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WIK

Daniel Chua, Head of Global Sourcing

Green Procurement vs Customer environmental requirement

Daniel Chua

Green Procurement generally means procurement of goods and services that have little impact on environmental or ideally zero. Some definition also incorporates human health and environmental concerns into the search for high quality goods and services at competitive prices.

In the procurement world, many MNCs have being preaching sustainable procurement for years. As per Sir Neville Simms, chair of the UK Procurement Task Force, described it as the use of procurement “…to support wider social, economic and environmental objectives, in ways that offer real long-term benefits” to organisations and the communities in which they exist.

Few of these long-term benefits related more toward environmental include:

• The incorporation of the “three Rs” (Reduce, Reuse, Recycle), to cut waste and improve the efficiency of resources.

• The enhancement of businesses public image, by demonstrating a sustainable approach to business, and championing related environmental and social benefits.

All these come under the big umbrella of green procurement, but can it be easily implemented?

As a procurement professional, I believe the implementation of green procurement very much depends on the role your company play and the willingness of your customers.

Many customers especially the well-established renowned MNCs wanted to implement this initiative not purely for environmental issue but also to a higher degree to enhance their business public image. Nothing wrong about it but it is the approach that some of these MNCs have is not helping.

Green procurement in general will increase the current cost of the overall spent of a product.

Whilst companies wanted to be seen as a GREEN company, more often then not they either have little budget to give out or literally not willing to give out anything! How would you expect this to happen in reality?

By Being Open and Transparent Attitude, Allowing the Suppliers to Respond Back With the Right Cost, Effort and Material It Will Allow Companies to Operate Sustainably

As an OEM/ODM manufacturer, we do not have our own brand and such final RRP is not determined by us. Whilst customer give us an instruction that they want to implement environment friendly materials but often they are not going to increase the manufacturing price. This is a chicken and egg question and a vicious circle start in the supply circle. When we are not able to absorb the additional cost, the pressure goes to our 2nd tier, 3rd tier supplier, etc., and they will pressure theirs, the circle will go on and thus I called it a vicious circle within the supply chain

We all know today, if we want to go for a green product, one of the major “negative” impacts will definitely be costing. Every company know this fact, it’s a matter of whether they want to accept this fact. Some even have the mind-set that “China can do it cheaper” or “others can do it if you insist on price increase”. Some of the threat and fear created unhealthy Environmental within the supply chain.

Therefore, we need to practice what we preach. Especially for large companies and they can set the example for an industry and lead the changes. By being open and transparent attitude, allowing the suppliers to respond back with the right cost, effort and material it will allow companies to operate sustainably. In this instant, you send a strong positive message to your supply base that becoming more sustainable is not just a fashionable statement or “to be seen as doing it,” but a way of doing business.

By wisely using the influence your purchasing power each company have, a company can potentially raise the environmental performance of an entire industry. Make sustainable purchasing a priority and when budget is concern be ready to make some minor compromises when suppliers provide you with the most environment friendly alternative at the same price as the not so environmental offerings. Of course, when quality and safety is concerned, it should not be compromised.

Spend time to work and develop your key suppliers. When suppliers don't measure up in terms of their commitment to sustainability, rather than threatening to walk away from them, invest the time to be clear about how you want to do business and work with them to help them meet your expectations. Develop and communicate a code of conduct, train your suppliers, and reward the best performers with more of your business while helping the weaker to improve.

There are many examples of companies whose reputation has been tarnished by its supply base. But can you totally blame your supply chain?

The articles from these contributors are based on their personal expertise and viewpoints, and do not necessarily reflect the opinions of their employers or affiliated organizations.