Sustainable Procurement – More Than Buying Green

Holistic Approach Includes Human Rights, Ethics and Diversity

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Leo Mackay is vice president of ethics and sustainability at Lockheed Martin.

Sam Hummel is director of outreach & operations for the Sustainable Purchasing Leadership Council.

Beth Eckl is director of environmental purchasing at Practice Greenhealth.

Danielle Vitoff is program manager of the California Sustainability Alliance.

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Posted: Wednesday, August 19, 2015 3:30 pm

Incorporating sustainable procurement policies at public and private institutions has been a growing trend in recent years.

But while some organizations still define the practice strictly in ecologic terms, many are now incorporating the other two fundamental aspects of sustainability — economic viability and social equity — into their buying decisions.

So, rather than simply purchasing "green" products that benefit the environment, proponents of sustainable procurement are increasingly shifting their business to environmentally friendly suppliers that also happen to treat their employees and subcontractors ethically.

And, by the way, as the purchasing power of these organizations continues to grow, the price of "buying green" is coming down.

“We define (sustainable procurement) as managing our extended supply chain to achieve sustainability through social responsibility and environmental stewardship to drive affordability and innovation,” said Leo Mackay, vice president of Ethics and Sustainability for Lockheed Martin. “It involves analyzing supplier activities — from materials sourcing to shipping — to make better decisions that strengthen business ethics, advance social and economic inclusion, and foster resource efficiency.”

The company began to incorporate environmentally-conscious procurement practices in 2008 as part of its original Go Green goals to reduce carbon emissions, water use and waste sent to landfills from direct operations.

In 2012, Lockheed Martin broadened its approach to sustainable procurement. The corporation established a Corporate Sustainability Office and completed its core issues assessment.

“Through internal and external stakeholder workshops, a cluster of supply chain topics emerged as among six high-impact areas for Lockheed Martin sustainability,” Mackay said. “Over the past two years, we have introduced a supplier code of conduct, issued a voluntary sustainability assessment to key suppliers, analyzed supplier spending using Life Cycle Assessment methodologies and developed a business ethics mentoring program for suppliers, as well as other new initiatives.”

Mackay explained that through these workshops held in 2013, Lockheed Martin determined three focus areas for supplier sustainability (Conflict Minerals, Counterfeit Parts and Supplier Standards) and five corresponding performance indicators, including:

• Increase percentage of eligible respondents completing our Sustainable Supply Chain Management Voluntary Assessment;

• 100 percent of Lockheed Martin’s Suppliers Receiving our Supplier Code of Conduct (via open Purchase Orders);

• Assess 100 percent of Lockheed Martin’s top 500 suppliers below target threshold for Dun & Bradstreet SSI Score and have risk mitigation plans as necessary;

• 100 percent of Eligible Purchasing, Quality or other affected employees completing Counterfeit Parts Awareness Training; and

• Increase percentage of suppliers with deliverable hardware with acceptable counterfeit work control plans, as assessed by Lockheed Martin’s Business Areas.

Since incorporating these performance indicators, Lockheed Martin has reported some successes, but the company recognizes its efforts are only one link in a global supply chain made up of more than 16,000 direct vendors.

“In some respects, the environmental impact attributable to our suppliers is 65 times that of Lockheed Martin’s own business operations, so we encourage them to adopt sustainable practices,” Mackay said.

Lockheed Martin was a founding member of the Sustainable Purchasing Leadership Council, which was established in 2013 to help member organizations navigate through the marketing rhetoric and determine which products actually meet their strict procurement guidelines.

“Today, there are so many eco-labels in the marketplace,” said Sam Hummel, director of outreach & operations at the SPLC. “How does a purchaser know which claims are legit?”

The green label confusion prompted the council to develop “robust guidance” for its 140 member organizations, which together wield more than $200 billion in global purchasing power. The council provides strategic training and tools that can be used as benchmarks for sustainable purchasing by its members. They also have access to a supplier directory that matches buyers with suppliers. These suppliers are vetted by SPLC, so buyers can trust their environmental claims.

SPLC describes its organization as a broad coalition that brings organizations interested in green procurement to the same table. Participants include federal agencies like the EPA and GSA, as well as social interest organizations such as Fair Trade USA and environmental interest organizations like Healthcare Without Harm. It also includes state and local government purchasers, university purchasers, corporate purchasers and suppliers.

Is sustainable purchasing more expensive for either the supplier or the purchaser? Not necessary, Hummel said. In fact, there’s a tandem push to make environmentally responsible purchasing cost effective on both ends of the supply chain.

“We need sustainable decisions to be affordable,” he said.

It’s a misconception that sustainable procurement automatically increases costs, Mackay said.

“In fact, today we procure eco-friendly goods at cost parity in many cases. It also is true that certain sustainable goods and services may lead to cost avoidance – materials that last longer, lubricants that reduce toxic disposal volumes or, say, systems that carry less cyber risk,” he said. “As the overall demand for sustainable products increases, price premiums will further erode. Meantime, we seek to map sustainability factors to prevent supplier turnover and reliability challenges — stemming from a range of activities from unfair labor practices to counterfeiting.”

Strategic, environmentally preferable purchasing needs to look beyond purchasing costs, added Beth Eckl, director of the Environmental Purchasing Program at Practice Greenhealth.

“We encourage organizations to look at the total costs of ownership,” Eckl said. “There’s the main cost of the product, but there’s also the use cost or product’s life cycle and the disposal costs associated with that product.”

Practice Greenhealth, is a nonprofit and member of the SPLC. It provides resources and tools to guide its 1,300 members in the U.S. and Canada on standards for environmentally preferable purchasing.

“Sustainable health care that’s good for the environment, good for patients and staff, and good for the bottom line means action plans to eliminate mercury, reduce and recycle solid waste, reduce regulated and chemical waste, reduce energy and water consumption, create healing environments, and establish green purchasing policies,” its website states.

Within the health care industry, environmentally preferable purchasing is important because it goes beyond the environmental impact, including both patients and employees.

“What we buy really does matter,” Eckl said. “Procurement is a central point and the best place to reduce environmental impacts within an organization.”

Consideration of a product’s life cycle also was emphasized in the 2010 Local Government Green Procurement Guide, developed by the California Sustainability Alliance.

“By weighing not only the purchase price of a product but also its full lifetime cost, green procurement policies can help local governments save money, create local green jobs and improve overall sustainability when compared to using similar products,” said Danielle Vitoff, program manager of the alliance.

The guide was developed in partnership with the city of Ontario, Calif., but it was designed to be used as a resource guide by other local government entities in California, Vitoff said.

A challenge for green procurement is “developing criteria and determining whether products meet this criteria,” Vitoff said, but “this is becoming less of an issue as it is more common to find environmental sourcing resources.”

As sustainable procurement evolves, the emphasis on equity and ethics becomes more in focus.

“It goes beyond going green, Mackay said. "It encompasses a more balanced set of social, economic and governance indicators.”

Sustainable procurement is a holistic approach, Hummel added.

“We are talking about human rights, ethical conduct and supplier diversity,” he said. “Sustainable procurement is a lot of things.”

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