practices. The financial and management benefits include:
  • Cost reductions in material and utility expenditures, waste disposal, health and safety costs, and legal and insurance costs;
  • Attracts customers and helps meet their expectations for sustainably produced goods;
  • Simplifies compliance with environmental, health and safety regulations, and reporting;
  • Improves access to capital;
  • Helps suppliers better understand purchaser needs and promotes product innovation; and
  • Helps attract and retain talent and improve employee productivity.
Integrating social and ethical criteria into the purchasing decision can generate benefits such as better wage levels, working conditions, human rights, and health and safety. It can also support vulnerable groups and provide community services, promote a strong local economy and economic opportunity for indigenous people, and improve conditions in the developing world.

It’s not just companies that are following this approach. Vancouver’s Organizing Committee for the 2010 Olympic and Paralympic Winter Games (VANOC) has adopted a program they call "Buy Smart," which includes goals to:
  • Increase their social, ethical, and environmental performance;
  • Support the growth of Aboriginal and minority-owned businesses and the sustainable enterprise sector;
  • Increase jobs for socially and economically disadvantaged groups;
  • Build higher performance venues and operations to support an excellent Games;
  • Support the local and provincial economy;
  • Increase sustainability purchasing leading to innovation, trade, and investment in the sustainability sector; and
  • Create a best practice model for sustainable purchasing.
Lest one think the fascination with sustainable purchasing is going away any time soon, a recent TerraChoice report, EcoMarkets 2008 Summary Report, says otherwise. They surveyed over $78 billion of purchasing power in Canada and the U.S. and found that 68% of North American organizations increased their green purchasing in the past 12 months. They also note 91% of purchasers believe they will become more active green purchasers over the next two years.

More retailers are jumping on the bandwagon of ethical sourcing. An AT Kearney 2007 report revealed that over half of U.S. Fortune 100 corporations are addressing the social aspects of their supply chains, with 54% tracing metrics on supplier labour practices and 32% tracking metrics on supplier wages.

Most purchasers find the real value of sustainability purchasing lies in supplier engagement. Purchaser-supplier collaborations are a gold mine of product and service innovation, improved social and environmental conditions, and long-term economic benefits for both parties.

Firms that overlook the strategic opportunity of engaging their suppliers in their quest to serve new markets, satisfy growing government regulations, manage diminishing resources, and build their corporate reputations are missing a key business opportunity.

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