The Five C'S Of Going Green
How to achieve responsible procurement
Corporate Social Responsibility (CSR) and responsible procurement in particular are on boardroom agendas, but they remain a challenging task for organizations to execute successfully. Responsible procurement covers a broad range of issues, including the environment, health and safety, and labor practices. The benefits are often difficult to measure and the investments large and unclear. But companies without real, operative actions behind their CSR statements are vulnerable and open to attack from NGOs, which can tarnish reputations through bad publicity.
Embarking on the road to CSR
At a recent meeting at IMD to discuss CSR, organizations expressed frustration, hesitation about how to proceed, and a concern about not showing immediate results. But often, those companies that have been successful with responsible procurement programs focused more on executable tactics than on conducting research. With a structured process and motivated individuals, it is always possible to do something, even starting small. Here are five ways to create a successful, cost-effective program.
The Five C’s of Going Green:
Capture
Knowledge brokering - applying existing ideas and experience to new contexts – is a proven method for cutting costs and spurring innovation. As an example, in 2006, power and gas company E.ON UK had no agreed process for responding to suppliers that were acting in a socially irresponsible manner. Faced with a real threat from Greenpeace and Friends of the Earth, the company enlisted outside facilitators to help define its goals and to knowledge broker. A global network of partners was provided, and the knowledge gained enabled E.ON UK to develop their own approach to responsible procurement quickly and cheaply.
Collaborate
Some of the most effective CSR efforts can come from collaborations with external audiences like NGOs. For example, the Rainforest Alliance’s certification of Chiquita farms spurred a productivity increase of almost 30% and a cost reduction of 12%. In most cases, activists are very willing to give guidance and training, share research, define expectations and arrange meetings with knowledge brokers. Tremendous organizational learning can be gained from meeting your critics, and these transparent relationships can be motivating and inspiring for organizations to meet their CSR goals.
Consistency
The biggest mistake a company can make is to broadcast its intentions without following up. This discredits the value of the initiative and exposes the company to the charge of “greenwashing” - disingenuously spinning their products and policies as environmentally friendly. Furthermore, when troubles arise, a transparent and upfront response is the only effective strategy. A company that holds its green efforts with conviction is Marks & Spencer (M&S), one of the UK’s leading retailers. The company developed a five-year plan which will see the it become carbon neutral and send no waste to landfill by 2012. M&S has adopted a very pragmatic approach, working with its suppliers to successfully develop a sustainable supply chain.
Catalyze Champions
Most companies have a network of potential CSR “champions” who are passionate and willing to donate time and energy. Developing a structure that mobilizes this “silent army” can be very productive, without the need for formal roles. Champions at technology company Hewlett-Packard (HP) successfully used internal CSR programs to make senior management understand the risks of inaction. And E.ON UK’s responsible procurement manager successfully allied herself with an external network of NGOs and other environmental agencies and received continuous guidance and support.
Consolidate
CSR and responsible procurement must still be managed within economic realities. Rather than adopt an expensive policing mentality, demanding new requirements and creating audit fatigue, it is far more effective to apply a quality program-type approach, educating and collaborating with suppliers.
Organizational challenges for responsible procurement
One of the biggest CSR barriers is that the perceived value is less than the expected cost. The following are some effective strategies:
1. Increase the value of sustainable supply chains and sustainable procurement. Consumers will pay more for sustainable products if they can perceive a benefit for themselves.
2. Monetize the economic value of sustainability. Sustainability benefits must be clearly articulated and the value made visible, including from other intangible sources such as attracting better talent.
3. Increase the perceived value. Make clear how expensive it is to get caught or be unprepared.
4. Increase communication and decrease misconceptions. Sharing the progress made through internal PR helps to increase everyone’s commitment and energy level. The quality programs of the 1980s were similarly faced with the perception that high quality required higher cost. A major breakthrough was the understanding that “quality was free” - economic benefits were greater than the costs.
CPO Checklist
√ Make your program economically rational
√ Find an efficient existing approach
√ Collaborate, educate and share IP
√ Use pilot projects
√ Establish a “preferred” supplier network
As the economy improves, CSR issues will regain their high profile and critical status. Now is the time to improve what you are doing or to get a pilot project going. Doing nothing will be your worst and most costly option.
Corey Billington is Professor of Operations Management and Procurement at IMD, the leading global business school based in Lausanne, Switzerland. He is also the Director of the Forum for Corporate Sustainability Management at IMD (CSM). The CSM is building on its strong research heritage by introducing programs that will support organizations in this crucial area. Contact Professor Billington at corey.billington@imd.ch to share your experiences. The CSM is hosting an open forum on September 17 and 18 in Lausanne. Learn more.
Aileen Ionescu-Somers is the Deputy Director of the CSM. Michèle Barnett Berg is a Research Associate.
[This article has been reproduced with permission from IMD, a leading business school based in Switzerland. http://www.imd.org]
