Chain of demand
Purchasing activities are diverse, and - in many cases - environmentally significant. Energy purchases can directly affect the atmosphere, forest products can have a major impact on the world's biodiversity. Toxic materials can spread through the biosphere riding on the back of the supply chain. We need to ask more questions about the lifecycle of products, and maintain constant vigilance up and downstream within the supply chain in order to avoid pollution, social injustice and environmental risk. Minimising and managing business risk
One of the greatest benefits of a focused and well-managed sustainable supply chain programme is its contribution to managing business risk. Recent high profile examples have shown that a business cannot separate its own activity from that of its suppliers, as organisations are associated with their suppliers' activities. If a supplier is in breach of environmental legislation or even the Universal Declaration of Human Rights, the companies it supplies could suffer.
Dr Alan Knight, in the foreword of Purchasing in Practice - Guidance for Organisations, suggests that there are significant commercial benefits to be gained from environmental purchasing. "Done well, greener purchasing means a better informed buyer, through knowing more about where products are made and how. It means having more creative and influential relationships with suppliers which results in product innovation and even cost reductions."
One of the aims of the DTI/DEFRA Environmental Innovations Advisory Group, chaired by Dr Jack Frost, director of Johnson Matthey Fuel Cells, is to use purchasing power to stimulate environmental innovation. This has led to the establishment of four working groups, one of which is the Environmental Innovations Procurement Group chaired by Jennie Price, Chief Executive of WRAP.Stimulating environmental innovation
The EIPG aims to use public sector purchasing power to stimulate environmental innovation and to extend the lessons learned into the private sector wherever possible. The government is looking to sustainable procurement to strengthen demand. The public sector purchased £109bn of goods and services last year and could play a major part in stimulating innovation.
It was recognised that there were numerous barriers to progress, such as cost, risk, skills, information and inertia. The challenge is, however, to ensure that failure at any one of these barriers does not mean innovative technologies cannot find a public sector market.
The DTI Technology Programme is another example of the DTI supporting innovation and R&D. Announced in its recent Innovation Report, its objectives are to:
- Help business exploit new technologies by offsetting some of the financial risk in taking new and innovative technologies to market; and
- Develop vibrant communities of interest around key emerging technologies, inform companies of news and developments at regional, national and international levels, spot technological opportunities and threats, and meet potential collaborators.
These and other government initiatives reflect the increased interest shown by many in the public and private sectors in environmental supply chain issues, often as part of an engagement with the wider issue of sustainable development. Stimulating awareness and understanding within industry and commerce and increasingly in the public sector of the need for environmentally responsible supply networks by identifying, exchanging and disseminating relevant experiences and good practice among members and their stakeholders is also the primary aim of the Sustainable Supply Chain Forum based at CROMTEC, UMIST, University of Manchester.Integrating the environment into purchasing
The Sustainable Supply Chain Forum is a proactive network of private and public sector organisations which looks at how organisations can integrate environmental factors into purchasing decision-making. Ad hoc initiatives by individual companies and groups working in isolation will not, however, deliver the consistent message which supply chains require. This view has been the driving force which has led to collaboration with Business in the Community and the Chartered Institute of Purchasing and Supply in the establishment of a Strategic Supply Chain Group. The SSCG forms the strategic core of a Sustainable Supply Chain Network whose mission is: "To drive sustainable production and consumption through informed procurement and supply chain management."
The Strategic Supply Chain Group collaboration project will link directly to BiE Index of Corporate Environmental Engagement. In recent years, results of the index have consistently shown that supply chain management remains the most difficult area for companies to demonstrate high performance, reflecting the relative complexity of dealing with issues beyond the boundaries of the company.Challenges companies face
Index results illustrate the challenges that companies face relating to their supply chain, such as:
- carrying out risk assessments of specific suppliers as part of a selection process;
- working with selected suppliers to help continuously improve their environmental performance;
- responsible marketing of products and providing relevant information to customers;
- considering impacts throughout the product lifecycle; and
- health and safety considerations.
Ken James, chief executive of the Chartered Institute of Purchasing and Supply, has said that in today's global economy no organisation can operate in isolation. Each is part of a complex supply network where necessary goods and services are bought in from chosen sources and suppliers, and in turn are sold on to the end-customer or distributor. This pattern is duplicated by organisations the world over and keeps the global economy moving.
He went on to say that a focus on cost, flexibility and efficiency remains paramount in supply chain management. CIPS has identified that one of the biggest challenges facing any organisation is its ability to manage not only its own code of corporate responsibility, but also that of its suppliers, ensuring they act appropriately and adopt the same environmental and ethical principles.Responsibilities and accountability
Companies now recognise their wider responsibilities and accept that they are accountable to a range of stakeholders including shareholders, customers, suppliers, employees, community groups and the media, and that their impacts are increasingly linked to the operations of their suppliers and contractors as well as the materials, products and services they source.
Corporate social responsibility means addressing the legal, ethical, commercial and other expectations society has for business all along their supply chains, and making decisions that fairly balance the claims of all key stakeholders. Procurement and supply chain management is uniquely positioned to influence the social, environmental and economic performance of business both directly and indirectly.