News focus: Sustainabilty that pays

3 October 2011

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Adam Leach | 4 October 2011

The social and environmental benefits of sustainable procurement are clear, but it should not be assumed this always comes at a higher price – indeed the opposite can be true, finds Adam Leach

When Prince Charles launched his Accounting For Sustainability project, he highlighted the need for “better accounting” in the pursuit of increasing sustainability in the business world.

The International Integrated Reporting Committee (IIRC), which is part of HRH’s project, last month called for sustainability and financial reporting from companies to be more closely linked.

It argued “globalisation and resulting interdependencies in economies and supply chains” has left reporting standards out of date.

It’s a smart call because while sustainable procurement can produce significant environmental benefits, it can also bring savings and even profit.

Jonathan Garrett, group head of sustainability at Balfour Beatty, is using savings potential as a means of encouraging sustainability: “Our supply chain management programme has prioritised those with the greatest potential cost reduction.”

Better travel management is a prime candidate for cutting emissions and costs, he says. “Air travel impacts both the bottom line and fuel use and emissions. We have set a target of reducing travel costs by 10 per cent while reducing our carbon related emissions by 20 per cent over the next five years.”

The construction group has also moved to using just one supplier for print and office supplies.

This has enabled it to set minimum environmental standards across its offices, implement a double-sided printing policy and use only black and white printing, which should reduce costs by 22 per cent.

A win-win deal

The group found environmentally friendly office supplies to be more competitively priced. “This dispels the myth that recycled and eco-friendly products have a cost premium attached to them,” Garrett adds.

Shaun Evans, procurement strategy and relationship manager at The Co-operative Banking Group, also sees a close connection between the environmental efforts of the company and efficiency. “In many instances the two should go hand-in-hand. Reducing waste in the supply chain can also make a significant contribution to sustainability.

“By working with our supply chain to introduce waste segregation, we’re recycling a significant amount of material removed from stores while realising financial benefits in the hundreds of thousands of pounds.”

In order for initiatives to be signed off, highlighting savings potential is key. “This is vital,” says Garrett, “especially to achieve quick wins”.

Evans believes the extent to which cost is a factor changes from business to business: “While the Co-operative has a different set of values, it remains a commercial organisation and needs to make a profit like any other, so cost savings are obviously important to maintain our cost base.”

Shaun McCarthy, director of Action Sustainability and chairman of the Commission for a Sustainable London 2012, believes companies that really grasp sustainability are motivated by

a number of factors. “Cost savings are always a big driver – but smart companies are looking at many other reasons. People, customers, shareholders and other stakeholders are driving different sectors in different ways. There are also risk-related drivers and the desire to perform well in CSR indices.”

Looking ahead

What’s the future for sustainable procurement – where will it be in five years? Evans believes companies that lead the way will play a key role in driving the sustainability agenda across the business world. “As more of the sustainability issues we work on deliver financial benefits, competitive and commercial advantage is wrapped up within them. And organisations need to increasingly establish their appetite for sharing these initiatives.”

McCarthy predicts: “The leading companies will consider sustainable procurement to be business as usual, but the majority still won’t get it.”

Whether or not the integrated reporting format proposed by the IIRC is adopted, the links between sustainability and financial performance remain clear. And with the current lack of confidence in the world economy, the pressure to justify investment in sustainability through long-term savings is likely to increase.

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