Latest Best Practice in Latest Best Practice in Environmental Purchasing & Environmental Purchasing & SupplySupply

Barbara MortonBarbara Morton

Manchester School of Management , Manchester School of Management , UMISTUMIST

Hong Kong CIPS Event 12 May 2000Hong Kong CIPS Event 12 May 2000

Latest Best Practice in Latest Best Practice in Environmental Purchasing & Environmental Purchasing & SupplySupply

1.1. Business CaseBusiness Case

2.2. Examples of “best” practiceExamples of “best” practice

3.3. Issues & suggested approachesIssues & suggested approaches• Sharing knowledge & expertiseSharing knowledge & expertise• Environmental Supply Chain Forum Environmental Supply Chain Forum

modelmodel

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

Procurement - good practiceProcurement - good practiceSecuring supply of goods & servicesSecuring supply of goods & servicesCost reductionCost reductionRationalising the supplier baseRationalising the supplier baseSourcing to reduce business risk Sourcing to reduce business risk Identifying sources of knowledgeIdentifying sources of knowledgeAdding valueAdding value

Barbara Morton, MSM

Environmental Regulation *

BiE Index of Corporate Environmental Engagement

Environmental Pressure Groups

Key Drivers for the Organisation

Investors Suppliers

Insurers Customers *

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental

SourcingSourcing Environmental Regulation - Environmental Regulation - European PerspectiveEuropean Perspective

European DirectivesEuropean Directives Producer Responsibility Producer Responsibility

supply chain perspectivesupply chain perspective Packaging and Packaging WastePackaging and Packaging Waste Waste Electrical & Electronic Waste Electrical & Electronic

EquipmentEquipment End-of-life VehiclesEnd-of-life Vehicles UK Landfill TaxUK Landfill Tax

Barbara Morton, MSM

Part 1 - Business CasePart 1 - Business Case

1. Securing supply of goods and services1. Securing supply of goods and services

Environmental Regulation and Legislation

PRODUCTregulated out of use - CFCsphase-out hazardous materialsless resource-intensive products

Barbara Morton, MSM

Customer Pressure

No product / market

Alternative products

SUPPLIERregulated out of business markets threatenedalternative sources more competitive

PRESSURE FOCUS OF IMPACT OUTCOME

No supplier

Alternative suppliers

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

2. Cost reduction (1)2. Cost reduction (1)

Challenging assumptionsChallenging assumptions Baxter Healthcare - healthcare products Baxter Healthcare - healthcare products

companycompany

1998 - environmental initiatives saved the 1998 - environmental initiatives saved the company US$10 million.company US$10 million.

From 1991 total costs incurred would have From 1991 total costs incurred would have been US$107 million than they actually were been US$107 million than they actually were in 1998 .in 1998 .

Barbara Morton, MSM

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

2. Cost reduction (2)2. Cost reduction (2)

Challenging assumptions - Baxter Challenging assumptions - Baxter HealthcareHealthcare

Raw materialsRaw materials EnergyEnergy ProductionProduction Disposal costsDisposal costs PackagingPackaging

http://www.baxter.com/http://www.baxter.com/

Barbara Morton, MSM

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

2. Cost reduction (3)2. Cost reduction (3)

Regulation driving out costs Regulation driving out costs • Waste Electrical & Electronic Equipment Waste Electrical & Electronic Equipment

Directive Directive • Product take-back Product take-back • 1998 - AT&T & Lucent1998 - AT&T & Lucent• Lucent picked up 526 shipments of vintage Lucent picked up 526 shipments of vintage

telecommunications equipmenttelecommunications equipment• AT&T received US$2.2 million in residual AT&T received US$2.2 million in residual

value value • http://www.att.com/ehshttp://www.att.com/ehs

Barbara Morton, MSM

Part 1 - Business Case for Environmental Part 1 - Business Case for Environmental SourcingSourcing

2. Cost reduction (4)2. Cost reduction (4)

Concerned with‘whole life’ costsConcerned with‘whole life’ costs– running costs e.g. energyrunning costs e.g. energy

– US EPA computers = 10% of commercial US EPA computers = 10% of commercial electricity consumption by 2000electricity consumption by 2000

– In the UK 20% of office energy use is in In the UK 20% of office energy use is in equipment equipment

– reduce costs through managementreduce costs through management

– indirect costs e.g. air conditioning, indirect costs e.g. air conditioning, admin.costsadmin.costs

– waste usually = 4% of turnoverwaste usually = 4% of turnover– www.etbpp.gov.ukwww.etbpp.gov.uk

Barbara Morton, MSM

Part 2 - Examples of “best” practicePart 2 - Examples of “best” practice

Environmental Management SystemsEnvironmental Management Systems

ISO 14001 / Eco-Management and Auditing ISO 14001 / Eco-Management and Auditing Scheme (EMAS)Scheme (EMAS)

Automotive Sector Automotive Sector Ford’s requirements of suppliersFord’s requirements of suppliers General MotorsGeneral Motors certification required - customer drivingcertification required - customer driving nature of supply chain relationshipsnature of supply chain relationships

Appropriate for all sectors?Appropriate for all sectors? UK Project Acorn - phased approachUK Project Acorn - phased approach

Barbara Morton, MSM

Barbara Morton MSM 2000

Design and Specification

Supplier pre-selection &qualification

Purchasing & supplier management

Product TransportationProduct use

Accounting

Reuse, recycling& disposal

Part 2 - Examples of “best” practicePart 2 - Examples of “best” practice

Role of purchasing & supply in environmental Role of purchasing & supply in environmental managementmanagement

Part 2 - Examples of “best” practice Part 2 - Examples of “best” practice

Re- thinking design & specification Re- thinking design & specification (1)(1)

Mechanisms for specifiers & purchasersMechanisms for specifiers & purchasers Banned substancesBanned substances

Volvo - Black and Grey ListsVolvo - Black and Grey Lists Canon, SonyCanon, Sony

Approved productsApproved products Canon, Sony, NEC, Tokyo GasCanon, Sony, NEC, Tokyo Gas Perrigo Perrigo www.epa.gov/oppintr/epp/privsect.pdfwww.epa.gov/oppintr/epp/privsect.pdf

Barbara Morton, MSM

Part 2 - Examples of “best” practice Part 2 - Examples of “best” practice

Re- thinking specification & purchasing - Re- thinking specification & purchasing - PerrigoPerrigo

AimsAims• to improve indoor to improve indoor

air qualityair quality• to reduce number to reduce number

of cleaning of cleaning productsproducts

• to minimize to minimize environmental environmental impacts of impacts of cleaning processcleaning process

ResultsResults• saved > $35,000 saved > $35,000

p.a.p.a.• reduced number reduced number

of products to 2of products to 2• buy in bulkbuy in bulk• consolidated consolidated

purchases with a purchases with a single suppliersingle supplier

Barbara Morton, MSM

Part 2 - Examples of “best” practice Part 2 - Examples of “best” practice

Re- thinking specification & Re- thinking specification & purchasing (2)purchasing (2)

HierarchyHierarchy• eliminateeliminate• minimiseminimise• reusereuse• recyclerecycle• disposedispose

Barbara Morton, MSM

Guidance for public Guidance for public sector buyerssector buyers• UK DETR - Green UK DETR - Green

Guide for BuyersGuide for Buyers• US EPA EPP - Santa US EPA EPP - Santa

Monica case studyMonica case study• Belfast City CouncilBelfast City Council

Re-thinking utilityRe-thinking utility

Part 2 - Examples of “best” practice Part 2 - Examples of “best” practice

Supplier selection and assessment to reduce Supplier selection and assessment to reduce business riskbusiness risk

IssuesIssues• Closer relationships with fewer suppliers & Closer relationships with fewer suppliers &

key supplierskey suppliers• Increase in outsourcingIncrease in outsourcing• Cannot outsource environmental Cannot outsource environmental

responsibilitiesresponsibilities StagesStages

• Pre-selection - ‘approved’ supplier statusPre-selection - ‘approved’ supplier status• Awarding business Awarding business • Supplier managementSupplier management

Barbara Morton, MSM

Supplier selection and assessment to reduce Supplier selection and assessment to reduce business risk - Mechanisms (1)business risk - Mechanisms (1)

Supplier Supplier environmental environmental questionnairequestionnaire - mixed results- mixed results

Questionnaire & Questionnaire & grading system grading system • The Body ShopThe Body Shop• B&Q - QUEST systemB&Q - QUEST system

Barbara Morton, MSM

Appropriate to level Appropriate to level of business & of business & environmental riskenvironmental risk• strategic suppliersstrategic suppliers• environmental impactenvironmental impact

Appropriate to Appropriate to resources availableresources available

Supplier selection and assessment to reduce Supplier selection and assessment to reduce business risk - Mechanisms (2)business risk - Mechanisms (2)

Ask about key issues Ask about key issues for your businessfor your business• ISO 14001 only if ISO 14001 only if

relevantrelevant• compliancecompliance• hazardous materialshazardous materials• toxic contenttoxic content• packagingpackaging

Tie to supplier auditing Tie to supplier auditing • Boots & Halford’sBoots & Halford’s

Barbara Morton, MSM

Supplier workshops Supplier workshops • explain policies and explain policies and

prioritiespriorities• Blue Circle Blue Circle

Offer guidanceOffer guidance • Belfast City CouncilBelfast City Council

Part 3 - Issues and suggested approachesPart 3 - Issues and suggested approaches

Identifying sources of knowledge (1)Identifying sources of knowledge (1)

Procurement

Environment

User / specifier

Regulator

Supplier Aproduct information- including alternativesprocess informationmanagement system environmental expertise

Supplier B

External bodiesSupplier C

Customer Organisation

Barbara Morton, MSM

Part 3 - Issues and suggested approachesPart 3 - Issues and suggested approaches

Identifying sources of knowledge (2)Identifying sources of knowledge (2)

Information on Information on products & servicesproducts & services

Eco-labelsEco-labels

Product Product declarationsdeclarations• Hewlett PackardHewlett Packard• VolvoVolvo

Information Information requirements not requirements not being metbeing met

Databases of Databases of products & products & services soughtservices sought• construction sectorconstruction sector

Part 3 - Issues and suggested approachesPart 3 - Issues and suggested approaches

Environmental Supply Chain ForumEnvironmental Supply Chain Forum

Established 1996Established 1996 Meetings with specialist inputMeetings with specialist input Determining good practice and Determining good practice and

sharing experiencessharing experiences Network and website Network and website Supply Chain Environmental Supply Chain Environmental

Management ProgrammeManagement Programme

Barbara Morton, MSM

Environmental Supply Chain Environmental Supply Chain Forum Forum Participants include:Participants include:

AMEC Design & AMEC Design & ConstructionConstruction

Belfast City CouncilBelfast City Council BICC CablesBICC Cables Body Shop Body Shop Centre for Centre for

Sustainable Sustainable Construction - BREConstruction - BRE

CIRIACIRIA

Co-operative BankCo-operative Bank Eutectic Co LtdEutectic Co Ltd Halford’s LimitedHalford’s Limited Nortel Networks Nortel Networks Tarmac ConstructionTarmac Construction Vertex Data ScienceVertex Data Science United Utilities*United Utilities* Yorkshire WaterYorkshire Water

Barbara Morton, MSM

Part 3 - Issues and suggested approachesPart 3 - Issues and suggested approaches

Environmental Supply Chain ForumEnvironmental Supply Chain Forum

Topics coveredTopics covered• Supplier Supplier

environmental environmental assessmentassessment

• Integrating Integrating environmental environmental criteriacriteria

• Construction Construction industryindustry

• Transport Transport • Forest ProductsForest Products

Meetings plannedMeetings planned• Aerospace & Aerospace &

automotive automotive • Chemicals & Chemicals &

related industriesrelated industries Links with Links with

• Business in the Business in the EnvironmentEnvironment

• CIPSCIPS

Latest DevelopmentsLatest Developments

CIPS Environmental & Green Issues Policy CIPS Environmental & Green Issues Policy GroupGroup• Examples of policies, case studiesExamples of policies, case studies• To inform development of policyTo inform development of policy• To bmorton3402@hotmail.comTo bmorton3402@hotmail.com

Project on plastic packaging Project on plastic packaging • Partners requiredPartners required• Contact Dr Richard FungContact Dr Richard Fung• richard.fung@cityu.edu.hkrichard.fung@cityu.edu.hk

Barbara MortonBarbara Morton

Manchester School of Management , UMISTManchester School of Management , UMIST

Hong Kong CIPS Event 12 May 2000Hong Kong CIPS Event 12 May 2000

Latest Best Practice in Latest Best Practice in Environmental Purchasing & Environmental Purchasing & SupplySupply

Part 1 - Business CasePart 1 - Business Case

1. Securing supply of goods and services1. Securing supply of goods and services

Environmentally Environmentally preferable preferable purchasingpurchasing

US EPA EPP ProgramUS EPA EPP Program Impacts include:Impacts include:

• energy-efficiencyenergy-efficiency• recycled contentrecycled content• water efficiencywater efficiency• resource resource

conservationconservation

• waste preventionwaste prevention• renewal material %renewal material %• adverse effects to adverse effects to

workers, animals, workers, animals, plants, air, water & plants, air, water & soilsoil

• toxic material toxic material contentcontent

• packaging packaging • transportationtransportation