How Will Green / Sustainable Procurement Play in a Recession?

Posted At : January 24, 2008 1:02 PM
Related Categories: Spend Management

I've been giving a lot of thought of late to the impact that sustainability and green procurement initiatives will have in a down economic climate. And here's the conclusion that I've come to. While it would be easy to dismiss green and sustainable procurement practices as a luxury for companies to invest in when times are good, I actually believe that they could help organizations to buoy their top lines and pull up from a spiraling downturn or period of contraction. Whether it's better marketing the benefits of green supplier practices to customers to spur pent-up demand or making investments in supplier development initiatives which reduce unnecessary packaging, supplier-focused sustainability initiatives have the potential to drive sales and reduce costs. But in a down economy, the key to getting these types of initiatives launched will be proving out the business case to justify the investments in the first place.

- Jason Busch

Posted By : Jason Busch | Comments (5) | Send | del.icio.us | Linking Blogs

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A former employer of mine ran an internal initiative called WRAP...waste reduction always pays. This applies as much to purchasing as any functional activity. The benefits go straight to the bottom line, and in the process you reduce your energy usage, carbon footprint, etc etc. Good business sense

# Posted By paul gooch | 1/24/08 11:47 PM

Jason,

Interesting question which is should better be asked, than ignored by all those concernded by ths topic

Our views is that potential recession would have a negative impact on a certain type of 'sustainability initatives : those which are pure hype and communication. As consumers become more cost-conscious they will be less sensitive to the 'greenwashing' marketing messages.

But overall we think difficult economic times will only reinforce true sustainability inititatives.
First because, as supply chain get fragilized, the risks associated with uncompliant environmental practices or bad social behavior will get more and more important. Mitigating those Supply Chain Risks is going to become a top priority in the coming months.
Secondly because, high commodity prices (energy, raw mats, chemicals) willl significantly improve the ROI of environmental footprint optmisation intiatives in 2008. Packaging you are right is a good example.

This is a "European" view, and we would be interested to see if this is shared on your side.

PFT

# Posted By ecovadis | 1/25/08 12:28 AM

On this side of the pond I think green will go a long way even in a recessionary environment. But for a different reason perhaps than elsewhere around the world. As with many business shifts/practices, I think folks will look at green exactly as Paul Gooch mentioned above....to eliminate waste. But the biggest reason will be to reduce enterprise costs. So in many ways, green is a form of lean...to eliminate and reduce waste. Not to shift it per se (e.g. lower the piece part price but increase the freight costs as we have seen with many global sourcing initiatives) but to seriously take out the waste and reduce the carbon footprint, so to speak. In a recessionary environment, I predict you'll see many US firms innovating around green...as a way to cut costs.

# Posted By Lisa Reisman | 1/27/08 11:11 AM

All of you are on the right track. Aside from sustainability's benefits to environment and society, the real economic improvements posit its acceptance. Reducing waste simply saves money, and reducing pollution via greener products eases compliance, reduces remediation, disposal costs, and reuse options. The recessionary concern lies in that some of the products do cost more initially and are less available, causing hesistation amid budgetary constraints. This is our fiasco in sustinable procuremet in the military. It is currently difficult to prove sustainability as the greenwashing facade muddies the choices. There are few clear indicies by which to choose.

# Posted By Frank | 1/30/08 10:34 AM

Lisa is right on. That's why you see "Lean and Green" (even a book titled that - it's not bad) and "Lean and Clean" (actually another book) used together in practice.
If you set the way back machine to the great sensei Genichi Taguchi and his definition of waste, it was actually a loss function to the consumer and to society - so this correlation is both understandable and natural.
Hell, even the government gets it, and that's saying something!:

http://www.epa.gov/lean/toolkit/index.htm

# Posted By The SpendFool | 2/1/08 12:11 PM

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