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Sustainable Purchasing:The next frontier of value creation

Intercity meeting Rotary Clubs WaterlandJune 15, 2010, Volendam

Prof.dr.ir. Bart VosNEVI Chair Purchasing Management, Tilburg University

Expert Partner Coppa Consultancy

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McDonald’s. I’m loving it……

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Agenda

• Context: Supply chain dynamics

• Sustainable purchasing (SP):What & why?

• How? Embedding sustainable purchasing in the internal organisation

• Concluding remarks

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Context: Supply chain dynamics• Increasing focus on chain optimisation

relay race as metaphor

• Role purchasing? Selection, managing and development of suppliers More important as a result of outsourcing tendency!

• Ever more performance pressure: faster, better, cheaper

• And more “challenges” like globalisation, technological progress (ICT!), more demanding customers & growing impact “public opinion”

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Corporate Social ResponsibilityWhat? Triple P value creation: People, Planet & Profit Multiple ‘Stakeholders’ “Here vs there” & “later vs now”

Why?Have to (e.g. laws, regulations)Ought to (moral/social/ecological principles)Pays off (e.g. via improved image, differentiate from

competitors, positive HRM effect: ‘employer of choice’)

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Sustainable Purchasing: What are we talking about?

• “Multiple terms”: sustainable purchasing/sourcing, “responsible sourcing”, “green procurement” etc etc

• Sustainable purchasing (SP):“Within organisations purchasing function explicitly and structurally pays attention to societal role in a way that 1) goes beyond obligations by law and 2) results in added value for both the company and society (Jeurissen, Nyenrode, 2006)

• Motto: ”you are and remain responsible for what you purchase/source”

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Sustainability issues in chains

Social issues• Child labour• Forced labour• Non discrimination• Right to have trade unions• Working hours & overtime• Salaries• Safe & healthy labour conditions

Environmental issues• Hazardous materials• Waste treatment• Efficient energy consumption• Efficient materials usage• Biodiversity

Other “ethical” issues• Bribery & corruption• Product safety & quality• Animal wellbeing

Container topic, trade-offs, strategic priorities

3 mei 2023

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Sustainability at Dutch Railways (NS)• Corporate Social Responsibility (CSR) clearly on strategic

agenda NS• Three CSR priorities:

– Energy savings– Noise reduction– Waste treatment

• Purchasing contributes in many ways, for example via:– Cleaner fuel– Reducing weight of trains– Green building

Source: Deal!, January – February 2009

People, planet, profit criteria used in all NS purchasing decisions

3 mei 2023

Geluid

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Drivers sustainable purchasing

Results American research (Carter & Jennings, 2004):1. True leadership top management

• Direct significant positive link with SP• Indirect effect: strengthen more ‘human based’ culture

2. Own initiatives individual employees

3. Pressure from customers (e.g. Dutch government!!)• Challenge purchasing is to integrate these market

demands in its supplier management

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Planet Me at TNT• TNT’s ambition behind Planet Me: become the first

zero emission mail and express delivery company• Idea: combine corporate activities & individual

actions• Planet Me is a three-pronged approach to radically

reduce CO2 emissions:– Count Carbon: Report about Carbon footprint– Code Orange: Reduce CO2 emission in TNT

operations– Choose Orange: Encourage employees (globally

about 160.000) to take action ‘to save the planet’

Source: Website www.tntplanetme.com

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New, sustainable HQ TNT

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Why sustainable purchasing?Not only because should or ought to, but alsobecause it can be very rewarding:

1. Risk management (more “defensive”)

2. Sales increases and/or cost reduction(more “offensive/pro-active”)

Innovation via Sustainable Purchasing

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How to get it done?Embedding SP internally (1)

Stimulate• Clear basic values/principles organisation (vision/mission)• Human resource policies (e.g. include in “profile” for

recruitment & selection, training, reward system)

Facilitate• Report achieved results, e.g. via Sustainability Reports• Ongoing dialogue with stakeholders (internal & external), e.g.

about social & environmental criteria in specifications

CO2 uitstoot in TNT’s keten

Source: TNT annual report 2009

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How to get it done?Embedding SP internally (2)

Control/monitor• Codes of conduct: internally and for suppliers (e.g.

Heineken, Unilever, Philips, AkzoNobel)• Risk analysis in the supply chain/network• Audits (e.g. SOCAM for C&A)• Ethical office (sort of “faith person”)• Clear and consistent sanction policy

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Concluding remarks• True leadership top management as critical success factor• Purchasing challenge? Align with and contribute to

corporate CSR/sustainability initiatives• Sustainable purchasing essentials:

rewarding, cooperation, job enrichment• Hype?!? Could be, yet very unlikely:

– Increasing public opinion “pressure”– Ambitious SP targets Dutch government– Many leading companies active in sustainability domain

VBDO Responsible Supply Chain Management Award 2009

1. Philips 90 2. Akzo Nobel 873. Unilever 794. Reed Elsevier 755. DSM 736. Ahold 607. ASML 60

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Motto: De VonkHet vuur moet blijven brandenEn de hoop mag niet vergaanEn de geest moet kunnen waaienWant de vonk, de vonk kan overslaan!Van Nieuwegein tot Oldebroek ……En als ze morgen bellen,Zijn we er overmorgen weer

De Dijk, De Blauwe Schuit (1994)