Sustainability and social responsibility are becoming integral to big companies’ supply chains. Those at the bottom of the chain need to start taking notice or risk losing business. LUCINDA SCHMIDT has some tips.
By Lucinda Schmidt
Green procurement is gaining traction in the corporate world. Although it’s not yet mainstream, many big companies are now pushing triple bottom line and corporate social responsibility requirements deep down into their supply chains.
That means that you – the small supplier at the bottom of the chain – need to start taking notice.
In fact the term “green” procurement is probably too narrow. What the leading big companies around the world are talking about is sustainable procurement. That means their suppliers must tick all the boxes on environmental issues – reduced packaging, less pollutants, energy efficiency, water conservation and the like. But that’s not enough. They also need to treat their workers fairly, offer a safe workplace and purchase their own inputs in a sustainable fashion.
Hewlett-Packard, for example, adopted the Electronics Industry Code of Conduct in 2004, and has now signed up 557 of its biggest suppliers. The code covers a wide range of issues, including the environment, ethics, how workers are treated and safe working conditions.
“It’s a huge responsibility for us as a manufacturer to look at social and environmental responsibilities within our supply chain,” says Annukka Dickens, environmental manager for HP South Pacific, adding that HP operates the IT industry’s largest supply chain, worth $US50 billion a year.
When a supplier signs up to the code, they are required to do a self-audit, which HP then reviews. HP will also audit some (115 suppliers so far have been tested).
If a supplier does not conform to the code, HP will ask it to prepare an improvement plan within a set timeframe. Termination, says Dickens, is a last resort.
HP might be an industry leader, but others are taking steps in the same direction. Suzanne Little, an executive director of Good Environmental Choice Australia, has spent the past three months training about 100 procurement officers from big companies and government agencies on how to measure whether a product really is green.
True green procurement, she says, looks at the entire lifecycle of a product, from manufacture to disposal.
So how do SMEs get the attention of these newly trained green procurement officers? Little’s advice is to seek independent verification of specific green claims that can be scientifically substantiated.
Her organisation, for example, tests products over their lifecycle, and only awards the “Good Environmental Choice” label to the top 20% of products. Little says most of the 80 products that have qualified so far are manufactured by SMEs seeking to differentiate their products from those of competitors. The cost range is around $1800 to $10,000, depending on how complex the product is, plus an annual licence fee of 0.2% of turnover.
Another option is to consider certification under ISO 14001, for environmental management systems (EMS), although for most SMEs this will be too time-consuming and expensive. Another approach is to just use the guidelines as a model to develop your own EMS.
Governments and local councils are also getting on board, as green procurement is increasingly seen as an instrument of government policy.
One example is ECO-Buy, which was established in 2000 as a recycling alliance among Victorian local councils and has now expanded to encourage governments and businesses to buy green.
ECO-Buy members look at issues such as greenhouse gas emissions, water and energy use, recycling, fuel efficiency, packaging, how goods are manufactured, distributed, maintained and disposed of and the source of raw materials used to make the goods.
Hugh Wareham, chief executive of ECO-Buy, says the market for green purchasing is growing, with ECO-Buy’s local government members spending $75 million on green goods in 2005-06.
He also notes the Victorian Government last year committed to make ECO-Buy available to all departments. And in September, the Federal Government committed to developing a framework for sustainable procurement.
Large companies that have joined ECO-Buy in the last two years include Toyota, Cadbury Schweppes and Origin Energy.
Katie Patrick, chief executive of on-line directory Green Pages, says sustainability reporting by big companies about their supply chain has become more commonplace in the last 12 months.
“We are still in the early stages,” she says. “There’s been a lot of green hype in the media, but it’s not necessarily translated into behavioural change yet. But there is definitely a growing market [for sustainable products], especially from governments, councils and ASX-listed companies.”
Do’s and don’ts for sustainable rankings
Use specific claims for your product that can be scientifically substantiated.
Think about getting independent verification of your “green” credentials, such as the Good Environmental Choice label or ISO 14001 (on environmental management systems).
Use vague “greenwash” terms like “environmentally friendly”, unsubstantiated by evidence.
Assume that procurement officers will only want to know about environmental concerns. They may also be interested in broader sustainability issues such as fair pay, safe work practices and ethical behaviour.
>> Go to our Growth Resources Going Green articles.