Today, such analyses can go far beyond lightbulbs; they can look at similar trade-offs among a wide range of materials and services, including renewable energy, janitorial supplies, packaging, and many aspects of building construction. Although not all of the analyses will yield the clear value proposition of the lightbulb example, they are worthy of closer examination.
This kind of careful scrutiny yields a significant advantage. When a company learns more about the impact of various choices throughout its value chain, it is better able to control and potentially reduce costs. Green sourcing has a number of other benefits as well. At an obvious level, it allows companies to capitalize on the growing awareness of green issues, helping them attract customers, motivate current employees, and recruit new employees. It enables companies to respond more effectively to regulation, or even to anticipate it. Finally, green sourcing allows companies to deliver on the promises made in corporate social responsibility (CSR) reports: According to the Green Purchasing Report, a 2007 study from the research firm eyeforprocurement, fulfilling the CSR mission was the primary reason that survey respondents pursued green sourcing initiatives.
Beyond those benefits, green sourcing encourages the same kind of in-depth, widespread awareness of practices and processes that companies have gained from adopting Lean Six Sigma, process optimization, collaborative decision making, and other quality-oriented methods. Indeed, the potential of green sourcing today is reminiscent of the quality movement in the late 1980s, when that idea had just begun to mature. This was the era in which, following the lectures of W. Edwards Deming and the examples of the Toyota Motor Corporation and other Japanese manufacturers, companies began to systematically focus on eliminating waste and making operations more reliable. To accomplish these goals, they had to give up the idea that improving product quality was “overengineering,” and that better products cost more to produce. Instead, when production processes were understood and continuously improved, costs continually dropped. As an additional benefit, companies were able to tout the quality of their products to customers and back up the claims with hard evidence. Within a few years, in many companies, quality took its place alongside price and service to become the third full-fledged element of strategic sourcing. Today, thanks to changing circumstances and new enablers, environmental sustainability is poised to become an important fourth element.
Pressures and Enablers
Public opinion, government regulation, the competitive landscape, and investor interest are making it necessary for companies to develop a stand on green sourcing. The idea that the natural environment is declining at a dangerous rate is far more commonly accepted now than it was 10 or 15 years ago, and society at large is becoming more committed to sustainability — pushing individual consumers to factor environmental considerations into their buying decisions.
Governments are also becoming more aggressive in requiring companies to make changes to their manufacturing processes. First, there are more regulations than ever, addressing issues such as mandated carbon trading schemes and cap and trade programs. Multinational companies, especially, are under pressure to somehow reconcile the varying standards among different countries and even among different regions in the same country. For instance, many countries in Europe are pushing companies to reduce carbon emissions and use more recyclable materials in their products. This leaves management with the conundrum of whether to align the whole company’s policies with the highest common denominator and bear the costs of setting stringent standards worldwide, or to deal with the complexity of a patchwork of standards in operations around the globe.
Second, governments are promoting green materials and services as buyers in their own right: Both the U.S. federal government and local governments have been leaders in the use of hybrid vehicles, the adoption of paper with a high percentage of postconsumer waste, and the construction of buildings certified by the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program. The U.S. federal government, for example, has undertaken a multiyear renovation of the Pentagon that uses a great deal of recycled material, including more than 59,000 square feet of carpet tiles made from recycled material and 53,500 linear feet of recycled steel wall studs.