Written by: Rudy Yuly
When Sesame Street’s Kermit the Frog sang “It’s Not Easy Being Green,” he probably wasn’t thinking about procurement. But if he had been, he wouldn’t have been too far off the mark. Being green when it comes to your procurement efforts isn’t exactly a walk in the park. But it’s not rocket science, either—and it could offer your business significant benefits, especially in the long run.
First, the basics. Sometimes it’s called Sustainable Procurement. Others call it Green Procurement. Whatever the chosen term, the basic concept is that all purchasing, from the soap in employee bathrooms to components on the factory floor, is done with an eye to the environment.
Green Procurement & The Triple Bottom Line
When you buy stuff for your company in the traditional way, you’re most likely thinking about three primary factors: price, quality, and availability. You’re also thinking about your relationship with the vendor. Are they reliable? Do they deliver on time and accurately fill your order? Do they reward your continued business with better deals? All these factors contribute to your business’s economic bottom line.
In Green Procurement, the bottom line is looked at in a wider sense. In addition to economic considerations, social and environmental considerations are brought into the mix and given equal weight.
This combination of economic, social, and environmental considerations is called the “Triple Bottom Line.” British sustainability expert and author John Elkington first coined the term in 1994. Today, you’ll sometimes also see this concept referred to as “TBL” or “3BL.”
Figuring out the Triple Bottom Line is accomplished through an accounting method known as Environmental Full-Cost Accounting (EFCA or FCA) or True Cost Accounting (TCA). We won’t bore you with all the rules and regulations, but just know that these methods take into account social and environmental “costs” that would not be obvious using traditional accounting methods.
Exploding Widgets
For instance, let’s say your company manufactures widgets. The widgets contain a key component that is available in two types—let’s call them Type A and Type B. Both work equally well for your widget.
Type A is completely stable and never fails, but costs twice as much Type B. Type B works equally well 99.9% of the time. However, one in a thousand Type B’s fail after three years. And when a Type B component fails, it does so explosively, destroying the widget (and one time in a million the building it’s housed in, as well).
In traditional procurement, you’d probably buy Type B components—at least for the first three years, until you had an explosive failure and the lawsuits started rolling in. In green procurement, you’d go for Type A. It would cost your business more in the short run, but in the long run it could save you untold amounts of money—and perhaps even keep you from being run out of business on a rail.
This is an extreme example. In most cases, the choices are not so clear cut. The up-front costs are often obvious, but the long-term benefits can be more subtle. Green procurement can even veer into some serious ethical questions.
For example, what if the Type B components don’t blow up? Instead, they give one in a thousand people who work with them cancer. Of course, it would be extremely difficult for anyone to prove their cancer was caused by your Type B component. They probably wouldn’t even know your widget contained a Type B component. What do you do in this case?
In green procurement, you’d give weight to all known potential environmental and social costs, no matter how far down the road they might be. You’d buy the more expensive but more stable, safer component—and make the bet that it’s going to benefit your company in the long run.
What’s in it for you?
Planting your flag on the moral high ground of altruistic social consciousness is all well and good, but if that was the only benefit of Green Procurement, the practice wouldn’t enjoy the wide and growing popularity it has today. In fact, it’s doubtful companies like Ikea and Fujitsu would make it a centerpiece of their procurement efforts if it was merely a feel-good exercise.
So what do you get when you go green?
- You support your company’s Corporate Social Responsibility (CSR) and Public Relations (PR) efforts.
Green procurement makes your company look good in the public eye. It can attract a lot of attention (and business) from consumers and other businesses who care about such things—and these days, those are the majority
- You reduce the human cost of your business.
Green products typically have a lower impact on human health, and higher safety standards. This is good for your employees, your customers, and the general public. Down the line, it can potentially result in lower costs for health care and stop lawsuits before they ever happen.
- You create new business opportunities.
Many governmental organizations (like New York State, for instance) and some businesses give preferential, or even exclusive, access to companies who practice green procurement methods. Going green won’t ever hurt you with companies and organizations who don’t care much about such things—but it will definitely help you with those who do.
- You reduce costs
Green products often last longer so cost less over their lifespan. They also generate less waste and eliminate toxic elements, making them cheaper to dispose of. A lot of the time, they work better as well, reducing replacement costs.
- You increase compliance and reduce risk
It’s not just that toxic or dangerous products are lawsuits ready to start knocking on your door. There’s also the fact that regulations are growing by leaps and bounds. If all your procurement efforts are green, you’ll easily sail through local, state, national, and international regulations.
UP NEXT: How To Get Started With Green Procurement
Originally posted by Procurement Sense - It’s Not Easy Being Green Pt.1: What is Green Procurement?