Why go 'Green?' Because it adds efficiency
By Paul Teague, Editor in Chief -- Purchasing, 5/8/2008 2:00:00 AM
I recently attended an alumni event at my college alma mater and got into a conversation on environmental issues with an old classmate who now works in social services for a nonprofit agency. It was a brief conversation. I didn't want a basic disagreement to ruin an otherwise good evening. He believes corporations should pursue environmentally friendly practices regardless of their costs or their impact on profits because they are just plain good. I don't. Oh, I support “Green.” But, except for cases where a company's actions can harm people's health, I think industry has to analyze costs before pursuing an eco strategy, and look for the business justification.
Fortunately, there's plenty of justification out there. The most obvious, of course, is the need to comply with such regulations as Europe's Restriction on the Use of Hazardous Substances Act (RoHS) and the Registration, Evaluation and Authorization of Chemicals rules (REACH), as well as such U.S. regulations as the Tier 3 and Tier 4 emission rules for diesel engines in rail and marine applications, issued in March. Be out of compliance, and you're out of luck when it comes to sales and fines.
But there are other justifications beyond compliance with regulations. Companies can actually save money with some Green initiatives. In fact, one expert in the field, author Bob Willard, says that sustainability—or Green—strategies can yield a 38% increase in profits over five years. He has written a book on the subject called The Sustainability Advantage.
You'll find some examples of earning a return on Green investments in our cover story, “Green procurement goes into the black,” on page 37 of this issue. Two points are clear from the report: 1) Green adds efficiency; and 2) attention to the fundamentals of purchasing practices yields the best results. John Gabriel, IBM's procurement manager for supply chain social responsibility, puts it this way: To determine the Green impact of purchasing activities on ROI, you have to first know the cost for each part and service that goes into a product at the most granular level possible. It's within the DNA of every purchasing professional to always strive for that kind of visibility.
Dig deep into the supply chain for Green opportunities
At office-furniture manufacturer Herman Miller, procurement did that for one product by digging deep into its supply chain to find the exact chemicals used by the company's injection molding suppliers. At pharmaceutical company GSK, procurement worked with operations to redesign the manufacturing process for one drug and cut the required use of solvents as well as 70% of the waste it generated. Now that's efficiency.
Who should lead Green initiatives? Dennis Gawlick, head of nonclinical sourcing at the Seattle Children's Hospital, says it should be purchasing and supply chain professionals “because they are in the best position to see the upstream and downstream effects.” Because of their strategic and cost-benefit focus, they're also in a good position to guard against the so-called “Green washing” effect, where departments claim to have Green programs in place but no infrastructure to really support them and no way to measure the return. Gawlick will run a session on sustainability at this month's ISM Conference in St. Louis.
There are plenty of resources for ideas on and best practices in Green procurement. You can start on our website, www.purchasing.com/green, where you'll find a collection of reports, including case studies, tips, and later this month, a special video report on how purchasing is coping with environmental demands. Also, see www.rmi.org, the website for the Rocky Mountain Institute, which has long been an advocate for cost-saving Green business practices.
Green is about more than saving trees. It's about supply chain efficiency, which everyone wants. And that makes it a purchasing priority.
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