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Sustainable approach benefits business

(chinadaily.com.cn)
Updated: 2008-07-09 09:36

Aspects of ambition include how far you're prepared to push your company to grasp the opportunities afforded by sustainable procurement.

"An increasing number of retail consumers are shifting their buying preferences towards companies that have visible and valuable corporate social responsibility track records."

For example, a company with a reactive strategy (and hence quite a high tolerance for risk) is satisfied with patchy intelligence about sustainable suppliers, and incomplete criteria for assessing their appropriateness to the business' needs. Such a company keeps suppliers at a distance, rather than pursuing competitive advantage through collaboration and mutual support. Internally, understanding of the procurement strategy is confined to the procurement department.

In contrast, a proactive company seeks the benefits of anticipating the changing requirements of customers, regulators and other stakeholders. Such a company uses sustainability for product or service differentiation. Sustainability ambitions are integrated into the business strategy and procurement (as well as other) activities, and fully communicated within and outside the company. Collaboration with suppliers, with industry, and with customers is part of day to day business, to continually raise sustainability standards and performance.

Barriers to the introduction of sustainable procurement arise, above all, from the leading perception that this is a difficult strategy to implement. Arthur D. Little's research among Italian utility companies, mentioned above, showed that the potential lack of a sustainable supplier of goods and services is the most common constraint perceived when approaching a decision on whether to implement a sustainable procurement strategy. Another common myth highlighted by this research is the perception of a higher cost of sustainable products and services compared with alternatives.

"Collaboration with suppliers, with industry, and with customers is part of day to day business, to continually raise sustainability standards and performance."

A reactive company starts and ends by scouting its existing supplier base in search of already available sustainable products and services. Supplier switching policies are often not an option. The purchase price of products or services is the only metric used to conduct a cost-benefit analysis and to evaluate the overall economic merit of sustainable products. Environmental benefits calculations are seldom integrated into the analysis.

A proactive company, in contrast, knows that if it has significant procurement spend it can push the market towards the development of a more sustainable offering. Development of new products and services is hence pursued in tight collaboration with new or existing suppliers. Life cycle analysis thinking is "business as usual" in the procurement department.

Benchmarking your business against its peers, best in class or best in the world is about testing how well positioned your business is in relation to the opportunities presented by sustainable procurement, and how capable it is of dealing with the risks of not engaging.

A reactive company develops its business and product/service strategy without any consideration of sustainability issues in the supply chain. Monitoring of suppliers is piecemeal and lacking predetermined targets for sustainability, leaving the company open to risks.

A proactive company, meanwhile, operates a product/service strategy informed by considerations of the current and future abilities of the supply chain to meet sustainability objectives.

The company plays a leading role in driving industry collaboration to adopt the best possible standards and approaches, working with regulators, governments and standards agencies to ensure that regulatory, fiscal and other public sector interventions fully support sustainable procurement.

Where would you position your company on the "reactive – proactive" spectrum? If you'd like to discuss your business' ambitions for sustainable procurement, or you are concerned about its capabilities in dealing with the opportunities and risks outlined here, please contact your local ADL office. The contributors to this report are Davide Vassallo, Emanuele Cacciatore, Marco Locatelli, Richard Clarke and Matt Jones.

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