Green Procurement Introduction

In 2008 the world entered into a new era. Most of us felt it. Many us of identified it. Many of us also thought it went away. The ‘it’ was the inflationary spiral of commodities such as food and fuel. As gas topped near $150 per barrel there were huge strains in the global economy. The importance of alternative fuels, less consumption, more fuel-efficient cars, solar energy and the like, in short, Green Technology, was evident to most every person.

Since the summer of 2008, the world economy has migrated from the concerns of high commodity values to the more basic question of keeping jobs, cash flow and the supply base intact due to the economic downturn that started in the fall of 2008. Popular concern, and will power, for Green Technology went down the drain with positive GDP growth. Everyone has been concerned about making it through the ‘Great Recession’ and not about what happens after the recession ends.

It is not a known fact, but a highly likely event, that the world will again, very soon, see high gas prices and other commodity prices. As procurement professionals, we all need to entertain and understand that we may be facing the same challenges in future months as we did in 2008. More so, the challenges to provide assurance of supply for our organizations will, this time, come out of the crucible of the recession and the bankruptcies, mergers and other events that have reshaped our respective supply chains. In fact, if one looks around to see the world from 2008 one would note that the price of petroleum fell and rose but the price of gold has basically stayed the same – at all time highs. The prices of copper and silver decreased, but the price of many foods remain the same from 2008 or have already moved higher. In short, the world as we have known it, is being redefined. The end result of this reshaping is not fully contemplated here, but one overriding concept shines through – the need for Green Procurement and Green Purchasing. The need for each of us to develop our green supply chains.

Why distinguish between Green Procurement and Green Purchasing? Purchasing, or procurement, has been around for a very long time, arguably hundreds of years, so why make a distinction? For me, there are two reasons to make the distinction. First, at the time of this writing, there is really no consolidated view of Green Procurement. Basic research indicates that different firms all over the world approach this concept differently and with different standards and vigor. As such, and for the purpose of helping to establish a dialogue as to what ‘green’ means, I believe there should be a distinction in Purchasing versus Procurement.

Purchasing, for the purpose of this blog, will really refer to the verb ‘to purchase.’ Purchasing truly is the activities associated with the purchase of an item and the transfer of title from one party to the other party. It is tactical in nature. The issuance of a Purchase Order, receiving against the Purchase Order, bargaining with the Supplier are examples of the act of buying. By contrast, Procurement, is more of the result of the verb. For example, we have the verb ‘govern’ meaning to govern or to rule by authority. Then we have the word ‘government’ which is the establishment use for the act of governing. Similarly, Procurement, to this author, is the establishment that conducts Purchasing. It also connotes a strategic element to it whereas Purchasing is limited to tactical measures.

In the arena of Green Procurement and Green Purchasing, one can now begin to make valuable distinctions. First, what is your organization going to do on a daily basis to promote green actions and activities? That is Green Purchasing. Second, how is your organization going to develop its supply base for environmental sustainability? What criteria will it use to correctly work to assure that environmental sustainability? These are questions of strategy and of Procurement. Without some form of distinction between the short term [tactical] and long term [strategic], it would be very difficult to appropriately explain how one can go green.

Having now established a basic framework for this blog, please come back to review the next steps in which we get into the concepts of Green Purchasing and Green Procurement in greater detail and develop the concept of the Green Supply Chain.

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© 2009

This entry was posted on 31. October 2009 at 02:02 and is filed under Green Procurement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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