One clearly needs to differentiate between the more strategic perspective of procurement, which includes market analysis, supplier portfolio manage- ment, etc, and the more operational dimension of purchasing.
We covered the strategic perspective in earlier parts of this chapter.
Making use of LCAs and supplier portfolios become part of the operational perspective. Quantifying the sustainability advantage of one supplier over another is difficult and evaluating the value of improvements even more so.
The consideration of sustainability performance can be a knock-out criterion (for example only suppliers achieving a particular certification are considered in the first place); it can be measured in monetary values and compared, or form part of the decision in a multi-criteria analysis (all crite- ria are scored and, for example, 20 per cent of the decision may be allocated to the score in social responsibility performance).
Quantifying the monetary value of more sustainable products is a diffi- cult task. Similar to the environmental LCA, the lifecycle costs need to be
Sustainable Purchasing and Procurement 175 measured. The results of the lifecycle costs can then be used in cost–benefit analysis or cost-effectiveness analysis. The cost–benefit analysis looks at the positive and negative effects on the welfare of the environment. This approach considers environmental and other sustainability costs only if these external effects can be monetarized (for example health care cost savings due to fewer respiratory illnesses if exhausts from a factory are reduced). But it cannot capture the costs of unethical actions such as child labour other than through the damage to the brand or lost business. Hence, ethical expectations towards suppliers will be communicated and potential suppliers not matching these standards will not be considered.
The cost-effectiveness analysis limits its focus on the project. The cost- effectiveness approach can be used to investigate and compare solutions on the way towards a specific target. The target itself, however, is most times not measured in money but in a unit of environmental impact. If several impact categories are considered, each category can be weighted (Pierrard and Faßbender, 2003).
Organizations need to evaluate their own sustainable supply chain perfor- mance to benchmark themselves against their competition. Often managers in supply chains are confused about what to measure and why for sustaina- ble supply chains. The confusion arises from being traditionally focusing on cost in relation to output (for example service performance like the propor- tion of on-time, in-full deliveries). Measures for environmental performance, however, are mostly looking at inputs and emissions, examples being the electricity consumed, fuel consumption, number of pallet movements and vehicle utilization. A monetary measure of environmental performance is often preferred by managers (Shaw et al, 2012). Ethical aspects, however, are usually binary in nature; either the company uses forced labour or it doesn’t.
Summary
Procurement is a crucial lever to improving the sustainability of the overall supply chain, and becomes even more crucial if most of a supply chain’s impact is caused outside the organization. Much pressure to improve sustainability performance usually comes from the customer end of the supply chain, which is why concentrations of buying power like public procurement and the procurement practices of industry leaders play an essential role in the development of more sustainable products and supply chain practices.
The individual drivers and barriers vary between sectors, market segments, countries and companies. However, regulation clearly plays a key role, especially for those companies that have little intrinsic motivation to improve their sustainability and the internalization of external costs makes it easier for companies to consider sustainability issues in their purchasing decisions. In a different way, labels and certifications simplify sustainabil- ity in procurement as they set standards and take auditing and monitoring burdens off the buying side.
Implementing sustainability into procurement becomes particularly difficult when more sustainable products are more expensive and when sustainability achievements are hard to measure in a monetary value.
Performance targets and sustainability specifications are needed to direct purchasing managers in the execution of their tasks.
References
Awaysheh, A and Klassen, R D (2010) The impact of supply chain structure on the use of supplier socially responsible practices, International Journal of Operations & Production Management, 30 (12), pp 1246–68
Booth, C (2010) Strategic Procurement: Organizing suppliers and supply chains for competitive advantage, Kogan Page, London
BSI (2011) The guide to PAS 2050: grow to carbon footprint your products, identify hotspots and reduce emissions in your supply chain [online] available at www.bsigroup.com [accessed 03 January 2017]
Carbon Trust (2017) About us [online] available at: carbontrust.com/about-us/
[accessed 03 January 2017]
Carter, C R and Dresner, M (2001) Purchasing’s role in environmental
management: cross-functional development of grounded theory, Supply Chain Management, 37 (3), pp 12–26
Coglianese, C and Nash, J (2001) Environmental management systems and the new policy agenda, Chapter 1 in C Coglianese and J Nash (eds) Regulating from the Inside: Can environmental management systems achieve policy goals?
Earthscan, London, pp 1–25
Crespin-Mazet, F and Dontenwill, E (2012) Sustainable procurement: building legitimacy in the supply network, Journal of Purchasing and Supply Chain Management, 18 (4), pp 207–17
Dias, A C and Arroja, L (2012) Comparison of methodologies for estimating the carbon footprint: case study of office paper, Journal of Cleaner Production, 24, pp 30–35
Erdmenger, C (2003) The financial power and environmental benefits of green purchasing, Chapter 7 in C Erdmenger (ed) Buying into the Environment:
Sustainable Purchasing and Procurement 177
Experiences, opportunities and potential for eco-procurement, Greenleaf Publishing, Saltaire
Fairtrade (2012) What is Fairtrade? [online] available at: www.fairtrade.org.uk [accessed 27 November 2012]
Forest Stewardship Council (2012) Certification [online] available at: fsc.org [accessed 27 November 2012]
Greenhouse Gas Protocol (2012) About WRI and WBCSD [online] available at:
ghgprotocol.org/about-ghgp/about-wri-and-wbcsd [accessed 29 November 2012]
Grimm, J H, Hofstetter, J S and Sarkis, J (2016) Exploring sub-suppliers’
compliance with corporate sustainability standards, Journal of Cleaner Production, 112 (3), pp 1971–84
Johnson, E (2009) Charcoal versus LPG grilling: A carbon-footprint comparison, Environmental Impact Assessment Review, 29, (6), pp 370–78
Kraljic, P (1983) Purchasing must become supply management, Harvard Business Review, September–October, pp 109–17
Krause, D R, Vachon, S and Klassen, R D (2009) Special topic forum on
sustainable supply chain management: introduction and reflections on the role of purchasing management, Journal of Supply Chain Management, 45, (4) (October), pp 18–24
Krut, R and Gleckman, H (1998) ISO 14001: A missed opportunity for sustainable global industrial development, Earthscan, London
Marine Stewardship Council (2012) www.msc.org
Matthews, D H (2003) Environmental management systems for internal corporate environmental benchmarking, Benchmarking: An International Journal, 10 (2), pp 95–106
Meyer, J W and Rowan, B (1977) Institutionalized organizations: formal structure as myth and ceremony, American Journal of Sociology, 83 (2) (September), pp 340–63
Murphy, E (2012) Key success factors for achieving green supply chain
performance: a study of UK ISO 14001 certified manufacturers, unpublished PhD Thesis submitted at the University of Hull
Pierrard, R and Faßbender, S (2003) Integrating environmental and economic costs and benefits, Chapter 11 in C Erdmenger (ed) Buying into the Environment:
Experiences, opportunities and potential for eco-procurement, Greenleaf Publishing, Saltaire
Rainforest Alliance (2012) Sustainable Forestry [online] available at: rainforest- alliance.org.uk [accessed 27 November 2012]
Schmidt, A and Frydendal, J (2003) Methods for calculating the environmental benefits of ‘green’ products, Chapter 8 in C Erdmenger (ed) Buying into the Environment: Experiences, opportunities and potential for eco-procurement, Greenleaf Publishing, Saltaire
Shaw, S, Grant, D B and Mangan, J (2012) Selecting green supply chain performance measures, Proceedings of the Logistics Research Network Conference, Cranfield University
Sinden, G (2009) The contribution of PAS 2050 to the evolution of international greenhouse gas emission standards, International Journal of Life Cycle Assessment, 14, pp 195–203
Smith, L (2011) Sustainable fish customers ‘duped’ by Marine Stewardship Council, Guardian, 6 January [online] available at: https://www.theguardian.
com/environment/2011/jan/06/fish-marine-stewardship-council
USGBC (US Green Building Council) (2012) LEED [online] available at: usgbc.org/
leed [accessed 29 November 2012]
Vitasek, K (2010) Supply chain management terms and glossary [online] available at: https://cscmp.org/imis0/CSCMP/Educate/SCM_Definitions_and_Glossary_
of_Terms/CSCMP/Educate/SCM_Definitions_and_Glossary_of_Terms.
aspx?hkey=60879588-f65f-4ab5-8c4b-6878815ef921 [accessed 31 December 2016]
Walker, H, Di Sisto, L and McBain, D (2008) Drivers and barriers to environmental supply chain management practices: lessons from the public and private sectors, Journal of Purchasing and Supply Management, 14, pp 69–85
Walton, S V, Handfield, R B and Melnyk, S A (1998) The green supply chain:
integrating suppliers into environmental management processes, International Journal of Purchasing and Materials Management, 34 (2) pp 2–11
Wilhelm, M, Blome, C and Wieck, E (2016) Implementing sustainability in multi- tier supply chains: strategies and contingencies in managing sub-suppliers, International Journal of Production Economics, 182, pp 196–212
WWF (2012) The Hidden Cost of Water, report, World Wildlife Fund