At a roundtable debate I attended recently, conversation turned to the current demands being put on procurement and whether sustainability is now taking a back seat to cost takeout. It was a fascinating debate for several reasons – not least because there was a complete dichotomy of opinion from two participants in particular. I wouldn’t go so far as to say that tempers flared, but there was certainly a heated debate…
One CPO made the comment that the current climate was all about cost. While six to nine months ago, sustainability was certainly an issue, he said, today he can’t justify the extra cost involved in sustainable sourcing projects.
The conversation showed just how differently some organisations view the sustainable challenges we face. At the same time, it showed how much work there is still to be done.
Two things struck me. One was how the CPO in question saw cost reduction and sustainability as mutually exclusive – in other words, they simply can’t happen together. The other was how he saw sustainability as a project-based issue – something to be done in chunks, rather than embedding it within the very core of the sourcing process.
I wonder how typical a CPO he is. I also wonder whether he has a point.
Many people I speak to are passionate about the sustainability challenge – they see the opportunity to make a difference and they see how this can go hand in hand with cost reduction and efficiency savings.
But others I speak to couldn’t care less about the environment (at least in their professional lives). They see their only responsibility as maximising shareholder value. And, the worrying thing is, in their minds this doesn’t allow for improved sustainability.
The answer, as always seems to be the case, lies somewhere in between. There is no doubt that many sustainable initiatives are very closely aligned with cost reduction – fewer short-haul flights, improved vehicle tracking, reduced water and energy usage to name a few.
But until sustainability is embedded within corporate and investor psyches, there will always be a substantial number who – perhaps rightly – see large-scale sustainability projects as not core business. And, therefore, not relevant.
With great interest I read this article. About 6-8 months ago I had a similar disucssion on this subject. Most participants indicating that sustainable sourcing is a key issue. I am sure that if I would raise in the same environment the same question again that the feedback would change significantly. During times/periods that there is economic wellfare/wealth you might better afford sustainability, whereas during the crisis everything goes back to cash flow. Whatever is not required to survive is eligible – consequently, should be stopped from being done! Is this then a consequence of optimising share holder values? Personally I believe so, as the company just wants to deliver short term optimized results. Sustainability will rank lower on the priority list, whereas cashflow moves up. Sustainability at the same time is in most cases costly and therefore cannot be afforded during a crisis. That is why certain people built on overcoming the crisis – once that’s managed, it might move up on the priority list again. It is as simple as that!
I wished that such short term optimisation due to share holder value would be no issue! Call me a dreamer! Nevertheless, long term my recommendation proves to be right – and I am sure about that!
Where are the share holders that finally start asking for long term improvements/inproved results? Long-term optimization instead of short-term optimization! That is what the economy is currently lacking off!
Does anybody know about organizations that built on longer-term profit orptimizations, leaving out the quarterly/short-term optimization that most of the board members are paid for? Once that is achieved, we will base economic growth again on physical growth and not on artifical bubbles that traders/speculators create!
David,
thanks for the well balanced article aubout sustainability, or ‘Green Purchasing’ , if you want. At the end the decisions will always orbit around cost efficiency. And this token is mainly influenced by the factors of cheap and readily available resources.
With a little foresight it is obvious that the depletion of natural cheap resources will challenge the current economic system in a not so far future. If this can be accepted as fact; sustainability today is multiplied cost take out tomorrow.
Harald