Guest Post: by Stephanie Hamilton, ing., EP(CEA)
Vice-President, Sustainable Business
The following article was written in the days prior to the Bangladesh building collapse. May that horrific event accelerate change to more sustainable procurement practices.
Procurement departments at leading companies understand that it is no longer enough to just ensure supplies are delivered to the right place, at the right time, at the right cost. There are new considerations: does it also contain the right material and was it produced in the right way? Social and environmental factors are being introduced into decision matrices across the supply chain as companies begin to understand the influence of their buying power on people and planet.
Both management and procurement departments need to be educated in order to fully understand the environmental and social impacts of the products and services they are buying. And these efforts need to be on-going, as new products and processes are constantly being brought to market with claims of improved sustainability performance.
Is bamboo rayon fiber really better than organic cotton? Not according to research
by clothing company Patagonia. Is recycled paper better than paper from a forest certified under a responsible forest management system, such as that of the Forest Stewardship Council? Not in all circumstances, according to TC Transcontinental (the largest printer and leading provider of media and marketing activation solutions in Canada). Is it better to avoid all dealings with China to avoid possible human rights abuses or to select Chinese suppliers where working conditions can be monitored and improved?
It’s not easy to answer these types of questions and responses need to be adapted to the circumstances of the company asking.
A Sustainable Purchasing Strategy
If your operations are simple enough, you may be able to develop a sustainable procurement policy to cover all your purchases in short order, but more than likely you will need a sustainable purchasing strategy to get you there. You will need to prioritize your actions to address your largest purchases first, then those with known social or environmental issues, before addressing the lesser purchases.
A product approach involves evaluating the environmental and social aspects of a product, seeing if there is a certification system in use that matches the values that you have deemed most important, and then consulting with suppliers about their ability to provide that product at the right place, right time and right cost. Where no such product certification scheme exists, you will need to define your own criteria and develop an implementation process to ensure that suppliers are providing products that meet your criteria.
Case Study: TC Transcontinental
This is the approach that ÉEM used at TC Transcontinental when developing their Paper Purchasing Policy in 2007. We first conducted a review of the environmental issues related to paper purchasing to establish the important factors to manage (fiber source, processing chemicals, transportation distances, etc.). We then studied the certifications available and consulted with select suppliers and forest advocacy groups to understand their expectations. As there was no one certification that covered all of these factors, we developed a classification system that grouped different papers with defined criteria (See the Classification Table).
The next step was to meet with the paper suppliers to explain the approach and to express TC Transcontinental’s preferences for recycled and certified paper. Considering that TC Transcontinental purchases over 500,000 tonnes of paper per year, availability was an issue and it was clear that moving to environmentally preferable paper was going to be a gradual process. Suppliers needed time to adapt their product offerings, refine their forest management practices where necessary, and seek the appropriate forest or chain-of-custody certifications.
TC Transcontinental’s paper procurement department then had the significant task of evaluating all the papers they bought and assigning them to the correct category.
In that first year, 2008, TC Transcontinental concluded that their purchases of the most environmentally preferable categories (Gold and Gold Plus) were only 22%. Today, they have increased that number to 67% and have set a goal of 80% to be achieved by the end of 2015.
It should be mentioned that in most cases, it is actually TC Transcontinental’s customers who have the final say on what paper is purchased for their print projects. ÉEM made sure that the Paper Purchasing Policy and the accompanying classification table were clear, simple and user-friendly, and provided training and additional background information to the sales teams. The teams were then in a position to encourage their customers to choose the more responsible papers.
In view of the efforts required to do this right, ÉEM recommends that unless you have a very simple supply chain, you should build your sustainable procurement policies one product group at a time, securing buy-in from all players before moving to the next type of purchase.
A supplier approach focuses on assessing the supplier’s practices rather than their products. Typically, a company will publish a supplier Workplace Code of Conduct or Standards for Supplier and will ask suppliers how they comply. In many cases, this will be followed with audits conducted by the purchasing company at supplier locations. A great description of this approach is provided by Patagonia’s Footprint Chronicles
This screening and assessment approach should be coupled with a remediation process. Often, the process is more about continual improvement (raising the bar) and building longer-term relationships with suppliers who are willing to make the necessary changes.
For companies reporting their sustainable development practices according to the Global Reporting Initiative (GRI), procurement practices are given new emphasis in the new G4 Guidelines, to be published this May. First, the organization’s supply chain must be described in the report’s introduction in terms of supplier numbers, locations, volumes, etc. Then, following a sustainable development materiality analysis which determines the relative importance of the supply chain among the company’s issues, risks and opportunities, the reporting organization must describe how suppliers were screened and assessed with respect to environmental performance, labour practices, human rights and societal issues, such as corruption or anti-competitive behaviour, and what remediation processes are in place.
Some companies are going further in asking their suppliers to also complete sustainability scorecards. These collect information such as energy and water use, fines and emission data in order to build an environmental footprint of the supplier’s operations and to track improvements over time. Of course, they are also used to make business decisions when comparing two similar products. At Procter & Gamble, this is known as selecting best total value
Walmart has recently rolled out a new phase of its suppler sustainability index
in which key performance indicators were developed for specific product categories, basically combining both the product and supplier approaches described above.
Developing sustainable procurement practices is arduous and fraught with pitfalls. While companies may be experts at what they make, they are rarely fully knowledgeable of the environmental and social aspects related to all their raw materials and purchased services. By providing background information and integrating stakeholder expectations, environmental professionals can help companies implement better procurement practices.
About the Author
Stephanie Hamilton is a senior consultant at ÉEM Sustainable Management in Montreal. An engineer by training, she brings a practical approach to client requests which range from environmental legal compliance audits to management workshops on implementing sustainable development ideas. Her 20 years of experience at ÉEM has exposed her to many industries including manufacturing, mining, transportation and printing. More recently, her focus at ÉEM has been on developing key performance indicators and assisting clients with their corporate social responsibility strategy and reporting.