CEF Spotlight

Building a Sustainable Purchasing Super-Sector

By Sam Hummel, Director of Outreach & Operations, Sustainablesam_headshot Purchasing Leadership Council 

Sourcing raw materials, components, and goods-for-resale (GFR) has received the lion’s share of sustainable supply chain attention in the corporate world to-date. Increasingly, however, companies are capturing opportunities to advance their environmental, social, and economic sustainability through the purchases they make for their own operations, such as energy, construction, shipping, IT, food, fleet, travel, and a variety of durables and consumables.

For service sector companies, such as those in hospitality, healthcare, banking, education, recreation, consulting, event management, communications, housing, and more, this “indirect procurement” represents the majority of their supply chain impacts, making it a particular concern for corporate sustainability staff. And with major brands like Disney and Victoria’s Secret coming under fire from Greenpeace for their procurement of paper, risk managers and investors are also growing more concerned about sustainability risks in indirect procurement categories.

The same types of purchases also represent the most consequential supply chain impacts for public sector agencies at the local, state, and federal level. So while corporations have been working individually and within industry associations to figure out the best ways to meet their indirect procurement needs in sustainable ways, public sector agencies have been doing the exact same thing, individually and within a variety of associations. The result has been a cacophony of similar-but-different sustainability requirements, preferences, surveys, and checklists.

For suppliers servicing multiple sectors, the discord is particularly acute. Without a clear sense of what types of sustainability innovation will be rewarded by the market, getting investment in sustainability innovation – and demonstrating the return on that investment – is harder than it should be, given how many purchasers say they want sustainability. But what if purchasers in all sectors started working together to align their sustainability requests in the indirect procurement categories from which they all buy?

In 2013, several dozen leading companies, government agencies, and civil society organizations came together from a diverse group of sectors to form the Sustainable Purchasing Leadership Council. Their goal was to bring harmony to the cacophony. They planned to develop a multi-sector program for defining, guiding, benchmarking and recognizing leadership in sustainable purchasing. The group saw the US Green Building Council’s (USGBC) success in creating a consistent definition of leadership in green building across a wide variety of sectors and regions as a possible model.

Before USGBC created the Leadership in Energy and Environmental Design (LEED) rating system, every company, government agency, and university that wanted to build a green building had to create their own definition and process for doing that. LEED removed that burden by providing building owners/operators, designers, engineers, and contractors with a common language for talking about green building and measuring leadership. Importantly, it also provided suppliers with clarity on what sustainability innovation would be valued in the marketplace. That common language and market clarity across a wide variety of sectors created a sustainability-oriented marketplace larger than anyone had imagined possible.

If cross-sector clarity can do that much good in an $800 billion marketplace, the Council’s founders wondered, what could it do for the multi-trillion dollar indirect procurement marketplace? They weren’t sure a multi-sector guidance would work, but the opportunity was too huge to not try, so they each made three-year commitments of financial and technical resources to found the Council. Two years later, there’s a lot less doubt that it can work.

The Council now has over 130 member organizations, who collectively manage more than $200 billion in purchasing power. Volunteer technical advisors on a dozen committees have produced several guidance resources. Last May, SPLC’s Board approved a consensus set of Principles for Defining Leadership in Sustainable Purchasing that have won praise from Chief Procurement Officers at Fortune 500 companies and public agencies, including these remarks from the US General Services Administration’s then-Administrator, Dan Tangherlini.

In February of this year, the Council released Guidance for Leadership in Sustainable Purchasing v1.0, a comprehensive handbook for organizations looking to build a leadership-capable Sustainable Purchasing Program. In addition to providing guidance for a number of priority purchasing categories, Guidance v1.0 shows how to achieve big supply chain sustainability improvements by inserting sustainability planning at the front of the tactical procurement process, in the much the same way that Strategic Sourcing Programs use spend analysis and cross-functional collaboration to plan procurement tactics that produce break-through cost savings.

Already, more than 100 organizations are participating in the Guidance v1.0 Pilot Program. Meanwhile, the cross-pollination of ideas between sectors and stakeholder groups during the Council’s meetings continues to generate excitement and new projects, resoundingly confirming the value of multi-sector collaboration on defining and guiding sustainable purchasing.

Work on the Council’s next big project, its Rating System for Leadership in Sustainable Purchasing v1.0, will begin during its 2015 Summit in Seattle, May 27-28. Summit participants will have a chance to weigh-in on some big picture questions before Technical Advisory Groups – made up of purchasers, suppliers, and public interest groups – begin the hard work of establishing criteria and credits. When ready, Council members expect it will provide significant clarity for purchasers and suppliers in the marketplace. Continuing the ambitious pace that has been a hallmark of the Council’s work to-date, SPLC expects to release a pilotable version of the rating system in mid-2016.

CEF Members and others interested in participating in the development of SPLC’s Rating System may do so by attending the Summit and/or applying for an open spot on a Technical Advisory Group after the Summit. Those wishing to keep track of developments and additional opportunities to give input are invited to subscribe to the monthly SPLC Update e-newsletter.

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