Category Archives: Sustainability

You Need to Get Sustainable Because Customers Won’t Pay!

As per Monday’s post on Do as I Say, Don’t Do as I Do, while customers say they try to buy from companies with a good record on sustainability and ethics, but don’t always, the reality is that only 9% of UK customers and 16% of US customers rate ethical company/brand in their top 3 attributes, being considerably more concerned with value for money, price, and quality. Furthermore, while most customers say they will pay more to buy from a sustainable company, they won’t pay more than an extra 5%.

As a result, the inclination of most senior buyers might be to forego sustainability and ethics when sourcing and go for the supplier that provides the best value for money, quality, or price, especially since that’s what the average buyer wants. But this reactionist approach is the exact opposite of what you should be doing! In fact, you should be doubling down on sustainability efforts.

Consider what the average consumer wants to buy. Fashion. Electronics. Media. Now consider what these items are made of. Cotton. Rare earth Minerals. Paper. All of these items are in limited, decreasing, supply. Increased drought and increased need of limited farmland for food production are causing cotton prices to increase. Rare earth minerals are decreasing but demand in modern electronics gadgets is steadily increasing. And paper, well, there are only so many trees and some take decades to grow.

In other words, costs are going to go up — and, at some point, costs are going to go up significantly. At that point in time, the best strategic sourcing and negotiation skills in the world aren’t going to be worth a dime because you can’t source for less than cost, and if costs skyrocket because there is (much) more demand for the materials than there is supply, your costs skyrocket and your consumers go elsewhere.

But if you double down on sustainability, and source products that use alternative, more readily available, and if possible, renewable materials, from suppliers that focus on recycling and material recovery, then your costs will stay down while your competitors’ costs go up. That’s why, despite your inclination to follow your customers, you have to do a 180 in the other direction to make sure that you keep those customers as time moves on.

Do As I Say, Don’t Do As I Do!

As promised, today is Masquerade Monday.

There’s a lot of hype about the importance of ethics and sustainability to today’s consumers and how companies that aren’t sustainable and ethical are at risk of consumer boycotts and bankruptcy.

But is this really the case?

In an attempt to answer this question, Trade Extensions commissioned Fly Research to conduct two general public awareness surveys to answer the question. Fly Research collected 1,000 responses from US consumers and 1,000 responses from UK consumers. The results were not quite what you might expect.

While 47% of UK and 48% of US consumers say they “try to buy from companies with a good record on sustainability and ethics, but don’t always“, when asked what was important when shopping for goods only 9% of UK and 16% of US consumers rank “ethical company/brand” in the top 3 attributes. In contrast, 87% are more concerned with value for money, 76% are more concerned with price, and 73% are more concerned with quality I’d expect.

Furthermore, when given the choice, only 31% of US and 19% of UK companies are much more likely to buy from companies with proven policies on sustainability and ethics. And, furthermore, while 90% state that they would be happy to pay a little more if they knew that an item was sustainably sourced, the majority, 47%, would not pay more than 5% extra!

In other words, while the masses say they want sustainability and ethics, they want sustainability and ethics only as long as it doesn’t cost them anything.

Procurement — Why We Matter Even More!

Last week, we re-ran a post by David Furth, former VP of Marketing at Hiperos and current President of Leap the Pond, on Procurement – Why We Really Matter. In this post, David explained that Procurement is on the verge of its next major transformation where it will continuously assess risk and introduce integrated processes and controls across the company to mitigate the risk by working closely with other functional areas, business lines, and geographies. In addition, Procurement will implement management control programs that actively monitor both performance and compliance to help ensure suppliers are meeting all their obligations.

David was, and is, right. Now that everything is outsourced, resourced, and optimized to razor-thin JIT models, risk management — and continuous monitoring — is key. But that is just the beginning.

It’s not just risk monitoring, but compliance monitoring and performance monitoring. (Safety) regulations (like RoHS, WEEE, and REACH) are coming into effect fast and furious around the globe, as are bans on toxic substances, materials and products that can be used to create dangerous weapons, and conflict minerals and diamonds. As a result, compliance monitoring is becoming more and more important.

But so is performance monitoring. You can’t ignore the importance of quality, reliability, and safety as it is your reputation — and bank account — on the line. If the products you deliver continually break under warranty, even if you have a policy that you can return for replacement, you’re still losing the profit, the customer’s trust, and the costs associated with processing the return. If the products hurt someone — you’re getting sued, not your supplier. And if the products don’t perform up to spec, even if they don’t break, the customer ain’t coming back.

And even though savings aren’t everything, because it all comes down to ROI — value delivered by your organization. However, if your organization is to remain competitive, it still has to keep costs in check and at least keep costs in line with your competition. Often the only way to do this is to identify when you need to help your suppliers decrease their costs and increase their productivity, and this requires constant performance monitoring.

And who else in the organization can properly monitor risk, compliance, and supplier performance? Not manufacturing. Not logistics. And definitely not finance. That’s why Procurement Matters — Now More Than Ever.

Supply Managers Will Be the RockStars of The Resource Revolution


I’m through with standing in line
To clubs we’ll never get in
It’s like the bottom of the ninth
And I’m never gonna win
This life hasn’t turned out
Quite the way I want it to be

  from Rockstar by Nickelback

Supply Management hasn’t exactly been the poster-child of the corporation in recent years. In fact, in some organizations it would have been lucky to be the Island of Misfit toys that Mr. Dominick of Next Level Purchasing has compared it to. But if the Resource Revolution comes to pass, that might all change.

A recent article in the 2014 Q2 Edition of the McKinsey Quarterly that asked Are you ready for the resource revolution? said that another industrial revolution is coming, and while the first two focussed on labour and capital, two of the three primary business inputs identified by Adam Smith in his classic treatise The Wealth of Nations, the third will focus on the last input identify by Adam Smith — resources that come from the land.

According to the authors, who recently authored Resource Revolution, five approaches will be utilized by companies that lead the resource revolution. And three of these — namely substitution, optimization, and virtualization — will be critical to success. (The other two, circularity — or design for reuse and recycle, and waste elimination — or lean to the next level, will primarily be used in conjunction with the other methods to deliver significant enhancements that neither approach on its own to achieve. )

Substitution, the process of replacing costly, clunky, and/or scarce materials with cheaper, better, and more readily available materials, is already being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Optimization, the process of embedding software in resource-intensive industries to improve how companies produce and use scarce resources, is also being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Virtualization, the process of moving processes out of the physical world, is being employed by leading manufacturers (who will use a platform like Aravo’s) to determine the most efficient and cost effective process to produce a part as well as aircraft and car manufacturers (who will use advanced 3D modelling tools) to determine the most environmentally friendly or best performing design. But this too will be used more and more by leading Supply Management organizations to design the best supply chain to support the products and the business.

And when you get right down to it, no other organization in the corporation is in a position to make more use of these approaches than any other. That’s why, if the Resource Revolution is to come to pass, forward-thinking Supply Managers will have to lead the way, and become the corporate rockstars they always desired to be. (And put those motor-mouth marketers in their place.)

What Will It Take for North America to Embrace Sustainable Energy?

Fracking might get us more natural gas, but the process of drilling and injecting fluid into the ground at high pressure in order to fracture shale rocks to release the natural gas is risky.

First of all, there are the hundreds of chemicals used in the fracking fluid which include a number of dangerous carcinogens and toxins such as lead, uranium, mercury, ethylene glycol, radium, methanol, hydrochloric acid, and formaldehyde which can, and do, leak into ground water suppliers. For example, methane concentrations are 17x higher in drinking-water wells near fracturing sites than in normal wells. And it’s a sure thing that some of the fluid is going to leak considering at most 50% of the fracturing fluid, that is not biodegradable, is recovered.

In addition, some of this fracking fluid will evaporate and release harmful volatile organic compounds into the atmosphere that can contaminate the air and create acid rain.

If something goes wrong, the well can explode, and, in addition to killing and injuring workers, spark fires that can burn for days. This happened recently in Pennsylvania, where Chevon decided that it could offer free pizza to make up for deadly fracking explosion.

If too much gas is released, gravity can bring the earth down to fill the empty chambers and create massive sinkholes that can swallow entire towns. This is what happened last year to Bayou Corne, Louisiana.

In other words, while it works, it’s just not safe — in comparison to solar, wind, and water power which is plentiful, safe, and provided for free by mother nature. Now it won’t solve all of our energy problems, and we’re not going to be running trucks, trains, and planes on renewable energy any time soon — but, combined with natural (pump storage, etc.) and man-made “battery” arrays (which could include water and geothermal storage in addition to lithium-ion storage), it could solve more than half of our global energy problem with the appropriate balance and investment.

And if even the CEO of a known fracking company isn’t comfortable with fracking in his own backyard and is joining in on anti-fracking lawsuits (like the CEO of Exxon, as per this Salon article), that should tell us something.