Perspectives on greener product development and manufacturing from Sustainable Minds, our partners, customers and contributors.

Sustainable purchasing - the indirect upstream bill

By Joep Meijer on September 13, 2009

When organizations want to improve their triple bottom line1 they usually start with the internal processes. It seems to fit the direct-responsibility focus that makes good managers most successful. Internal processes are within reach, and most easily grasped. Looking at it from a life cycle perspective, the indirect responsibility usually comes later, if at all. However, for some sustainable design solutions the critical area lies in the indirect upstream responsibility.

Indirect responsibility For a lot of products, a major source of environmental and social impact lies in the materials and energy that are purchased. Think about a product made of steel. A whole industry exists whose sole purpose is to roll-form steel into shapes that we need. Their contribution to the overall impact of the steel industry is limited to directly-quantifiable losses (material efficiency) and logistics (transportation efficiency).

Yet the indirect responsibility of roll-formed steel is all the bigger. Where does the plant source their material? What is the percentage of recycled content in the final product? What applications unambiguously require virgin material? What electricity source is contracted? Where do the losses end up? Sustainability can only be achieved for these types of industry if the upstream supply chain is included in the way they define their responsibility.

Perhaps you’re thinking, “this example is so clear, but it does not apply to me.” Your (theoretical) response begs the question, “how do you know?”

Supply chain management Fifteen years of experience with clients has taught me that supply chain management is vital to providing sustainable solutions to the market. I recommend that first, you follow the money; in general you can argue that the more money is spent, the greater the environmental impact (and the greater to impact of any incremental changes you make).

Politicians like to focus on ‘decoupling’ economic growth and environmental pollution. Some Europeans countries have demonstrated that this is possible, and the general correlation proves to be valid in many cases. If you want to focus on engaging your stakeholders, LCA can gain you great entry points based on environmental performance. But doubling the assessment on where you spend most of your money might help you prioritize who to talk to.

The great benefit from talking to your supply chain is that you broaden your horizon in creating solutions. You would be surprised by the number of times you will hear answers like “we gave you exactly what you asked for”. By asking different questions, you include sustainability and change the equation.

Including indirect responsibility I believe including your indirect responsibility – the upstream component -- is a requirement for businesses that are successful in the future. Just think about the greenhouse gas reporting structure; they include Scope I, Scope II and Scope III emissions.

Scope I emissions reflect direct emissions from your operations. Scope II includes indirect emissions from stuff you buy or ask people to supply to you. Scope III covers all other indirect emissions that are "a consequence of the activities of the institution, but occur from sources not owned or controlled by the institution." They include commuting, air travel, waste disposal; embodied emissions from extraction, production, and transportation of purchased goods; outsourced activities; contractor owned- vehicles; and line loss from electricity transmission and distribution.2

Another example is the standards that are being drafted by ASTM bearing the title “WK24856: new Standard Practice for Chain of Custody Procedures” that defines how the supply chain needs to be documented. It stipulates that LCA standards all over the world include requirements to contact your suppliers.

I am convinced that companies that want to maximize their triple bottom line need to engage in upstream stakeholder engagements. The momentum to do so will only grow. Let’s get to it!

1. -- Roughly defined, the triple bottom line takes into account people, planet and profit. It encourages thinking beyond the more narrowly-defined financial bottom line, and takes into account concepts like environmental quality and social equity.