Electronics Production | November 23, 2010

Sustainability in purchasing & sourcing: crucial factor for profit

Sustainability used to be just a buzzword, but now it has become a steady component of corporate strategy. Many companies rigorously apply the principles of sustainability in purchasing and supply chain management, finds a new study.
The study, conducted by Roland Berger Strategy Consultants and the Bundesverband Materialwirtschaft, Einkauf und Logistik (BME – Association of Materials Management, Purchasing and Logistics), is entitled Sustainable sourcing – Next level in procurement excellence. More than 250 decision-makers from purchasing, supply chain management and logistics participated in the study.

"In the near future, sustainability will play a decisive role in companies' competitiveness and acceptance," says Roland Schwientek, Partner at Roland Berger Strategy Consultants. "It will thereby also influence the traditional target dimensions of purchasing: price, cost, time, delivery punctuality and product quality." In the meantime, many companies are rigorously applying the principles of sustainability.

They incorporate not only economic aspects into their decisions and processes, but social and ecological considerations as well. For example, by realizing sustainability in purchasing, companies pledge to take action against corruption, antitrust agreements, child and forced labor and to strictly observe human rights, environmental and health protection as well as fair labor conditions.

Sustainable profitability is not a contradiction in terms

The good news: sustainability and profitability are not mutually exclusive. For the overwhelming majority of respondents (83%) interviewed by Roland Berger and BME, "economic calculations" are the main driver of their sustainability efforts. After that comes customer requirements (78%) and the company's corporate philosophy (77%).

For Schwientek, these results show "how rigorously sustainability is being implemented in purchasing, even today." The study revealed some regional differences in how mature the sustainability activities are: Western Europe is in the lead, followed by North America. In Western Europe, 44% of suppliers are mature or very mature in terms of sustainability, in North America 32%. In contrast, South America, Central/Eastern Europe and Asia are currently in an early development phase.

38% actively involve suppliers in their sustainability actions

According to the study, sustainability will gain considerably in importance over the next five years. Already today, many decision-makers are entering into cooperative ventures only if their business partner accepts their code of behavior. Those who break this Code of Conduct face sanctions, including being excluded from future agreements. A good third of the survey respondents (38%) incorporate their direct suppliers into their sustainability efforts.

However, integrating several supply levels is still in the early stages: Only 20% have contact with suppliers from the second level and fewer than 5% with those on the third level. The degree of implementation in purchasing also varies. According to the study, sustainability is embedded in the corporate goals at nearly half of all companies, but only a quarter have used that to identify specific areas for action and activities for purchasing.

66% are convinced: Sustainability pays off

Most of the companies (89%) that participated in the study report that they do not or cannot measure the value added by sustainability. However, this doesn't change the support of sustainable business: 66% of those surveyed are convinced that sustainability pays off. "The study shows that sustainability has become a 'hard fact'," says BME CEO Holger Hildebrandt. Berger Partner Schwientek adds: "The winners in this development will be those companies that see sustainability as a new source of value creation and use it. This will mean an entirely new business case."


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