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A natural progression

A natural progression

06/06/2011 | Channel: Business

Businesses need to wake up to sustainable procurement as more than a green issue says David Noble

As the global economy becomes ever more reliant on longer and more complex supply chains, the debate around sustainable procurement is becoming more sophisticated, and never more important for all businesses to understand.

Where once these discussions centred on the need for green, ethical practices - instigated by Corporate Social Responsibility (CSR) policies - things have moved on. The impact of the tragedy and ongoing crisis in Japan has brought home what many had already started to realise: that without robust sustainable procurement practices, many organisations are in danger of severe interruptions to their business.

Sustainable procurement takes into account a range of environmental, social and economic consequences of a whole range of production methods and services, such as design, non-renewable material use, manufacturing processes, service delivery, logistics and transportation options, maintenance, recycling and disposal, and not forgetting each tier of the supplier base. The driver is not ‘just’ CSR anymore, but a range of influences from statutory, through to political and social, and of course commercial. Implementing processes that truly meet the demands of good sustainable procurement practice means each level of supplier is required to do the same.

There are four core areas that impact on the sustainable debate:

Ethical and sustainable trading
Where once it seemed the world had unlimited resources, now it’s all too obvious that increasing populations, and ecological challenges means the world is no longer able to replenish those valuable resources.

To date, retailers and other directly consumer-facing businesses have perhaps felt the greatest scrutiny, with criticism of unethical employment practices amongst suppliers hitting the headlines for companies such as Primark and Nike. Not understanding how suppliers conduct their business can lead to reputational damage that is hard to shake off, and increasingly business customers as well as consumers are looking deeper into the provenance of products.

Landfill is no longer an option and costs of disposal are increasingly expensive. By cutting waste, production costs are reduced and processes become more streamlined.

Carbon emissions
According to the Carbon Disclosure Project, supply chain report 2011, 50 per cent of an average organisation’s emissions come from the supply chain. So, if organisations do not put their house in order, they will soon be forced to by legislation. For instance, the Carbon Reduction Commitment’s Energy Efficient Scheme in the UK is the first mandatory carbon trading scheme and targets those producing higher emissions.

Energy use
Declining reserves of fossil fuels, and rising costs of those fuels means everyone has Sustainabilitythe responsibility to make best use of those resources.

Though 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 organisations 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, such as political, gives businesses that edge. Those businesses putting sustainability at the top of the corporate agenda will have not just a competitive advantage, but a higher chance of survival when the going gets really tough. It also helps businesses attract the best staff possible, with candidates increasing looking to work for organisations with the highest ethical and sustainability standards.

Many organisations have already understood this message and are making proactive efforts to protect their businesses and the environment. Young’s Seafood recognised 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.

With Adnams beer in Suffolk, what started as an impetus for a corporate social responsibility policy, developed 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 32East 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 organisations; 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 organisation structure and so influence the health of every economy. A recent survey of our members found that 55 per cent 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 future for future innovation and profit.

In the global economy, businesses are becoming much sharper at developing and co-ordinating 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.

David Noble
David has been a CIPS member since 1982 and a Fellow since 1994. He served for four years as a member of the CIPS Fellowship Selection Panel before being appointed to the Board in 2008. Alongside his role within CIPS’ governance, David has 30 years corporate experience including the last 10 years at Board level in P&SM, most recently as Group Supply Chain Director at IMI plc, a FTSE 250 company.

CIPS exists to promote and develop high standards of professional skill, ability and integrity among all those engaged in purchasing and supply chain management. CIPS assists individuals, organisations and the profession as a whole.

For further information visit: www.cips.org