Environmental considerations now play an important part in purchasing and supply decisions, as business success increasingly depends on environmental performance
Environmental pressures are currently forcing organisations to assess the way they operate. In the area of purchasing and supply, the environment is an important consideration alongside price, quality, delivery and security of supply, so the role of suppliers is crucial. This best practice note sets out the issues to consider.
Understand the business reasons.
Environmental purchasing should be based on sound business reasons, coupled with an evaluation of costs and benefits. The implications of four key areas need to be examined:
1 Compliance with legislation –
how do regulations on the protection of resources, cleaner technology, existing pollution and emissions affect the organisation?
2 Market opportunities and pressures –
suppliers responding to customer pressure for environmentally acceptable products stand to gain the competitive advantage;
3 Security of supply –
it is important to minimise the risks of breaks in the supply chain which may follow efforts to improve environmental performance;
4 Benefit versus cost –
the benefits of the long term investment in the environment must be recognised.
Know your environment
Environmental purchasing should make environmental as well as economic sense. An understanding of environmental responsibilities and issues is essential to the understanding of the links between environmental performance and the supply chain. This knowledge is also necessary for the setting of targets and programmes, as well as for the development of the business case and environmental ranking.
Understand your supply chain
A system of ranking key suppliers according to environmental issues and risks should be devised. From this, environmental purchasing policy and processes can be developed. Which suppliers are linked to environmental issues important to the organisation? Does the organisation have commercial links or contracts which could result in environmental risk?
Adopt a partnership style
Suppliers and customers working together can lead to mutual commercial and financial benefit. Customers can help suppliers to appreciate the advantages of environmental improvement. Suppliers can help customers to achieve a better understanding of environmental effects and their causes in the supply chain. Explore areas of cooperation for mutual benefits.
Collect only information needed
Indiscriminate requests for large amounts of information from suppliers is costly and unnecessary on both sides. It is therefore essential to identify key questions, define information needs and select suitable collection methods. Environmental ranking, knowledge of the supplier’s general performance and major environmental issues will need to be considered. Information should include product composition and source, processes involved and environment management.
Validate suppliers performance
Given that environmental management standards have yet to be established, some validation of environmental information may be needed. This is an accepted practice in other areas of the customer-supplier relationship. Select (only where it is felt necessary) a suitable method of validating information and management systems.
Set a timetable for performance measurement
The organisation must establish targets that specific suppliers must reach within a certain time. These will form the basis of performance measurement which is an important motivator for improvement. By agreeing achievable and acceptable targets, the benefits of performance measurement are fed into the food chain.
This guide is drawn from Buying into the Environment: Guidelines for integrating the environment into purchasing and supply, produced by Business in the Environment in conjunction with the Chartered Institute of Purchasing and Supply (CIPS) and KPMG’s National Environment Unit. A joint CBI/CIPS conference, Buying into the Environment – A Way Forward will be held on Friday 15 April. For details see the Diary section below.
Corporate Citizenship Briefing, issue no: 15 – April, 1994
COMMENTS