The Greening of Procurement (Part 2)

Posted on November 3, 2011

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The Environmental Connection?

What does this mean in terms of environmental considerations?  One might conclude that those organizations that fail to adapt to a new reality and are therefore destined to mediocrity at best or extinction at worst, are less inclined to embrace innovative imperatives such as sustainable capitalism.

Others might suggest that the newer and more mobile organizations of today, which are evolving within the framework of the new paradigm, will rise to become tomorrow’s industry leaders.  This suggests that the monolithic organizations of the past will be relegated to the realm of historical reference, in essence becoming a “before” case study in the evolution of corporate insight and innovation.  An evolution one might add, in which corporate success in future is defined by the sustainable capitalism model.

And if this is indeed the new standard by which the corporate elite will be established (I say corporate elite as these tend to be the trendsetters or the centers of influence who, in accordance with Malcolm Gladwell’s book The Tipping Point, can drive universal adoption), the questions that all organizations must ask themselves is where is their current operational framework in relation to sustainable capitalism’s core principles of the “Triple Bottom Line” (TBL) and the seven dimensions of a sustainable future (the 7-D world)??

More importantly what is the point or points of convergence between sustainability’s core principles and the financial imperatives that have governed corporate stewardship in the past such as profitability and shareholder value?

A Final Word About Kodak

In the Kodak example, the company’s unyielding commitment to traditional film impacted the organization on a variety of levels including their environmental record.

And while digital imaging raises its own questions regarding issues of sustainability relative to e-waste (according to U.S. Environmental Protection Agency data, more than 4.3 million tons of appliances and consumer electronics were discarded in 1999), it is a safe assumption that the environmental challenges and ecological impact are considerably less daunting than the ones resulting from the chemicals used in traditional film processing.

As a result, environmentalists and researchers have identified Kodak has being one of the worst corporate polluters in the United States.  Referencing the data in the scorecard.org web site, (which collects information on corporate pollution, Kodak is the number one polluter in New York State releasing an estimated 4,433,749 pounds of chemicals into the air and surrounding water supply.

The University of Massachusetts Political Economy Research Institute, the author of the Toxic 100, indicated that Kodak was the fifth largest polluter in the entire United States in 2002.  The Citizen’s Environmental Coalition (CEC) also recognized Kodak with the dubious Dirty Dozen award in 2004. This latter “honor” is given to organizations that are consistently rated as being the worst environmental offenders.

To be fair, there have been instances of environmental breakthroughs for the company, such as the Environmental Protection Agency’s (EPA) Energy

Star Sustained Excellence Award in 2005 for Kodak’s efforts in reducing greenhouse gas emissions.  There have also been examples of what has been referred to as Kodak’s “environmental stewardship” efforts through their provisioning for a pair of Peregrine falcons since 1988.  However the

general consensus is that the ecological benefits, while noteworthy, are far outweighed by the company’s negative impact on the environment as a result of continuing factory pollution.

Whether this is a hangover from the remnants of their traditional film business (Kodak after all continues to be the world’s largest supplier of photographic film for the amateur, professional and motion picture markets), or a reflection of irresponsible and environmentally insensitive

leadership whose primary focus is trying to keep the company’s head above water there are still many unanswered questions.

Including the most important questions as it relates to this paper’s case study of the company.  And that is, does Kodak’s change in focus from traditional film to digital imaging represent a step in the right direction in terms of pollution reduction?  And of even greater significance, can the results of said changes be quantified?  Finally, in the absence of a digital revolution would Kodak have continued to stay with what worked (traditional film) regardless of the environmental impact?

Substantive answers to these as well as other questions, which at the time of this paper’s publication were not readily available, would go a long way in terms of building creditability for the “business case” behind sustainable thinking and programs.

A Three Pronged Fork

In the context of Elkington’s 1998 book Cannibals with forks, an attempt to build a business case for sustainable capitalism comes down to the three pronged fork analogy which he had originally coined in 1994 as the “triple bottom line” (TBL). Quite simply, the TBL represents an expansion of traditional bottom line accounting to include both environmental and social performance.  (See Appendix A for the core elements of the TBL concept.)

In the private sector, this has been commonly referred to as “corporate social responsibility.”  Something with which we are all familiar and have been for some time, especially when confronted by crises such as the Love Canal, the nuclear disaster at Chernobyl or the contamination of drinking water with hexavalent chromium by the Pacific Gas and Electric Company (later the basis for the film Erin Brokovich).

And while these egregious breaches of corporate and government trust flash across our collective skis occupying our attention for what ultimately is a brief moment in time, were the eventual outcomes while incredibly important, meaningful beyond the regionalized interests of the communities in which they occurred?  What transformative impact did these as well as other ecological catastrophes have on the global community beyond scintillating headlines?

In a review of the Cannibals with Forks book, the UK-based environmental think tank SustainAbility http://www.sustainability.com/index.asp offered the following opinion; “the process of greening our minds and industries may have been under way for 40 years, but putting the world economy on a more sustainable footing has just begun.”

And in a follow-up dialogue from 2002, the firm’s Alex Cutler expanded on the this concept of knowledge versus tangible action relative to the gap between awareness and real-world transformation when she said, “sustainability is much more complex than a definition, because there are so many interwoven issues, impacts, prejudices, resources, attitudes, perceptions and relationships.  However, I take the view . . . that defining sustainability sometimes defeats the objective.”

While valid, I believe that an attempt to define what sustainability really means both individually and from a collective outcome perspective is essential to understanding its practical application and the subsequent impact it will have from a TBL perspective.

To be specific, while sustainable capitalism makes sense at a conceptual level, its practical application will likely present different obstacles for different sectors.  Even within the same sector, the impact on different organizations may vary from one company to the next.

Cutler also recognized the existence of perceptional variances between individual views of sustainability when she said that “different people see it in different ways. Some see it as “limiting,” while other may recognize it as an “opportunity to innovate.”

And these diverse differences are perhaps the single most significant obstacle to a broader adoption of both the TBS concept and the 7-D world revolution.  (Note: revolution was the word used to describe the “dimensions” of the 7-D world.  The term revolution is an important moniker, in which the consequences of its application will be discussed shortly.  (See Appendix B for the complete list of the 7-D world dimensions.)

To begin, and using the private sector as an example, how do you establish and execute a cohesive program when an accord on what actually defines sustainability cannot be collectively agreed upon?

Referencing an excerpt from Wikipedia’s definition of corporate social responsibility (CSR), the on-line encyclopedia observed that “the practice of CSR is subject to much debate and criticism.  Proponents argue that there is

a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own

immediate, short-term profits.  Critics argue that CSR distracts from the fundamental economic role of businesses, others argue that it is nothing

more than superficial window-dressing; still others argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.”

This hardly represents a unified and collaborative foundation upon which a strategy such as sustainability can be presented let alone pursued.

Even a simple reference to the 7-D world’s dimensions as being “revolutionary” in nature can undermine executive suite acceptance. Especially when business guru’s like Jim Collins came to the conclusion in his book Good to Great that “dramatic results do not come from dramatic process – not if you want them to last anyway.”  He went onto say that “a serious revolution, one that feels like a revolution to those who are going through it, is highly unlikely to bring about a sustainable leap from being good to great.”

To a vast majority of incumbent corporate hierarchies, the concept of sustainable capitalism is both new and revolutionary.

And it is for reasons such as these that the results of the 2007 EcoMarkets Survey are telling, in that it may help to explain at least some of the fundamental gaps that exist between the “logic” of sustainable capitalism and the traditional definitions of a capitalist market.

A Preliminary Scorecard?

The EcoMarkets Survey represented a collaborative effort between the North American Commission for Environmental Cooperation, the Center for a New American Dream and TerraChoice Environmental Marketing (who spearheaded the program. (See Appendix C for the complete EcoMarkets Survey Results.)

The 2007 Survey was the second of what has become an annual report, resulting from an initiative to monitor patterns of green procurement practice within the B2B and B2C communities.

The survey results were based upon 692 respondents from a total invitation pool of 10,500 procurement professionals. The conclusions are therefore drawn from a 6.6% sample response rate. The respondents’ organizations accounted for $5 billion in combined annual spend.

While 91% of respondents indicated that they consider green factors at least occasionally (the awareness factor as I call it) in terms of practical application, the Survey reached the following conclusions:

Ø “It is clear that while environmental factors are being increasingly incorporated into purchasing considerations, the translation of policy to practice is mixed and incomplete.”

Ø “The three most important factors that influence purchases are product performance, durability and price.  Environment is a lower priority.”

Ø “A strong majority of respondents (60%) report that they will not pay a price premium for environmentally preferred products.”

The questions this raises is quite simply what set of circumstances will elevate green procurement from a nice to do “boutique” status to a more meaningful (and essential) element of a sound purchasing strategy?

From the above findings, it is very clear that the challenges of making the transition from awareness to execution exist at multiple levels of a transaction including a disparate group of stakeholders of which the end consumer is one.

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