28. September 2011 by Steven.

To the Reader of this Blog -

Thank you for your patronage and your patience as I have not been updating the content of this site frequently.  To be completely transparent, I was conducting research in the green procurement area while also doing research in other areas including attempting to solve a personal finance issue.  Basically, I was attempting to define what I thought would happen next in the world and that has lead me to writing my first book.

http://www.amazon.com/wealthless-ebook/dp/B0053GAU1A/ref=sr_1_1?ie=UTF8&qid=1317172291&sr=8-1

The book “wealthless” is not about Green Procurement but does lead to a discussion about a green energy future.  The remainder of the book, the first few sections of it, discuss the economy, what makes a good economy and what is absolutely fundamental to all human activity.  Energy.

We need energy and we need more energy and we need it now.  In “wealthless” I show that energy conservation, a “green” thing to do, is not what we want.  Wealth is in fact created from use of energy.  Conserving energy as opposed to producing more energy is akin to living off a savings account or some inheritance fund rather than working.  It is only a matter of time before your life is impacted.

Perhaps as important, I show that the rate of unemployment in the United States, if not also elsewhere, is directly correlated to the amount of energy used per person.  The more energy used the lower the rate of unemployment.  The less energy the more people are looking for a job.  We can fix our economy by moving toward more and more energy – not just conservation.

The only question is how.

This is discussed at length in the book.  In summary, the green alternatives often explained are not necessarily an immediate solution.  For example, most science indicates that it takes as much energy to create ethanol, derived from growing renewable corn crops, as is created.  Wind appears to be a great solution but solar needs new ideas.

If you are interested, please consider clicking above and downloading the ebook.  If you remain interested in green procurement, please be patient.  I do hope to get back to publishing new articles soon.

With Regards to All.

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5. October 2010 by Steven.

This edition of the green purchasing blog is the second installment of an overview of current green purchasing and green procurement practices in many of the G-8 countries. The G-8 is a recognized group of countries that have the largest economies and, therefore, represent the most likely need for green practices. In the prior edition, an overview of Canada, Japan and France were provided. This edition will cover Germany, Italy, Russia and the UK. Not covered is the United States which is the topic of the next blog edition.

Note, while China’s economy is larger than many of the G-8 country’s own economies, China is technically not a G-8 member and is not covered here. Information about practices in China will be in a future post. For now, please find below the summaries of the remaining G-8 countries.

Germany. In 1999 a handbook was published by the German Federal Environmental Agency that set forth the impact of various products, and service, have on the environment. That handbook is still used as a relevant reference today. Citing use of the handbook is the Saxon State Ministry for the Environment and Agriculture. The Saxon State Ministry itself has published a short guide to green procurement that lists these six steps for green purchasing activities:

1. Make a clear decision about green procurement [i.e., management supported];
2. Figure out what products and services are most suitable for green procurement;
3. Take the green alternative into account;
4. Consider the costs of the entire life cycle;
5. Include environmental criteria in RFx;
6. Show Your Commitment.

Standing with, or behind, the German green efforts, and like the French and others, is the fact that Germany is subject to EU mandates. In fact, Germany has implemented into its national in 2006 two EU directives from 2004 on the award of public contracts and the public contracting for water, energy and transportation. Beyond these directives, Germany itself has adopted a national procurement standard for public [i.e., governmental] purchases. That standard includes the purchases of: IT equipment, household appliances, lighting equipment, green power, vehicles and building materials.

Italy. Italy has implemented a number of decrees and laws since 1991 to address various public green procurement concepts including recycled materials and requiring requirements on smaller governments such as municipalities. Italy is working to adopt into its national system the EU directives.

Today, it appears that Italy is, like so many other countries and organizations, working to establish a more effective and robust green procurement system. The Italian government has introduced a web portal that provides free information and consulting on green purchasing including lesson on how to incorporate environmental considerations into award criteria in addition to price and quality. Web resources also include guidelines for managers on the use of environmental labels and energy use.

Prior to launching its web resources, the Italian government has implemented a series of laws and decrees to direct public procurement to be more environmentally friendly. Such laws and decrees have required such effort as:

• 30% recycle content in certain goods;
• use of electronic purchasing systems [e.g., ‘paperless’];
• giving preference to ‘green’ products when other criteria are seen equal;
• definition of different recycle requirements by types of materials.

Russia. Unfortunately, at this date, it does appear that Russia is taking very proactive steps for green purchasing and procurement. Admittedly, there is a potential gap in knowledge given this blog Editor is not fluent in Russian. However, as Russia continues it journey of economic development more and more information will be available. The need for standards consistent with the rest of the world will also be realized and supported. For now, the key issues of green procurement in Russia appear to center around the legal harvesting of timber.

It is likely accurate to state that green procurement practices in Russia can be divided, in some ways, from two viewpoints. Those are from an Outsider’s point of view and from an Insider’s point if view. Above, the Outsiders [non-Russian] point of view is concern over harvesting timber. Many readers will note this issue in prior years as being a topic in other countries, including the US, as an environmental issue. It is not strictly a purchasing issue as it is a depletion of scarce resources issues. The two concepts are definitely connected. However, the point is, from the Outsider’s view, to stay green themselves, they need Russia to act green.

From the Insider’s point of view, the view is much like that of other countries. Efforts are being made to improve. A good example of positive movement is its implementation of GOST R standards that do incorporate environmental labeling requirements found in ISO 14000. The GOST R standards are regional products standards in which Russia takes a role in development and influence.

United Kingdom. The United Kingdom started a ‘Sustainable Procurement Action Plan’ in 2007. Lead by DEFRA [the Department for the Environment, Food and Rural Affairs] the plan’s intent was to provide energy in the area of green procurement while providing high value for taxpayers. The initiative lead the UK government to wrestle with many topics associated with green procurement. Among these topics were the definition of sustainable procurement; an explanation of why green procurement matters; to define areas of opportunity; to define discrete steps of action; a method of starting and a method of measurement.

The approach taken by the UK national government includes a multi-stage implementation consisting of:

• Foundation;
• Embed;
• Practice;
• Enhance;
• Lead.

During the Foundation stage, the approach calls for change agents to take up the cause within the government, agreement on key elements and spend analysis. The Embed stage requires broad training of procurement personnel, improvement of policies and broadening of spend analysis throughout the supply base. The Practice stage requires refresher training, an augmented policy to cover additional areas [such as risk] and targeted improvement in supplier sustainability. In the Enhance stage, sustainable procurement is included in core competencies of the organization, procurement strategy is further enhanced for sustainable goals and key supplier are targeted for intensive development. In the Lead stage, the last of the five stages, the leadership position in sustainable purchasing is used to attract new professionals, strategy is continually revised with outside stakeholders and suppliers continually develop their sustainability profile.

In addition to the efforts of the UK national government, local governments have also take action to be leaders in green procurement. A prime example is London. The Mayor of London implemented in 2001 a Green Procurement Code. This program is not only a local government initiative but also a method through which local businesses are encouraged to increase their green purchases. For example, local London businesses can become members and, in so doing, commit to reducing their impact on the environment and are awarded based on their relative success.

The past two blog editions have provided an overview of many efforts in some of the G-8 countries for green procurement and purchasing. As has been demonstrated, the breadth of approaches and tools is widespread as is the level of implementation and adoption within the countries.

Please continue reading the Green Purchasing Blog at www.recyclechain.com with the next edition about United States government programs for green procurement and purchasing.

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29. August 2010 by Steven.

At the time of the writing of the blog edition, Green Procurement and Purchasing is still in its infancy. Whereas large private companies are often held out as the most proactive organizations, that has not, yet, proven true for Green Procurement and Purchasing. Instead, public organizations around the world have taken the lead on this topic. Largely, this may be due to political necessity. Regardless of the cause, an assessment of the various approaches is interesting and helps to explain how some approaches are robust and others are weak. In developing your organization’s response to its green initiatives, please consider the current state of affairs from around the world.

A simple Internet query will yield one many aspects and insights to various programs. However, for the purposes of this blog, the top trading countries will be assessed. The G-8 countries of: the USA, Canada, Japan, France, Germany, Italy, Russia and the United Kingdom, provide a ready-made list to compare [note: government green procurement practices are the sole topic of the next blog edition].

Canada. Canada’s national government has started its green journey. It has formed the Office of Greening Government Operations [OGGO] that has begun to implement standards and training for Green Procurement. The office also works within the Canadian federal system to promote sustainable office buildings, ‘environmental citizenship’ [what each federal employee can do to help reduce waste], proper e-waste disposal as well as other initiatives. OGGO also works with provincial entities to improve overall greening of operations.

With regard to Green Procurement, OGGO has developed online training, decision tools, written guidance, made purchasing department heads responsible for achieving goals, has goals, has a written policy and other guidance for types of purchases. An example of improvement metrics is found in the Sustainable Development in Government Operations organization that tracks the percent of procurement budgeted funds spent on green purchases to the whole. This same organization has proposed additional metrics that are worth mentioning. They are:

• Environmental Load. Are measures for actions taken and results of those activities such as water consumed, waste to landfills, total ozone depleting substances used, etc.;
• Cost Load. Are measures of the cost for environmentally related actions, or results, such as the cost per gallon of water, the liability of contaminated, sties, etc.;
• Efficiency Measure. A measure derived from either Environmental Load or Cost Load and normalized to a denominator to obtain a measure of load per person or per other unit of measure;
• Activity. A measure of the organization’s workforce that are involved in green activities and training;
• Proportion. A measure of infrastructure within the organization on the count of alternative fueled vehicles, facilities with water conservation programs, etc.

Japan. On April 1, 2001, a law came into effect in Japan called the ‘Green Purchasing Law.’ The law’s main focus was to provide the tools and methods by which Japan could become a ‘recycling-based society’ by supporting the goal of promoting Goods and Services that reduce Environmental Loads by:

• Promoting greener purchases by public organizations [i.e., Government];
• Provide information on environmentally friendly Goods and Services.

The methods by which the country of Japan hoped to achieve these goals are to have governmental agencies and ministries act to purchase greener by implementing policies and promoting the eco-labeling programs of finished products.

In the act of purchasing, the law creates the expectation that fact-based data shall be used as a ‘factor for determination’ in selecting one product, or service, over another based on a designated list of items from 17 different categories [such as Paper, Office Furniture, Lighting, etc.].

Since the implementation of the law, the Japanese government has measured progress on the percent of green products/services purchased. For example, over 90% of Paper products purchased are considered green. The national government has also continued to monitor progress of its overall implementation plan by noting the adoption of green purchasing practices by prefectures, districts, cities and towns or villages – all at the governmental level. As one might believe, this studied indicated that the green initiative was implemented more readily in larger cities than in smaller towns. Also, the survey results indicate that the main detriment to opting for greener products, or services, was the premium paid for those products.

The Ministry of Environment [MOE] is responsible for implementing of the above law. Prior to this law coming into being in 2001, the MOE took actions in 1996 to establish the Green Purchasing Network [GPN]. The GPS in still active today with over 2,000 industry and governmental members. The organization helps to establish criteria for those member organization to make purchase decision on products that are green decisions.

France. In 2007-2009 the French government adopted action plan for green procurement. In France’s overall framework, it has national laws for environmental purchasing that are deployed by multiple agencies and for various levels of government from national to the local level. France has also established goals for improved action but does not have an overall method of tracking the goals. Nonetheless, some of the French government’s goals include action on recyclables, lighting, buildings, low emission autos and wood products.

French officials are able to ‘go green’ by using ecolabels, ISO 14000 standards and the EMAS [Eco-Management and Audit Scheme] as tools. These standards are developed primarily by the Agency for Energy and Environment Management. Despite such actions, it appears that the public sector of procurement in France lags behind the private sector in energy purchases with many private sector firms adopting the ‘kWh Equilibre’ option to obtain 100% renewable energy.

This dialogue is continued on the next blog edition. Part 2 of an ‘Overview of Governmental Programs for Green Purchasing’ will cover the remaining G-8 countries less the United States that will be subject of its own blog edition. Please continue reading the Green Purchasing Blog at www.recyclechain.com and thanks.

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7. August 2010 by Steven.

In the last blog we discussed how ‘greenwashing’ is a relative concept.  We continue with that concept by example and further develop the concept of ‘greenwashing’ and a potential strategy for your organization.  To demonstrate, let’s take for example, on one end of the spectrum, take a large organic farm.  Because it is organic one would immediately give it points for being green.  It does not use pesticides, etc. However, it is still a large farm and it will still use fossil fuels, etc.  If that organic farm is in California and only sells to New York, in which case there are a lot of fossil fuels involved for transportation, does that company rank as a greenwasher because it has a high carbon content relative to some other organic farms?  Does it fly under the radar of environmental organizations because it is a true organic farm? 

On the other hand, the polar end of the spectrum, take a small energy company using coal as a fuel.  Coal is assumed by most to be a ‘dirty’ technology and the concept of ‘clean coal’ a prime example of greenwashing.  However, the small coal company has taken out a loan and invested in some technologies to reduce carbon emissions by using algae to absorb the carbon dioxide.  Because this company uses coal it is much more likely to be targeted for greenwashing but the company is acting in an environmentally friendly way and the net environmental impact of both companies may be the same.

Working the procurement department as you do, you actually purchase from both organizations directly or indirectly.  How do you assess each company?  What are your criteria?  Are your criteria sufficient enough to match the environmental groups?  If you believe they are, are they enough to prevent your organization from being labeled as a greenwasher because you convinced your marketing organization to advertise about your green purchases?

To answer this question, you might employ a simple ratio.  Is the ratio of dollars spent by your organization to go green to the dollars spent to advertise going green greater than 1.0?  If the answer is, ‘Yes,’ then your organization is in a defensible position.  Your organization is attempting to do the right and good thing.  If your organization spends more money advertising its green activities than it spends in the implementation of green, then you are likely to be actively greenwashing.  In Procurement, as part of your Spend Analytics, you may be able to derive this ratio with the help of the marketing organization or your procurement colleagues that support the marketing organization.  This ratio, or one similar to it, is a first good step.

Behind this ratio still lies the requirement for your organization to be doing something and, further, that the ‘something’ needs to be increasing over time.  You can be rest assured that over a period of years, your marketing costs will increase.  Your green activities need to increase as well.  As always, being green, from a procurement perspective, is really two elements:  internal measures and measures with the supply base.  Those two measures are interlinked as your specifications can drive your purchasing behavior and your behavior can influence your internal actions.  The purchasing department can be the catalyst for change.  Recognize this fact as part of your greenwashing prevention campaign.  Let your entire organization know of your efforts.  Regardless of those efforts, your organization may still be accused of greenwashing.  The more green you do the better off your organization.  However, there is no certain standard.  You must be prepared to defend your organization’s claims of its environmental stewardship.

In closing this blog edition, we focus on the fact there is no standard.  If one references the seven deadly sins of greenwashing as currently listed on Wikipedia, one can derive a strategy for each.  Arguably, the procurement department can influence each of the seven.  However, of the seven, two stand out as being more directly influenced by the procurement team.  Those are the ‘Hidden Trade-Off’ and the sin of ‘No Proof.’  These two greenwashing sins account for most of the offences found in a study conducted by TerraChoice in 2007.  For both, the ‘sins’ has to do with sourcing of materials [e.g., is organic truly certified as organic].  In sum, your actions matter.  For the remainder of the greenwashing sins, the greenwashing trigger could be triggered by a relative measure.  Is your product relatively less green than another company’s but your claims are substantially the same as theirs?  As such, be aware the importance of what you do relative to other organizations within, or without, your industry.  To assist in determination of other’s actions, the topic of the next few blog editions will be common practices by government agencies throughout the world, in the US and then into large commercial enterprises.  The next few blog editions should help baseline your expectations of common activities within green procurement and purchasing.

Please continue reading the Green Purchasing Blog at www.recyclechain.com with the next edition about Government programs for green procurement.

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8. July 2010 by Steven.

Imagine that you are on you way to work after a trip to another city in which you met with team members from other company sites to be recognized and rewarded for your efforts on taking the whole company green.  You feel good.  Your work is recognized, the company is doing the right thing; life is good.  Then your cell phone rings.  It is a co-worker stating that your company was just listed by an environmental group as a company that is derelict on the environment.  Your company is being held out as a poster child of what not to do.  How could this happen?  Why did it happen?  What is going to happen to your career?

While an imaginary exercise, the potential for this scenario to play out is all too real.  You can try hard.  Your company can try hard.  However, you can still be called out for greenwashing. 

‘Greenwashing’ is a term first used by Jay Westerveld who wrote an article about hotel industry practices.  The term has grown in popularity since and a quick search on the Internet will yield various articles and opinions.  The idea though is that a company will claim an environmental virtue that is either untrue or counterbalanced by some negative element.  In fact, as listed on Wikipedia, there are now seven elements to consider.  They are:

• Hidden trade-off;
• No proof;
• Vagueness;
• Irrelevant;
• Fibbing;
• Lesser of two evils;
• False labels.

 For more insight into these seven categories, please visit the Wikipedia site.    

While there are obvious, to all of us, companies that actively ‘greenwash’ many more companies do not but still may not meet another party’s standards of environmental action and, therefore, be labeled as a ‘greenwasher.’  What can one do to prevent this type of occurrence or at least work to reduce it?

The first thing to do is NOT actively greenwash.  The act of not greenwashing is actively, and immediately, followed by the need to set a high standard for your organization.  You are likely nodding your head on these comments but asking yourself how you, in a purchasing and procurement role, can influence the marketing arm of your organization.  It will not be easy, but you can start.  Start by using an assessment such as that discussed in the last blog edition.  Start by working with your end users to have the knowledge to specify greener products.  Work with your EHS department to block certain substances and activities.  Finally, work with your marketing department to give them insight into your activities so whatever they specify is based on facts – on good, green facts.  You can make a change.

Still, you might find that all your efforts do not go rewarded by 100% of the environmental groups.  Some have tighter standards or specific issues that are more difficult to address.  Unfortunately, this is the reality in which we operate today.  You can try very hard and make accomplishment, but you are no longer rewarded for improving, you are only rewarded for meeting the ultimate goal.  The playing field is not level.  For example, have you ever realized that some industries are inherently green and some others are inherently not green?  How does one, especially an environmental group, separate these companies?

Continue to read about ‘Greenwashing’ in the next Green Purchasing Blog at www.recyclechain.com

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3. May 2010 by Steven.

In the last Green Procurement blog, the topic of ‘What is Green’ was covered. In that blog the idea of an absolute standard for being green was developed and, by necessity, the concepts were broader than just Green Procurement or Green Purchasing. In establishing your organization’s Green Baseline one can discuss the baseline for the entire organization or a baseline for your procurement department. For this blog, we will limit the discussion back to Procurement and Purchasing. Looking at the entire entity will be developed as a future topic.

How do you baseline the level of green in your department?

Currently, there are no known assessments of a Purchasing department for its green activities and effectiveness. What Procurement does is inherent in just about everything the overall organization does so the assessment is critical. Absent a tool, how can one approach a viable assessment? First, try to break down the purchasing function by activities and stakeholders. One can start with Internal Elements and External Elements [or outward-looking elements]. The Internal Elements are those actions taken within Procurement to enact or assure green purchasing and procurement activities. The External Elements are those stakeholders that either influence your group or that can be influenced by your group [e.g., your internal customers and direct suppliers].

Much of what you will baseline for your Internal Elements will be based on your department’s organization. Differences in job responsibilities is one of the most obvious items to baseline, but so are regional, or other organizational breakdown, differences. The interrelationship between people, functions and responsibilities is also key. So too is the concept, and level, of being green. As with any business process, there are activities and hand-offs. Another way to state it is that there are inputs and outputs. For every job function, there is the receipt of something, for example a purchase requisition, the activity, entering a purchase order, and an output, releasing the purchase order. To begin, therefore, an audit of inputs, activities and outputs is needed. You may choose to even create a process diagram to help establish each activity to be audited.

What is the initial audit to do? The audit, for lack of a better term, is meant to find what is being done, at each level, that is green. Following the basic example of a purchase requisition to purchase order, here are some sample questions you might ask:

• Is there any harm being created [what are you purchasing];
• Are you leaving it as you found it [is the end state of your purchase anticipated];
• Are you creating waste [how will you dispose of the items and of your purchase records after the purchase];
• Does your system require natural resources [do you work from a paperless requisition];
• Can your system be made more efficient are the process steps that can be removed];
• Does you organization have a green policy [are you acting on accordance with it]?

The first, most obvious, item to achieve is green leadership in your procurement department. Without it, all efforts will be individual and uncoordinated. The overall impact will be meaningless. So, foremost, make sure the purchasing leadership are in agreement that there should be a green policy. The second item is to define what ‘green’ means for your organization. As stated before on previous blog editions, the true measure of green is not to use resources. Anything else is relative. So, define your measurement of how close to perfect, that is not using resources or balancing your use to provide no impact, you need to achieve for success. At this point in time, any step toward more green is better than no step at all. Higher ambitions are better.

To continue, assume that the first elements of policy and standard [e.g., goal] are in place. As stated before, a gap analysis will be necessary to determine the immediate actions to take and many will be tactical. Your organization’s level of green, it goals, will determine the gap to close and the strategies and tactics to do so. Assume, for now, all strategies and tactics are in place. The assessment, your baseline, still needs to identify compliance to your strategy and tactical actions. To accomplish this goal, one must have some written form of plan and working documents, such as training plans, forms, etc. that are implemented before an approach can be assessed. Or, at least, the intent of those documents and work papers should be included in the assessment to form your baseline.

Once you have completed your assessment of: policy, goals and tools; you can still assess the level of implementation of these items. Ask:

• Are the tools being used;
• Are the tools aligned with the goals;
• Is progress being made?

At this point, you can begin to have a full understanding of your organization’s baseline, and from it, derive additional steps necessary to improve. Similar steps can be taken with your External Elements. With you internal customers, you can begin to assess how specifications and requirements documents are drafted. Is there a bias toward specifying green? If not, why not? Are engineers educated in green choices? Does your end user identify requirements in printed documents or in e-media?

For your supplier base, the same forms of questions can be asked and can be started with the same basic criteria you apply to your own organization. Does your supplier have a policy for green products? Does the supplier have one for green purchasing practices? Does the supplier train its personnel on green concepts and alternative decisions? The same assessment you utilize for your organization can be changed for your internal customers. The sum of all of those internal assessments can be simplified and turned into a supplier assessment. This is your beginning. It will not be easy, but it will be worth it. The world is changing and companies that do not value environmental results, and sensitivities, will be punished by the marketplace. Start now, set high goals and be honest. The next blog edition is about ‘greenwashing.’ A pun on the term whitewashing in which organizations claim to be green when they really are not. Again, it is a tough issue as there is no standard at this time. Nonetheless, your actions need to prove your organization is moving beyond words and the is the root of the term ‘greenwashing.’

Please continue reading more about green procurement and purchasing at www.recyclechain.com .

© 2010

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13. February 2010 by Steven.

As stated in prior blog editions, the concept of green is seen as an unknown at this time. Sure, there are many organizations and groups that will proclaim an item, or company, as green.  There are many more that will self proclaim that their products, services and whole organizations are green.  Are they truly all green?  If it was so easy to become green, then why has it taken so long for organizations worldwide to embrace it?  The concept of being green and the dialogue in the media and in advertising do not reconcile. That is the purpose of this blog edition, to begin to peel back what it means to be green from a theoretical view and begin to apply it to the real world of organizations and commerce.

Recently, the CEO of Duke Energy, Jim Rogers, was interviewed by ‘focusEarth,’ a Discovery Channel news show. In the interview, the discussion of Duke Energy’s newest coal fired plant was discussed and Mr. Rogers explained that the company’s goal was to be ‘Cleaner’ with the recognition that is cannot, at least not yet, be ‘Clean.’ In summary, Mr. Rogers gets it.  He understands.  As he explained briefly, ‘Clean’ is an absolute standard. By inference, ‘Cleaner’ is a relative standard.  Likewise, green can be both a absolute standard or a relative standard and that is what is happening today.  Organizations are widely claiming to be green based on a relative standard.  The problem is not so much with making that claim is that whose relative standard is being used?

Essentially, what is being asked is: Does any organization get recognized for environmental effort because they are doing more today than yesterday?

Right now, the basic answer is, ‘Yes.’  An organization with enough budget for marketing and advertising can hold itself out as environmentally friendly.  As being green.  While that can be debated, there is no standard by which those who would oppose the claim of being green can objectively, and rightly, oppose the claim.  It is a free-for-all.  It is the Wild West.  Further, the would-be advocates, usually environmental groups, are often their own worst enemies by having their single focus agenda.  Today, we discuss green as being associated with carbon emissions.  Many years ago, it was an argument on ozone-depleting substances.  Before it was nuclear energy and chemical spills.  It should be all.  It should be everything.  Here is the idea of green.

Harm No Living Thing.

It is a simple and straightforward concept.  Just make your actions and the actions of your organization not harmful to Life.  Easy.

Well, what is Life?

Does Human life only count or does mammalian life count?  What about insects, reptiles, trees and shrubs?  Where does one draw the line of Life and what life matters?  Then ask, what about the interaction of these different life forms?  Does that matter to me? Eventually, I believe, that it gets back to a simple premise.

Leave it as you found it.

In camping terms, it is called ‘packing it out.’  That means the plastic containers for foods, foils, etc. that you may use for camping is not left in the woods but carried back out of the woods to be disposed of in a proper method.  Your individual efforts and those of your organization should follow a similar standard to achieve an absolute measure of green.  It should be as if the organization never existed, or for those functioning and growing organizations, that its impact on Nature is neutral.  By this, it is not meant to be ‘carbon neutral’ but actually neutral.  No impact.  Can this actually be done?  If so, how?  What does this look like?  For now, recall this is a theoretical exercise on the absolute measure. The absolute measure will be explained by form of example.

Please continue reading ‘What Is Green?’ in the Green Procurement Blog’s next edition at www.recyclechain.com.

© 2010

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26. January 2010 by Steven.

Is your supply chain green?

Starting from your own organization’s view of Green Procurement and Green Purchasing, we can begin to answer this question.  Assume your Buyers are trained to ask questions of suppliers and make some choices regarding placing purchase orders so that more green choices are made.  Let’s assume also that your purchasing group has a green strategy that requires a self assessment, recycling of scrap materials, remediation of waste streams and an assessment of suppliers that is currently being implemented for your top spend suppliers.  In sum, you are comfortable that your organization is becoming green if not actually already there.  As such, you, more or less, believe the question resides more so with your supply chain.

For your organization’s top spend suppliers, you have collected and verified about 50% of the green assessments.  Of the 50% collected, the majority of the suppliers pass your organization’s benchmark for being considered green.  Therefore, if you top spend suppliers account for 80% of your spend and at least 50% of them are considered green for a total contribution of 40% [80 x 50 = 40].  Your organization is also green contributing and contributed another 20% for a total of 60% that can be easily defined.  The result, the majority of your supply chain is green – right?  Or is it?

For now, the issue of what is the green measure is still being assumed so the 60% green score is truly a 60% assessment.  However, it is an assessment that may be flawed for right now, it is only an assessment of your ‘green-ness’ and the relative ‘green-ness’ of your direct supply base.  Arguably, it is not an assessment of the supply chain.  For it to truly be an assessment of the supply chain, the measure would, necessarily, cover other items such as:

• Sub-supplier assessments;
• Transportation suppliers, costs and assessments;
• Total ‘green cost’ of the supply chain;
• An evaluation of your total delivered package.

Total delivered package is meant to be the finished product in its box.  What form of packaging does your organization use?  Does your organization have an active program to return old products?

Sub-supplier assessments and transportation assessment can be thought of as nearly the same.  Is every organization in the entire supply chain working to be green?  Have the each achieved some level of being green?  When the cost of transportation, or of direct production, is considered, the most obvious answer is that, ‘Yes, the cost of transportation is accounted for and managed and the total cost of production is constantly monitored and managed for efficiency.’  That is the normal response and the one so many people, including procurement professionals, make their living on.  Cost efficiency.  The profit motive.

However, and this is probably one the largest environmental arguments held out today, what is the true cost of having a supply chain that spans most of the world for s relatively simple product?  Sure, your organization’s product can be argued to be green because it is solar powered and your production efforts are assessed to be 60% green, but what about the hidden cost of pollution and CO2 emissions from all of that transportation?  Would it not be more green, it would be argued, to consolidate all of the production into one geographic area and eliminate all of the transportation between supply chain links? 

Unfortunately for your organization, the answer is probably a ‘Yes.’  It would be more green to consolidate into one geographic region and that region may not be the place your organization would prefer to relocate.  Why is the answer likely to be ‘Yes?’  Because low cost countries, like China and India, effectively subsidize the cost of transportation.  Think about it, metal costs and petroleum costs are initially the same, or near the same, for many companies worldwide.  It is the cost of capital and labor that allows one company to compete on costs for an item that should be considered a commodity-like item [such as plastic knobs].  If the cost to purchase those knobs in another country, depending on the lot size, etc., is much cheaper than the additional cost to ship to your plant, the profit motive drives your organization to source from the other country despite the additional fuel costs to get the product.  It is cheaper in your currency but not cheaper by the effort exerted.  Said another way, with exceptions, is will be almost always true to state that going Green will also be patriotic [or nationalistic pending your vocabulary] as being green will require less exertion.  Purchase from the plastics company in the next town and not across the next ocean. 

The other element that is being missed in the quick assessment of our green supply chain are other attributes that may be relevant.  As you may recall, your organization sent an assessment to the top suppliers that represent 80% of the spend.  Is that the correct criteria to use?  Does a dollar spent for sub-item equate to the same dollar spent on another sub-item?  Obviously, if one dollar purchases something from China for assembly in the USA and the same dollar purchases something else in the USA, then, based on the discussion of transportation, the items are not the same.  But, beyond that concept, there is more.  For example:

• Are the plastic knobs made from recyclable plastic;
• What is the weight of items being shipped;
• Are metals parts sourced from reclaims metals or mined ore;
• What is the proportion of your final product, by cost, that is green;
• What is the proportion of your final product, by weight, that is green;
• What is the proportion of your final product, by added value, that is green?

Each question listed above is a legitimate question to ask.  Any single question may fail your organization for being considered green.  If we move from the initial view that your organization’s production efforts are at least 60% green to ask about weight, you may score a 35%.  By value-add an 80%.  By re-use of materials a 10%.  Is it correct to ask all of these questions?  Is it right to take a simple mathematic average of these different scores and consider that score as your green score?  What happens if oe of your suppliers actually contributes a negative score?

Right now, in today’s current environment, the answer is an unequivocal, ‘It depends.’  As stated as something avoided in this blog edition, the issue of what is green, or green enough, is a moving target.  There is not adequate definition and when asked, the answer will vary from group to group.  In a defensive way, it is suggested that your organization collect as many parameters as it can to determine various green scores.  They will all likely be needed.  However, such takes effort and corporate will power that is not always present.  So, ultimately, some answer is better than no answer.  Further, depending on the location of your plants, your organization may already becoming compliant to some definition of green. 

At the time of the writing of this blog edition, the concept, in a general sense, of going green has gone from a fringe concept extolled by hippies and environmentalists to being mainstream.  More so, the concept of Green Procurement, Purchase or a Green Supply Chain, are nascent.  They are in their infancy.  No consensus has been built on the popular trend of green let alone a subset such as purchasing and procurement – no matter how fundamentally import they are to whole.  This is why the next blog edition is about the definition of green. 

www.recyclechain.com

© 2010

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6. January 2010 by Steven.

In the past two editions of this Green Procurement blog, the tactical issues of Green Purchasing and the strategic issues of Green Procurement have been highlighted and interrelated.  Not discussed at length is the concept of the Green Supply Chain.  As a purchasing professional you already are aware of the term ‘supply chain.’  The problem is that there are, too often times, different interpretations of the term.

From experience, I have seen many intelligent, educated, articulate and otherwise knowledgeable people use the term supply chain to basically mean the company’s supply base.  That is, to mean the company’s suppliers.  No chain.  No interlinking of different organizations adding value in different ways.  Just the plain rote concept of your organization’s direct suppliers.  By know, you are aware that the author does not define a supply chain to be the same as your base of suppliers.  It is much more and is something that, in some ways, may not be definable.

My first real introduction to the concept of a supply chain came from workshop at the Santa F Institute in the mid-1990s.  The Santa Fe Institute is a non-profit research and education center whose efforts focus on complex adaptive systems.  The workshop included people from the Institute as well as professionals from various multi-national corporations.  In this workshop, I was introduced to such terms as ‘bullwhip’ and ‘demand signals.’  The idea of looking past your immediate supply base into the cascading count of suppliers and how the demand signal was managed from interaction-to-interaction was discussed and theorized as to how to improve.  It was a fascinating discussion and it truly jaded my opinion of what is meant by the term: supply chain.  For the purposes of this blog, we will go with the above concept.  A supply chain is the interlinked network of organizations that buy and sell value-added good or services to each other to provide final products to an end user [e.g., the consumer].

Given this definition of supply chain.  What makes it Green?  More so, what make one supply chain green and another not when the two supply chains may have many of the same organizations involved.  Does it matter?

In the very next edition of this blog, the concept of ‘Green’ is explored.  What does it mean to be green?  Who sets the standard?  At this time of this writing, the answer is a variable.  To be ‘green’ is just not well defined.  Then, how, can there be this concept of a Green Supply Chain?  For the purposes of this blog edition, the concept of green will be limited to an organization acting, in some manner, to be an environmental steward.  In other words, each organization gets an “A” for effort and not necessarily for results.

The supply chain of interest is your organization’s supply chain.  For now, supply chain is limited to those that supply your organization and not your organization’s role in the greater supply chain.  In fact, in may be best, for example purposes, just to assume that the supply chain, your sample company, is a consumer-facing company making some product with many inputs such as a battery and solar-powered AM/FM radio.  To further the example, the Bill of Materials for your radio is comprised of:

• Speaker [sourced from Mexico];
• Solar cell [sourced from China];
• Wiring [sourced in the USA];
• Antenna [sourced in the USA];
• Analog read out [sourced from India];
• Plastic knobs [sourced from the EU];
• Plastic shells [sourced from South Korea];
• Printed circuit board [sourced from China];
• Internal Dial Sub-Assembly [sourced from Russia].

There are other various parts that are all sourced in-country at your sub-assembly plant in Mexico.  At that site, the pieces are all brought together and made into three final sub-assemblies: 

• Power sub-assembly;
• Tuning sub-assembly;
• Electronics sub-assembly.

The final assembly of your company’s radio is done at a small plant in south Texas near Houston.  There the three sub-assemblies are brought together and encased in the plastic shells. 

Your company’s market are outdoor enthusiasts including hunters and campers.  Over 60% of you company sales are from the United States and Canada.  Another 30% comes from European countries and the remaining 10% come from various other countries including Australia.  Your company does not sell directly to the consumer.  Instead it sells to retailers but you support your retailers with some customer assistance via an Internet site and a telephone help line. 

See the Second Part of the Blog Next Week

Green Procurement at www.recyclechain.com

© 2010

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19. December 2009 by Steven.

In the last blog edition, the point that tactical activities are often the result of strategic decision that was made.  Further, that some strategic decisions will be impacted by the reality of tactical implementation on a day-in-day-out basis.  Think if the interplay between strategy and tactics as a spiral who, as the journey is made, hits a certain point in which realignment of strategy and tactics are made.  A realignment at the end of each cycle.  That cycle can be based on annual, quarterly or other basis, but should be seen as required.

Multiple elements need to be considered for starting your Green Procurement journey.  First, of course, is the decision to start the journey.  There must be a recognized need to do this.  Usually, it will come in the form of a requirement by your organization’s customers.  Change creates cost and cost means money.  No enterprise is likely to opt for higher cots, even if it is the right thing to do, unless it has to do so.  That means government intervention, or more likely, customer driven requirements.

Once the decision to start the journey to effective Green Procurement is made a goal has to be identified.  Goal setting will be covered in another blog edition in the future.  For now, consider the goal of achieving effective Green Procurement to actually mean multiple goals with multiple measure for each goal.  As a procurement professional, you know already that each goal your group has is really multiple goals that are often traded off.  Going green is no different. 

After your goals are identified and agreed to by your organization’s management, you will have to establish a baseline that corresponds to those goals.  Establishing a baseline assessment and conducting will not be easy.  It will take time and commitment.  How to approach this key area of starting your Green Procurement journey will be covered in a future blog edition.  For now, assume that you have formed a team of people and conducted an assessment of purchasing activities and found gaps between your current state and your desired future state – your goals.  You now have to derive the path forward to move your organization to those goals, some short term and some long term, and that is the beginning of your strategy.  It is definitional and part of the Procurement picture.  As stated previously, the tactical elements should be considered more of the Purchasing activity.

  Your organization now derives the steps to close the identified gaps.  Each major step identified is a strategy.  The fact that you have implemented an assessment to derive your gaps analysis is, in itself, part of a strategy for improvement.  The assessment is the tactical implementation of that improvement strategy.  Likely candidates for your gap closure are: 

• Training personnel;
• Contract Coverage;
• Supplier Assessments;
• Amount of ‘Green’ goods purchased;
• Amount of scrap reclaimed;
• Amount of waste re-used.

Each organization will have different goals and different gaps to close and different strategies to close those gaps.  The above listed items are common gaps to anticipate.  Each of these will be briefly discussed and explored to identify the interplay between strategies for Green Procurement and how that relates to the tactics involved in Green Purchasing.  It cannot be stressed enough, the above list is only a partial and incomplete list.  Every organization will be different with different needs.

Training Personnel.  In closing the gap on knowledge your organization may develop one overarching strategy – to close the gap of knowledge, but also multiple detailed strategies depending on circumstances.  For example, you may have Buyers, Senior Buyers, Commodity Managers and Purchasing Staff in your organization.  Do these individuals require different knowledge and skill sets to successfully implement your organization’s green plan?  Arguably, the answer is, ‘Yes.’  Are the skills sets and knowledge cumulative or are they different?  At a Staff level, there may be only high level maintenance of the system.  At the other levels, a more hands on approach is likely required.  Does the Buyer need to know the laws and theory about going green or does the Buyer just need a set of questions?  The answer to that question is really the differentiator between Strategy and Tactics.  If the Buyer only needs to know certain questions to ask suppliers, then they are working at a tactical level.  The decision to make it that was is a strategic decision.

Contract Coverage.  Similarly, the decision as to whether or not your organization will value and then implement and then track the number of contracts that contain green contractual requirements, clauses, is a strategic decision.  The actual implementation of those terms is largely tactical.  Someone to write the clauses.  Someone to negotiate the clauses.  Someone to track the information and report on it.  Behind the development of the clauses and the more successful implementation of Contract Coverage is Training.  You can now begin to see that how the tactical issues are implemented will, in fact, drive strategy.  It is an iterative process.

Supplier Assessments.  As above, the goal first must be to go green followed by increasing the level of green, as your organization defines it, and applying measure.  A Supplier Assessment is a tool.  It is strictly a tactical item.  The decision to implement one and how it is implemented is strategic.  Strategy is partly driven by the goal.  What is the gap to close.  Is it 10% of the supplier base that needs an assessment or 90%?  The choice will tell you how many companies get the assessment, perhaps how long the assessment should be and who on your team implements.  The gaps found in the answer to those questions become part of the feedback loop into strategy.

Green Goods Purchased.  Just as with Supplier Assessments, setting a goal on the level of green goods purchased requires some for of definition, assessment, reporting and training.  Each of the strategic gaps your organization defines will have the same basic elements. Of goal, tool and training.  For this area, your organization needs to define a ‘green good.’  In fact, your organization may also need to assess if all Services are considered ‘green’ or not and apply a definition for goods, services, equipment and all areas of purchase.  For now, the consideration your organization has on good is the level of ‘green.’  What is the definition and therefore what is the goal. 

Scrap and Spoilage.  Production companies have scrap from their production lines.  There are some esoteric differences between the terms of ‘scrap’ and ‘spoilage’ in which scrap are left over remnants from the manufacturing process and spoilage is the failed production units.  For ease of conversation, we will just consider any material not sold as a Finished Good as scrap.  Does this area fall under Procurement?  Perhaps it does not but perhaps it does.  There is a great deal of tradeoff in this area between Production and Procurement that will the subject of a future blog edition.  For now, we will assume some portion Scrap falls under your organization’s responsibility and that responsibility requires your organization to efficiently get rid of scrap.  What do you do?  How do you do it?  What are your measures?  Again, there is an issue of goals, definition, tools and training.  That pattern repeats again and gain.

  Waste Streams.  Not included with the concept of Scrap are waste streams.  These could be anything from left over food scraps from the company cafeteria to chemicals that have been used in production that are no longer suitable for production.  Your company’s EHS staff is assuredly concerned with the proper disposal of waste streams.  However, is your organization?  What is the approach?  How good a job is your organization doing?  Is the current method of ‘proper’ disposal actually considered green or is it just legal?  Learning, coaching, setting expectations will lead your organization, and the EHS department as well, to higher performance.  The development of a cohesive strategy with an internal partner, development of tools, etc. are required.  The purpose of this blog edition has been to highlight the interrelationship between strategic element of Green Procurement and the tactical elements of Green Purchasing and to provide a few basic examples of how thin interrelationship should work.  More information on the various topics will be discussed in future blog editions.  The next blog edition will touch on the larger issue of the Green Supply Chain.  Procurement is the organization and Purchasing the act.  The Supply chain, let along a green one, is a theoretical construct.

www.recyclechain.com

© 2009

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