A Field Guide to Green Sourcing I

Environmental responsibility is no longer merely a regulatory burden, but a business imperative. As noted by Earl Sun, Jayanth Iyengar, and Max Goralnick of Deloitte Consulting in their Practical Guide to Green Sourcing, recently published in the Supply Chain Management Review, going green can save you green when your sourcing process capitalizes on sustainability opportunities. Energy and commodity costs may be soaring, but there are new product opportunities out there that save energy, water, and raw materials — and companies that use a green strategic sourcing process can not only identify these opportunities, but also achieve their margin improvement goals.

In their paper, the authors present a six-step green sourcing approach that is specific, actionable, and measurable in achieving financial objectives. The approach is not only designed to reduce costs, but to enhance a company’s image — which can result in increased sales from green-conscious consumers. Costs are reduced by replacing inefficient equipment and processes that, when combined, reduce energy, water, and input requirements at each step of the production process. Sales are increased by aligning a company’s corporate sustainability policy to what consumer’s want — “green” products and sustainable business practices.

According to the authors, the key to success is to translate the six-step strategic process for green sourcing into a sequence of tactical steps that can be executed successfully by your organization. This requires a focus on the keys to green sourcing, which they define as:

  • a broad focus on sustainability across all affected stakeholders
  • a recognition that complexity may increase and that the initial payback period may be longer in the short term
  • a data-driven cost-and-benefit modeling approach is required

The result of this focus is a green sourcing process that can create sustainable wins for your organization, which will result in (drastically) reduced costs in the long term, like those achieved by companies such as Adobe, Honda, HP, Interface Inc., Toyota, and Walmart. (See previous posts on Sourcing Innovation as well as Supply Excellence and 2 Sustain for details.)