Green Procurement – How companies buy fair, sustainable and ecological
Fairtrade, organic, CSR conformity, climate neutrality, etc. are just a few examples of the purchasing criteria used by consumers due to an increased need for sustainability and environmental protection. This trend is increasingly influencing the procurement activities of public institutions, but also of commercial enterprises. The respective procurement department assumes a key position and makes a decisive contribution to turning words into deeds and thus implementing „green“ procurement strategies.
Today more than ever, procurement must pay attention to low emission levels and compliance with environmental protection regulations. Fair working conditions in the countries of origin of the products also play an important role in the choice of supplier. Furthermore, environmentally friendly and thus energy- and cost-efficient production methods can generate significant savings effects and create new space for image and marketing campaigns for the greener companies.
Critical procurement topics
When investing in a new plant, for example, the question arises whether it should be operated with oil, gas or electricity. The aim is to reduce the „carbon footprint“ and thus improve the CO2 balance, which can lead to a reduction in CO2 emissions and thus lower costs. If you look at the relative share of costs for CO2 emissions, clear differences between companies become apparent. The challenge here is to determine the right cost-benefit ratio to become greener, but not to pay completely overpriced prices.
Another example are conflict minerals. It is not uncommon for the proceeds from the sale of these raw materials to flow into the accounts of parties to civil wars, thus financing conflicts, such as in Congo. Poor working conditions and starvation wages depress the prices of conflict raw materials and are therefore very attractive for many companies from a cost perspective. However, if it becomes known that conflict minerals are used in production, this damages the company’s image enormously.
How can companies ensure that they only purchase fair and „green“ products?
Cost targets vs. sustainability targets
Sustainability and costs can, but need not be mutually exclusive. Companies must translate the requirements resulting from corporate governance (environmentally conscious behavior) or product requirements (environmental compatibility), for example, into specifications. Specs must be implemented not only for raw materials, but also for own and purchased manufacturing processes, transport services, warehousing and disposal. One consequence of the new service descriptions, which go beyond the classical service descriptions, can be the search and selection of new suppliers or products.
In addition, procurement is required to achieve classic procurement advantages. For the consideration of the total costs resulting environmental charges must be included. The task of the procurement lies in addition, in the strategic view of the total costs.
Often however in procurement or supply chain departments lasting concepts are rejected, since not the positive economic effects, but only on the costs in the focus stand. It is forgotten that even savings are possible through environmentally friendly procurement. For example, the procurement of energy-efficiently produced products can lead to lower operating costs in the long run.
In short, customer interest in green procurement is high and the list of economic benefits is long. A cultural change must first create the appropriate awareness in the organization and then make the processes „green“.
Consultant, ADCONIA GmbH