Catalysing change through procurement

by Terence Jeyaretnam

 “….think of every dollar in the supply chain as a potential ”tool” for social good”

 

Marius Kloppers, CEO, BHP Billiton

As consumers, we make hundreds of decisions every day concerning what we use, buy, consume, see, hear, eat, drink and gift.  Each one of these decisions has a ripple economic, social and environmental effect.  These effects are either product/service based (how the product or service adds economic value through its supply chain while minimising environmental effect and maximizing social good), or supplier based (how the performance of the supplier effects economy, environment and society).

Now think of the magnified nature of this ‘influence’ when it comes to the purchasing scale and power of the organisation for which you work.  Agencies and companies buy anywhere from thousands to millions of dollars’ worth of goods and services each day.  These purchases are largely based of the concept of value for money, where price, quality, timeliness, trust, reputation, risk, efficiency/effectiveness and value-add all have various levels of impact on procurement decisions.  More recently, the concept of ethical procurement emerged as a response to the need for greater accountability and transparency in purchasing to manage risks such as bribery and corruption in transactions. The concept of ethical procurement has subsequently broadened to include social and environmental considerations by private and public sectors realising the transformational potential of procurement practices.

One early public sector example in sustainable purchasing leadership was the Greater London Authority, which in 2006 published a sustainable procurement policy, promising to award a “distinct competitive advantage” to those companies which demonstrated a commitment to sustainable procurement concerns.

In the private sector, one of the most significant projects in sustainable sourcing is being undertaken by the US retail giant Walmart, which is working with over 100,000 of its suppliers to assess their sustainability performance, develop data and tools to assess product sustainability through life-cycle analysis and finally, provide a simple tool for customers to be able to differentiate between sustainable and non-sustainable products in their purchasing.

With the launch of the British Standard BS 8903:2010 Principles and framework for procuring sustainably – Guide, there’s now a process for organisations to implement in helping integrate sustainability in their procurement decisions, thereby catalysing an effective transformation towards positive social and environmental performance, which research by INSEAD Business School suggests could yield positive economic benefits for private companies in terms of "Risk Management", "Cost Reduction" and "Revenue Growth", a win-win-win scenario.

In a future where value derived from every dollar will count, and where increasing competition would mean differentiation would add further value, creating social and environmental good from procurement seems not only sensible, but a societal norm in its making.

 

Terence Jeyaretnam is a Director of Net Balance (terence@netbalance.com), 
one of the world’s leading sustainability advisory firms.
Terence is based in Melbourne.