Sustainable Sourcing: The demand for green credentials

Would it surprise you to read that only 1 in 4 procurement managers say they would reject a potential supplier based on failure to meet green criteria? Maybe you think that’s even higher than you thought – if the supplier is low visibility, if the industry is one where customers tend to put less weight on sustainability, you’d expect a less enthusiastic attitude.

The figure above is from a survey by Kyocera Mita, and it’s worth putting it alongside the other number they came up with: 75% of organisations ask questions about a supplier’s environmental credentials. Does that mean that 3 out of 4 organisations ask about credentials, but only a third of those would actually do anything serious about it.

There’s little doubt that for some companies – retail has several obvious examples – sustainability is a key selection criteria. But that might be flexible depending on how strategic that relationship with that supplier needs to be, and what the cost is of improving their standards.

In the context of the behaviour of organisations in the public spotlight, a move like Microsoft’s might then seem quite sensible and progressive. Microsoft has essentially said that as of 2013, they will expect a ‘cross-section’ of suppliers to adhere to a reporting code and live up to Microsoft’s own vendor code of conduct.

And while that shouldn’t be knocked, you might be excused for wondering how that’s going to be enforced. For Microsoft, it’s a chance to drive “sustainability improvements in [its] supply chain”, but what will make or break the longer term success of the programme is the response to those not living up to expectations.

There are a few aspects to this decision that are worth some attention:

Working with suppliers: When I recently spoke to Dave McLaughlin, vice president of agriculture with the WWF, about businesses adherence to various sourcing standards, his view was that there was a lot of progress being made when purchasing organisations saw these standards as a shared goal with suppliers, a flag in the ground which allowed them to investigate techniques, practices and tools that would help them get there. In that sense, credentials are something that help procurement identify where there’s work to be done and spur them on that way.

The Hard Line: Businesses have occasionally said they will drop suppliers who don’t comply to standards and some have done as much – think Sinar Mas and the palm oil controversy earlier this year. But it doesn’t happen often. The question is, are these kind of tough-talking tactics enough to motivate suppliers into compliance or are they going to force shortcuts and set up an adversarial relationship on occasions. You may choose to view that as healthy, but it’s certainly worth caution.

Segmentation: Sometimes it has to be one rule for one and one for another. If the only appropriate supplier of a key material has question marks over the sustainability of their activities you can’t necessarily treat them the same as, say, a truck company that you might ask to reduce emissions. Working collaboratively is the obvious way, but it does seem at odds with the ‘code of conduct’ side of the policy to say that one supplier doesn’t have to adhere because, say, they’re relied upon for cost-effective products.

On one hand, you have to segment and adjust the reaction – on the other, integrating that approach into a supplier relationship policy is tricky.

By 2013, when Microsoft gets going with this, we’ll doubtless have seen different approaches succeed and fail and have a clearer sense of how a procurement organisation should react to the green credentials of it suppliers. For now, it’s interesting to see where the lines are being drawn and how serious some tough-talking businesses really are.

Steve Hall is deputy editor for Procurement Leaders Magazine.