June 22, 2011
by Michael Power
PURCHASINGB2B MAGAZINE: JUNE 2011
Canadian business leaders from a cross-section of industries met at Purchasingb2b’s sustainability roundtable on April 12, 2011. The event was sponsored by Grand & Toy, a Canadian Business solutions provider dedicated to promoting thought leadership on sustainability and strategic procurement in the Canadian supply chain and procurement industry. This is an editorial report detailing highlights of the event.
In today’s procurement world, few topics spark as much discussion as sustainability. Practically every procurement conference features speakers, panels or education sessions highlighting how sustainability issues affect purchasing. But what are the benefits in pursuing sustainable policies? What’s the business case? How do organizations implement strategies once they decide what sustainability initiatives look like?
To answer these and other questions, Purchasingb2b—along with sponsor Grand & Toy—assembled a group of experts to discuss sustainable procurement. Our panel
Our roundtable of experts L-R: Frances Edmonds, Kevin Boehmer, Patricia Moser, Cory Searcy, Marcia Seymour, Bill Horrocks, Tyler Elm
included: Patricia Moser, Grand & Toy’s vice-president of supply chain; Cory Searcy, assistant professor, department of mechanical and industrial engineering at Ryerson University’s faculty of engineering, architecture and science; Tyler Elm, vice-president, business sustainability, corporate strategy and real estate; Kevin Boehmer, director, sustainability, CSA Standards; Marcia Seymour, senior manager, special projects and change management, strategic sourcing group at TD Bank Financial Group; Frances Edmonds, director of environmental programs, HP Canada and Bill Horrocks, vice-president, Enterprise Supply Chain Logistics Group, Rogers Communications. Emily Atkins, Purchasingb2b’s publisher and editor-in-chief, led the discussion.
To begin, the group discussed how to define sustainability. Frances Edmonds praised a definition from the 1983 Bruntland Commission that sustainability involved “meeting the needs of the present without compromising the ability of future generations to meet their needs”. But, she said, that might seem “airy fairy” to those without a sustainability background, potentially leaving them wondering: “How am I compromising future generations?”
Tyler Elm cited Canadian Tire’s definition of business sustainability as “deriving economic benefits from enhanced environmental and social outcomes”. Sustainability policies were unlikely to last if used only for environmental benefits, he said. Therefore, it’s best for businesses to focus on sustainability as a strategy for organizational enhancement, value creation and organizational efficiency.
Businesses can be challenged in transferring from the Brundtland Commission’s definition to an organizational definition, Elm noted. “It may be the right thing to do, but if that’s the only reason for pursuing sustainability you’re either a non-profit or going to become one,” he said. “We have to be true to ourselves in terms of what is our mandate and how do we incorporate sustainability into that for-profit mandate?”
“One of the definitions I’ve always liked is ‘Sustainability is about enhancing corporate value,’” Kevin Boehmer said. “It’s not something that gets published a lot in terms of quotes, but I think that’s what it comes down to. And certainly making sure that you consider these environmental and social issues in decision-making.”
An important part of any definition of sustainability is the need to encourage like-minded behaviour among partners throughout the supply chain, said Boehmer. Patricia Moser agreed: “It’s important that we understand it from supplier, to us, to client—and that we’re all partners within that realm,” she said. “We can’t do anything unless everybody is involved.”
Show me the benefits
The discussion moved to sustainability’s business case. Many businesses had “low-hanging fruit” in terms of opportunities to adopt sustainability, said Edmonds. “First off, it can save money; and the first duty of business is not to maximize profit but minimize loss,” she said.
Every initiative Rogers undertook included a benefit, such as improving customer service or the bottom line, said Bill Horrocks. That push has propelled the company towards adopting sustainable policies. “To be honest, that’s how we started,” Horrocks noted. “It was in our drive for efficiency, and then a light bulb went off over our heads and we said ‘wait a minute, we’re actually doing the green stuff.’”
Grand & Toy also considered sustainability in all its business decisions, said Moser. “We never move forward on anything unless that’s taken into consideration and, actually, it’s driven a lot of creative thought,” she said.
Companies often start moving towards sustainability by searching for operational efficiencies, said Elm. Once companies get some “quick wins” they can begin expanding the scope.
“At Canadian Tire we’re looking at operational efficiency initially then we’re looking at sustainable design, sources of revenue, sources of growth—and that’s all about competitive strategy and now we’re already looking at corporate strategy,” Elm said. “So, using sustainability as a platform related to diversification; how do you take your assets, your core competencies, your skill sets and—based on what you’ve learned in operational efficiency and sustainable design—how does that prepare you for new sources of growth?”
What it costs
To show customers the costs associated with sustainability, HP had tools measuring costs, said Edmonds. Procurement managers previously were unable to calculate the total cost of owning an HP product, she said, noting the company now makes those evaluation tools available to customers. “Somebody in your position can actually know up front before you buy a product what it’s going to cost you to operate it in any given province, what the footprint associated with that is and then also build in the end-of-life management,” she said.
Stipulations within RFPs could also hinder sustainability, said Moser. For example, some companies asked for 24-hour delivery with no minimum order. “That’s totally contra-indicated to having a sustainable program where you don’t have to order every day and we shouldn’t have to ship out one pen,” she said. “You almost have to go back to what is the need-to-have and what’s the nice-to-have.”
While acknowledging there are costs associated with sustainability initiatives, Searcy noted some organizations were willing to incur short-term costs in search of longer term benefits. He cited a Toronto beer company that had bought brewing equipment initially more expensive than other options. But the equipment would help save money over time.
“Corporations are looking for stuff that does enhance value,” he said. “I think many corporations will do things that perhaps don’t have an immediate return and maybe not even an obvious return. But I think they do expect that long-term return, that long-term impact on their economic bottom line as well as the associated environmental and social benefits.”
While the initial costs of equipment or services may be high, organizations should also look at lifecycle costs such as operational and maintenance, said Elm. “Sustainability is about breaking down the silos within the organization to look at a system and what do those systems cost,” he said. “What’s the enterprise value as opposed to the value within a single department?”
Sustainability also offered value in terms of “organizational enhancements”, said Elm, for example removing silos, promoting innovative thinking and stakeholder engagement. “The two go hand-in-hand—the economic and the environmental benefits,” he noted.
But does adopting sustainable policies depend on executive leadership? While that represents the ideal it’s not necessary, said Edmunds. A team, group or department within an organization can affect change by working towards sustainability, she said.
“Because it’s a journey you can start small and grow, you can start from the top and go down, you can start from the bottom and go up,” she said. “It’s definitely easier if you’ve got a champion who has some bigger picture, who can look at the organization as a whole, set some objectives as a whole and try to break down some of those silos for you, but it’s not strictly necessary; it just means it will be harder.”
Often, issues like sustainability are given to a specific department that’s then tasked with offering solutions, said Elm. He stressed the importance of people learning from each other rather than working alone. “Transportation people, working with packaging people, working with merchants, to get at the systems perspective and these innovation networks are really the mechanisms by which we get sustainability in the business,” he said. “But they’re not nearly as successful in isolation as having also the executive leadership from the top.”
That executive leadership leads to sustainability becoming ingrained in that organization’s “DNA” said Moser, who noted at Grand & Toy “pretty much everybody, when they put forward an initiative, thinks about sustainability”. The shift was encouraged from senior management, she said, with top-down influence not the only way to adopt sustainability policies. “But it makes it easier,” she said.
Building sustainability initiatives on existing policies streamlines the journey, said Searcy. “Always start with what’s in place,” he said. “There’s probably all kinds of things people are doing that are relevant to sustainability even if it’s not called the sustainability initiative. There are probably all kinds of systems that people are using that work perfectly well and it doesn’t make sense to go create some parallel or separate sustainability system or management system.”
Measuring results, such as through sustainability reports, can help pull pieces together within an organization, Edmonds said. Compiling such reports can help organizations realize consequences and map what’s already been done. But “we’re kind of in the wild west right now in terms of metrics and standards,” she noted.
Elm weighed in on the importance of benchmarking sustainability initiatives, saying momentum increased when sustainability’s economic value got measured. “And now, when I go to see senior executives—hear the results for the quarter—they’re pouring over the metrics to see where they can derive additional value for the business, and because that value is linked to environmental value,” he said. “Measurement and quantification of the business and environmental value is an essential component of implementing the strategy.”
Organizations should work towards establishing a starting point on sustainability. From there, the business can benchmark whether they’re moving forward, work on continuous improvement and engage like-minded groups and people. “You have to benchmark yourself and then see how you’re doing in improving your packaging or your greenhouse gas emissions,” she said. “I hear so often that people say ‘I don’t know where to start’. That’s where you start.”
She encouraged setting short-term, relatively easy goals, especially in the early stages. Once those are achieved, organizations can move onto longer term “stretch goals”.
But sustainability can be tough to measure directly, Searcy noted. His students looked at about 90 Canadian corporate sustainability reports, pulling out the indicators companies shared, he said. Although there were 585 such indicators, there was little agreement on which should be reported.
“There’s really no standardization at all in terms of measuring,” he said. “We really are the wild west at this point. There were very few [indicators] that had anything explicitly to do with supply chain management.”
Getting suppliers on board
The group agreed on the importance of working to get suppliers to support sustainability initiatives. For example, HP had developed a “code of conduct” for the company’s supply chain, Edmonds said. “We developed it and then we realized, ‘well, in the IT world we’re buying from the same suppliers—wouldn’t it make sense, it would help our suppliers, if all our customers were asking the same questions in the same way?’ So we took it to an industry body and made it an industry standard so the suppliers were expecting information to be provided in the same way so that the supplier can do it much more quickly and easily.”
Horrocks noted Rogers had helped with the re-design of a product’s packaging. The move helped reduce the supplier’s costs as well as reducing Rogers’s transportation costs, he noted. Although sustainability wasn’t the company’s goal, the project helped kick off Rogers’s sustainability journey, Horrocks said. “It had a cascading impact all the way through and we had less damage to handle at the other end,” he said.
In helping a product’s users support sustainability—for example, at the product’s end-of-life—any action an organization takes must make the process as painless as possible for the end user, Edmonds said. “It has to be convenient, it has to be easy and not confusing—like putting your cell phone in a blue bin,” she said. “And it varies across the country because different provinces have different end-of-life management programs.”
Barriers to sustainability
What barriers do organizations face when trying to implement sustainability programs? Citing his research, Searcy noted several main barriers: resources, monitoring and a lack of understanding of the concept of sustainability.
“The last one is the one that jumps out at me,” he said. “We could probably have been here all day trying to define what sustainability is because it means different things to different people—it’s ambiguous. The Brundtland Commission definition has wide acceptance, but I think it doesn’t say a whole lot about what we actually do in practice.”
Searcy noted a lack of leverage over suppliers as another sustainability barrier. “If you’re not a particularly major purchaser of their product—or they’ve got a very wide customer base—they may not be so interested in changing,” he said.
Seymour stressed the importance of not trying to “boil the ocean” by taking on too much at once. “Pick one or two or three key programs or projects and put some focus on them, and be willing to go in for the long haul,” she said. “If you try to do it all, you’ll never be able to do it. So find those things that will work.”
As well, people in the organization must also be accountable in terms of sustainability, Seymour said. “have everybody just do it because they want to do it,” she said. “It’s got to be somebody’s job and it’s got to start to infiltrate [so that] everybody has some accountability to participate.”
Made in Canada sustainability
Much of the sustainability innovation originates from organizations in the US and other countries rather than Canada, said Horrocks. Still, there’s been more Canadian activity such as conferences and roundtables surrounding sustainability in recent years, he noted. “A lot of focus is on the low-hanging fruit that I know we have and just as Rogers, as an entity, we’re constantly coming across stuff where we say ‘Well, I didn’t do this five years ago.’”
Searcy characterized the Canadian experience with sustainability as a “mixed bag”, adding the country was in the early days of adopting sustainability in business. Still, he noted, many companies were doing great work and making improvements.
“Sometimes you talk about sustainability and people use it as a hammer—you should be doing more,” he said. “Everybody can do more, but baby steps. I’m sure there are some quantum leaps once in a while, but it takes time to integrate this stuff into a business.”
Traditionally, sustainability initiatives have been viewed as a corporate social responsibility. The roundtable stressed sustainability’s measurable benefits, and that more organizations are focusing on it as part of their mandates. Procurement managers are now in an excellent position to encourage their organizations to adopt sustainable practices. b2b