Being green has gone through many stages over the last ten years. For some time simply paying lip service to environment was enough to get by. Token projects and initiatives followed in all their PR-able glory. Exposures for ‘astroturfing’, bad press and grassroots and governmental pressure inevitably moved the corporate world forwards on green issues. Drip by drip the real importance of minimising impact on the environment has filtered into organisations and many companies now appear to be doing some impressive things. Carbon footprints, carbon offsetting, low-impact building and numerous other concepts have all followed. But as yet there is still much to be done about green issues in globalisation - what of those companies that outsource and offshore large chunks of processes and development?
Outsourcing and offshoring as an industry has reached relative maturity and many companies now contract out a large amount of work. This is creating an almost global carbon footprint largely hidden from their domestic corporate personas. What the company’s call centre is doing in India with its offshore IT developer in Russia, is becoming increasingly important to recognising a company’s global green impact. ‘Greensourcing’ is the answer being put forward by the outsourcing industry to help companies lower their outside impacts, but what is it and how’s it going to help?
Jeremy Hammant of LCP Consulting, a management consultancy firm, offered his explanation, “Alongside the financial and commercial elements of the procurement process we’re starting to see clients looking more at the intrinsic green and CSR credentials of potential partners. This is true in pretty much every sector we’re working in. Now, as part of the selection criteria there is a set of evaluation criteria around green, sustainability, CSR, call it what you will, meaning green is becoming part of the selection process.”
The drive towards green is certainly evident in consumer-facing businesses as customers continue to vote with their feet and wallets on environmental issues. But is this force strong enough to feed through into the B2B space, to those companies far-removed from end consumers?
“There’s certainly a desire from consumers to understand what are an organisation’s green credentials. I think this is permeating all the way down through the supply chain,” commented Mr Hammant.
The force of the green end user is not to be underestimated, recent figures from the carbon trust found that two out of three people think it’s important to buy from environmentally responsible companies and approximately one in seven had decided to use a different supplier due to a shabby environmental record.
So the green wave is clearly getting bigger but what are outsourcing suppliers doing to meet the rising tides? Patni, a large global outsourcing company, is an example of a company that seems some way ahead of the curve in this respect having invested millions of dollars in a new ultra low environmental impact delivery centre. The ‘Patni Knowledge Centre’ seats around 3,500 staff members at any one time and takes every possible step to reduce the amount of energy it uses and waste it puts out. The use of natural light wherever possible, intelligent air conditioning, minimal sewage output and ‘Lead Platinum Building’ (a certification for exceptional environmentally rated buildings), no name a few of the innovations, appear to give the centre bragging rights over most other outsourcer’s green efforts.
The importance of companies developing initiatives like this cannot be denied. But we asked Saurabh Karora, a Patni spokesperson, about the current demand for greensourcing.
“I think people are becoming more and more aware of green issues as a social responsibility. This is impacting big businesses hugely and they’re asking themselves and their suppliers how they can reduce their carbon footprints. Towards this goal end users are increasingly looking at leveraging vendor relationships with those that have invested heavily in green. Patni has invested around $40 million dollars in this facility and we are planning to construct more similar centres around India. As a corporate citizenship strategy this is how we’d like to look forward.”
Evidently greensourcing could be big bucks if supplier investment is anything to go by. But it’s not just lowly consumers that will make this sustainable globalisation a reality. There seems to be a green storm brewing around today’s companies that will increasingly and more forcefully begin to push the envelope on green issues.
Arthur D. Little, of the Sustainability & Risk Practice, commented in a report, “While carbon and environmental footprints are a growing concern, much of the footprint that can be attributed to a company lies in other parts of its supply chain. As stakeholders become increasingly insistent that “promises made” by the CEO should be “promises delivered”, CEOs will need to extract more innovation from suppliers as well as the company itself to deliver on commitments to sustainable performance”.
The drive from investors, consumers, canny companies and forward thinking suppliers could soon be augmented by the law. The EU Emissions Trading Scheme, introduced in 2005, is an early example of the direction governments are heading. Though focused on the high-emissions industries such as energy and transport, carbon footprint reduction driven by government is only set to grow. The sheer necessity of meeting the 2012 Kyoto Protocol and its successor will necessitate heavily polluting countries to get tough on companies.
“The regulatory environment is in a state of determination at the moment. You have the UK Government Office of Climate change inviting responses on a climate change bill. Regulatory conditions and emissions trading haven’t yet fully landed. We’re in a position where the game has opened but we’re probably still playing on the first morning of the test match,” commented, Alan Braithwaite, a Professor at Cranfield School of Management and founder of LCP.
Mr Hammant added “I think as regulation starts to kick in green principles will become much more important in procurement.”
Companies and outsourcing vendors may groan at the thought of compliance with new green legislation but there are also clear benefits to those taking the lead.
“Very often if something is green it’s also cheaper due to the reduction of energy consumption,” commented Alan Braithwaite, a Professor at Cranfield School of Management.
The Sustainability & Risk Practice report identified various other attractive reasons for going green including costs factors ranging from enhanced compliance with government regulation, lower consumption of energy and other resources, to enhanced return from capital investments. Greensourcing could also lessen risks to a business, for example, by a strengthened brand, enhanced reputation, improved community relationships, and/or reduced grounds for litigation. According to the report, the risk of supply discontinuity can also be lowered by applying environmental performance metrics and targets into the supplier performance assessment or contract renewal process.
Saurabh Karora sees Patni reaping the rewards of their bullish investments, “I think increasingly companies are also looking to green vendor partners to make a positive difference to their bottom lines or even their top lines.”
However, Mr Little’s report is also quick to warn of the difficulties of driving green into suppliers, “Many companies underestimate the difficulties of controlling supplier standards at long distance. The longer and more articulated a supply chain is, the harder it is to control entirely. This becomes especially true when a ‘low-cost-country sourcing’ (LCCS) strategy is pursued”.
So, the fact that some outsourcers are proactively addressing green will be heartening for end users. Certainly attempting to drive green into existing outsourcing relationships in far flung locations could be painful to say the least. And measurement processes are also a long way from clear definition.
But the risks are clear to those that ignore the trend, “A reactive company develops its business and product/service strategy without any consideration of sustainability issues in the supply chain. Monitoring of suppliers is piecemeal and lacking predetermined targets for sustainability, leaving the company open to risks,” said Mr Little.
Greensourcing is clearly going to become much more important over the coming years as the various forces encouraging sustainability intensify. The take-up of greensourcing services certainly is not yet fully established and it’s likely to be a while before an outsourcing deal is won on green specifications. However, like it or not, the green wave is coming and it’s up to companies to decide if they will act early to ride it or wait and be swept unceremoniously into a brave new green world.
