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Sustainable approach benefits business

(chinadaily.com.cn)
Updated: 2008-07-09 09:36

Why bother?

Regulation has had an increasing impact on the bottom line in the last few years. Drivers include European Union (EU) legislation and national government policies:

Recently issued EU directives require disposal costs of white goods, automotive and an increasing number of other products to be included in a company's P&L.

Since July 2006 the RoHS directive (restricting the use of certain hazardous substances) bans the placing on the EU market of new electrical and electronic equipment containing more than agreed levels of certain poisonous components.

By the end of 2007, 20 EU Member States had already adopted draft Green Public Procurement National Action Plans – eg the Italian government's plan includes product categories spanning a broad spectrum from stationery products to public lighting.

EU manufacturers have an increasing obligation to label and actively communicate the "energy balance" (energy consumption) of their products during the manufacturing process.

Expectations – of customers, consumers and other legitimate stakeholders – continue to rise:

Environment-friendly and sustainable attitudes (termed LOHAS – Lifestyle of Health and Sustainability) are spreading among consumers of most developed countries. Consumers, analysts and others attribute increasing value to the environmental and social performance of products and services, and that of the companies that produce them.

While carbon and environmental footprints are a growing concern, much of the footprint that can be attributed to a company lies in other parts of its supply chain. As stakeholders become increasingly insistent that "promises made" by the CEO should be "promises delivered", CEOs will need to extract more innovation from suppliers as well as the company itself to deliver on commitments to sustainable performance.

Business benefits from a sustainable approach to procurement include positive impacts on:

Costs – reduced by factors ranging from enhanced compliance with government regulation, lower consumption of energy and other resources, to enhanced return from capital investments.

Risks to the business – lowered, for example, by a strengthened brand, enhanced reputation, improved community relationships, and/or reduced grounds for litigation; the risk of supply discontinuity can also be lowered by applying environmental performance metrics and targets into the supplier performance assessment process or during the contract renewal process, as these help to mitigate the risk of suppliers' non-compliance.

Options – broadened by increased innovation scope, greater opportunities for premium pricing, possibility of engaging in emissions trading, and other new routes to revenue protection and revenue generation.

Preferences – with the company being more highly valued by potential and existing customers, insurers, credit sources and others.

This is borne out by a recent Arthur D. Little survey of major Italian utility companies. The companies perceived the three most valuable benefits of a sustainable procurement system to be: protection from environmental risk or disruption; attraction of environmentally sensitive customers; and reinforcement of brand reputation.

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