By Kris Colby and David Fertal
The green sourcing wave has begun to roll. An increasing number of companies are beginning to catch on and ride this wave in an effort to proactively manage a new era of customer needs, regulations and competitive realities that will ultimately impact their business.
Far from a fad or feel-good initiative, green sourcing is fast emerging as a strategic business imperative. Companies that want to get ahead of the curve and stay there need to begin thinking green now and develop an approach to sourcing and supply chain management that factors this new reality into their plans. It sounds daunting, but with a few simple steps procurement organizations can jumpstart their efforts and get on the path to success:
1. Know where you stand: Understanding your organization's spend, supply chain and consumption patterns is naturally the first step because you can't affect what you can't see. Whether this is a detailed carbon footprint study or an assessment of your organization's "green" status, you need to know how your supply chain is positioned for the changes on the horizon.
2. Have a plan: Once you understand where you stand, create a set of goals and, even more important, metrics that can be used to track progress.
3. Have a single point of accountability: Many organizations have appointed "chief sustainability officers" to oversee their green efforts. The applicability of this specific position will depend on your organization and industry, but the key is to have a single point of accountability empowered to effect change.
4. Market your progress internally and externally: Half the battle is getting the word out and getting people on board. Be sure to communicate to all levels why green efforts are being undertaken (Goals), what will be measured (Metrics) and how the company is going to get there (Plan).
5. Incorporate "green" into your existing sourcing and procurement processes: Sourcing and procurement have always been about more than just price. Factoring green priorities into your existing processes is a natural extension of the non-price process and an effective way to drive green goals. Be sure to include green criteria in your requests for proposals (RFPs) and create clear metrics for measuring them as part of supplier performance management.
6. Communicate your goals and standards to your supplier community: By setting clear expectations of your supply base during the sourcing process and proactively monitoring compliance/progress, you can quickly improve your sustainability performance. Outline what suppliers will be expected to provide and how they will be measured to ensure that they are delivering and putting in place the processes and procedures to drive compliance.
7. Stay up-to-date with global regulations: Environmental regulations such as the Restriction of Hazardous Substances (RoHS) directive in the European Union will increasingly affect how your supply chain functions regardless of your location. You need a method for keeping up with changes in this rapidly evolving area to avoid costly mistakes in your supply chain.
8. Keep up with new materials, technologies and processes: Significant work is being done to develop new approaches that can cost-effectively address the challenges and opportunities that green initiatives present. Stay up-to-date in your industry, participate in industry groups and do whatever it takes to maintain your competitive advantage and not be left behind.
9. Do the "easy stuff" first: You don't need to overhaul your supply chain to see gains from sustainability efforts. Instead, identify "quick wins" such as simple improvements in energy efficiency that can both deliver bottom-line results and kick-start your green initiative.
10. Get everyone involved: As with any broad initiative, it is nearly impossible for just one functional area to have an impact on the entire organization through its efforts alone. To be effective, you need Engineering, Design, Sales, Finance, Operations and everyone else involved.
By acting on these 10 steps now, you can ensure that your organization will be well-positioned to limit risks and profit from the opportunities that green initiatives hold.
About the Authors: Kris Colby is a senior manager and David Fertal an engineering project manager in the Spend Management Services group at Ariba, Inc. www.ariba.com.