By Holly Elwood & Scot Case
According to Executive Order 13101, ” Greening the Government Through Waste Prevention, Recycling, and Federal Acquisition” (September 1998), environmentally preferable purchasing means selecting “products or services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose.” An earlier Executive Order, Federal Acquisition, Recycling and Waste Prevention (October 20, 1993), initiated EPA’ s work on environmental preferability by mandating EPA to develop environmentally preferable purchasing guidance for federal agencies. EPA proposed seven guiding principles and provided further clarification to help federal agencies comply with the Executive Order mandates.
EPA recommends that agencies select products to maximize beneficial environmental attributes and to minimize adverse environmental effects consistent with price and performance considerations. EPA encourages agencies to evaluate the multiple environmental impacts of every product through the product’ s life-cycle: raw material acquisition, manufacture, packaging and distribution, use and disposal. Environmental impacts include:
While very few private sector companies have formally defined environmentally preferable purchasing, several are incorporating these principles.
Private Sector Reasons for Adopting Environmental Purchasing Practices
When making a purchasing decision, companies typically examine only a product’ s cost, performance, availability and any impact on future profits. An increasing number of companies are adopting purchasing policies to promote specific social, economic or environmental objectives. A much larger number of companies, however, are adopting them when they also promote the company’ s financial objectives.
While many of the companies in this case study adopted environmentally preferable purchasing practices to help improve the environment, they also had “traditional” business reasons, such as:
Responding to customer interest in “environmentally friendly” products and practices
Almost every company interviewed referenced anecdotal evidence of increasing customer interest in environmental performance of companies and their products. As a result, companies are taking steps to ensure their purchasing and manufacturing practices reflect the environmental sensitivities of their customers and that their products incorporate the environmental attributes customers seek.
Many companies reported receiving phone calls or surveys from existing and potential customers requesting specific environmental information about their products. Collins & Aikman and Herman Miller regularly respond to requests for information concerning their products’ recycled-content percentages, indoor air quality impacts, and other attributes.
Companies also mentioned consumer surveys that suggest people are increasingly interested in purchasing from environmentally conscious companies. Public Service Electric and Gas Company (PSE&G), a New Jersey utility company, adopted a ‘buy recycled’ program in 1997, for example, because polls suggested its customers strongly supported the emerging “green purchasing” trend. Public support for such initiatives led the New Jersey governor to establish the Office of Sustainability, which further encouraged PSE&G’ s efforts.
DaimlerChrysler referenced similar studies, but expressed some concern that it has not seen any indication of a strong correlation between customers’ words and actions. Although customers claim environmental performance is an important criteria in purchasing a vehicle, surveys conducted after a purchase place environmental concerns well below comfort, size, color and engine performance. While customer demand is not the primary reason, the company is adopting environmentally preferable purchasing practices for other reasons such as to lower costs and increase profits.
Distinguishing a company from its competitors
While surveys have not conclusively established a link between customers’ words and actions, anecdotal evidence suggests that environmental performance can increase or decrease sales.
- > In 1994, Test, a Dutch consumer magazine, rated Sony televisions as a ‘reasonable’ buy compared to two other companies that were rated as ‘best buys.’ The primary difference between the brands was environmental performance.
the environmental performance of Sony products by setting strict criteria its products must meet. At the time of this writing, Sony has more than 500 products registered as Greenplus.
Sony is beginning to see the benefits from this effort. In 1998, Test magazine rated the environmental performance of Sony’ s products more favorably than its competitors, and its market share in the Netherlands has increased steadily.
- > Since 1996, Volvo has provided automobile customers in Japan with information on environmental impacts associated with the manufacture, use and recyclability of its models. Following the introduction of environmental specifications, Volvo’ s automobile sales in Japan rose 17%. Volvo now provides similar information in Europe, the U.S., and Australia.
- > Collins & Aikman Floorcoverings, Inc., the second largest U.S. vinyl floor covering manufacturer, promotes the environmental performance of its products in all its sales literature and developed a fact sheet specifically citing its product performance as measured against EPA’ s environmentally preferable purchasing guidelines. To further distinguish itself from competitors, the company provides customers with a “Sustainable Warranty” pledging to recycle its products at the end of their useful lives so that they never require disposal. Sales have been increasing steadily since they began promoting the environmental benefits of their products, although the company has not done the research to demonstrate a direct correlation.
- > The search to improve the environmental attributes of its products drives Canon’ s environmentally preferable purchasing program. It believes more and more customers demand environmentally friendly products and cites several recent examples of large sales finalized because of its products’ environmental attributes.
> Ben & Jerry’ s fought a series of court battles to ensure the right to use product labels to inform customers that its products contain milk and cream from suppliers that do not treat their cows with recombinant bovine growth hormone (rBGH), a synthetic hormone used to increase cow’ s milk production by 10-15%. The company believes the use of synthetic hormones is an important environmental issue about which its customers should be informed. They have not attempted to measure it, but believes its customers expect no less.
Pursuing Cost Savings
Environmentally preferable purchasing requires examining all purchases from a new perspective and questioning previously unchallenged assumptions. Companies can discover and avoid previously hidden costs. It requires looking beyond the initial cost of a product or of a procedural change and examining the savings resulting from reduced material handling, reporting requirements, pollution abatement, or disposal costs that could accrue over the next five, ten or twenty years.
Companies that have adopted this perspective are proving that “pollution prevention pays.” They are profiting from the cost savings that result from eliminating unnecessary purchases, avoiding waste disposal costs, and investing in energy-efficient equipment.
DaimlerChrysler saved almost $45 million and reduced their pollution impact by 110,580 tons in 1997. Most of these savings resulted from careful screening and tracking of all chemical purchases to eliminate excess purchases; substituting less hazardous chemicals when possible, which significantly decreased disposal costs; reducing the number of plastic resins purchased, which reduced costs and increased in-house recycling opportunities; and investing in energy-saving measures.
PSE&G saved more than $2 million by streamlining its purchasing process and reducing the number of its chemical suppliers from more than 270 to only 9. The new system allows the company to avoid excess inventory and drastically reduces disposal costs for out-dated or unnecessary chemicals.
After adopting an aggressive energy-efficiency initiative in 1996, Anheuser-Busch expects to keep its utility purchases in 2000 at or below its 1995 costs. The company anticipates annual savings of $60 million by 2000.
Collins & Aikman reduced the amount of yarn in some its carpet lines by more than 10% without adversely affecting performance. In addition to lower material costs, this change also allows them to manufacture the same amount of carpet with significantly less energy.
Anheuser-Busch, The Body Shop, Herman Miller, IBM and McDonald’ s, and many others, are purchasing lighter weight or reduced packaging for their products, which significantly reduces product packaging volume, saves money, and reduces impacts on solid waste disposal systems.
Joining an Industry Trend
Several companies suggested that supplying environmentally preferable products will be an important industry objective in the 21st century. This requires companies to purchase and use environmentally sensitive components and to identify vendors that stock such products. In an attempt to identify such products, more than 1800 Japanese companies and other organizations have joined the government’ s Green Purchasing Network (GUN: www.wnn.or.jp/wnn-eco/gpne) to learn more about these environmental purchasing and to share product information. GUN has sold more than 10,000 copies of its Environmental Data Books, which compare the environmental attributes of products.
Similarly, more than 368,000 people refer to information published by Green Seal (www.greenseal.org), a non-profit organization providing environmental product recommendations in 33 product categories. Green Seal developed a 110-page buying guide to share its research. It also helps more than 450 member companies evaluate their current purchases and implement green buying programs. They publish a monthly Choose Green Report, which lists products Green Seal has identified as environmentally preferable.
Overview of Private Sector Environmental Purchasing Activities
Many companies have incorporated environmental principles into their routine purchasing operations, but few have formal programs in place. Instead, companies are refining critical components of what could become formal programs. The components include:
Companies are also making efforts to better track chemical and waste-streams and to define the total cost and environmental impact of
materials, processes and products. These measures significantly aid company efforts to buy and manufacture environmentally preferable products.
Developing lists of chemicals to avoid
In the mid-1970s, the U.S. federal government began regulating the manufacture, use and disposal of numerous chemicals because of concern for potential adverse human health or environmental effects. As a result, many companies in a wide variety of industries began tracking and modifying their chemical purchases. Several companies have expanded these efforts beyond their original compliance concerns to save money or to incorporate a broader environmental ethic.
- · DaimlerChrysler maintains several databases to screen more than 1700 chemicals and chemical compound groups. It tracks information concerning the environmental and health and safety impacts of more than 760 substances used or considered for use by the company. More than 100 of the chemicals are identified as having potential adverse effects or excessive handling or disposal costs based on toxicity, volume used, associated emissions, number of operations using the substance, potential worker risks, reporting requirements, carcinogen potential, mutagen potential, adverse effects on nearby Great Lakes, and potential for additional regulations. As a result, purchases of these chemicals are either prohibited or are being significantly reduced.
- · Volvo has a similar program. It employs a database identifying the environmental impacts of more than 5000 chemical products. From this list, Volvo has developed two lists: a black and a grey list. The black list includes chemicals that the company has banned from use. The grey list includes a list of chemicals for which Volvo is attempting to locate more environmentally benign substitutes. Volvo shares its list with all of its suppliers to ensure none of the components it purchases contain any of the banned substances.
- · As part of its “Green Procurement Standards” , Canon includes two lists containing more than 300 chemicals. The lists include 270 chemicals used in company facilities as part of routine plant operations (eg., R&D, cleaning) and 49 chemicals remaining its products. Chemicals on the lists are prohibited or are being reduced.
- · Sony uses a classification system to prohibit use of certain chemicals. It classifies production processes chemicals into four groups based on the degree of hazard posed. It prohibits use of Class 1 chemicals, which the company classifies as the most hazardous. Sony plans to eliminate the use of all Class 2 chemicals and reduce its use of Class 3 chemicals by 50% by March 2001. Class 4 chemicals will continue to be used carefully.
- · Collins & Aikman prohibits the purchase of raw materials containing known hazardous or high levels of volatile organic compounds (VOCs). As a result, product VOC emission tests result in no detectable formaldehyde, styrene, 4-PC, or known human carcinogens at product installation.
- · Other manufacturers focus efforts on avoiding or reducing smaller sets of specific chemicals. The Body Shop, for example, avoids the use of polyvinyl chloride (PVC), a common plastic resin, out of concern for the dioxins produced as part of the manufacturing process and for the potential adverse health effects from chemicals routinely added to the plastic to improve performance.
- · As part of Ben & Jerry’ s efforts to avoid products linked with dioxin releases, the company avoids chlorine-bleached paper products. As mentioned previously, the company avoids purchase of milk from dairy farmers who treat their cows with rBGH. It has been linked to decreases in the nutritional value of milk, reduced shelf-life, adverse effects to the health of cows. Ben & Jerry’ s purchases organic cotton t-shirts for use by “scoop shop” employees and for retail sales because they believe organic farming techniques, which eliminate the use of chemical pesticides, are environmentally preferable.
One of the many challenges companies face when implementing an environmentally preferable purchasing program is determining which products on the market are preferable. While one approach is to eliminate the purchase of all products containing certain chemicals or possessing specific adverse environmental attributes, another method is to develop a list of approved products. Some companies find that such a list simplifies the purchasing process because employees consult the list before making a purchase, which eliminates the need to screen products against a set of prohibited attributes.
· Canon, Sony, Tokyo Gas and numerous other Japanese companies have created “approved” lists. Before making a purchase, employees must first consult the list to determine of the company has established a preference for a particular product.
Tokyo Gas, for example, lists 23 office products it determined to be environmentally superior. The company first focused on the most frequently used office products such as copy paper, stationery, post-it notes, erasers, and pencils and pens. Now, they are expanding the list. Like many of the Japanese companies creating similar lists, Tokyo Gas based its assessments on information provided by GUN.
· Approved product lists seem to be less common in the U.S. Perrigo wanted to improve indoor air quality, reduce the number of cleaning products purchased, and minimize the environmental impacts of the cleaning process. After reviewing material safety data sheets and interviewing suppliers and manufacturers of various products, the company developed a list of attributes including VOC content, pH level, toxicity, flammability, chemical content, use of regulated materials, reduced packaging, cleaning effectiveness, and price. Perrigo then identified a range of products that meet its requirements.
As a result of this effort, Perrigo saves more than $35,000 annually. The company significantly reduced the number of cleaning products it purchases (from seven cleaners to two). And it purchases in bulk. The company also saves money by purchasing from one supplier. This decreases the need for administrative oversight and paperwork by reducing hundreds of monthly product invoices from multiple suppliers to a single monthly invoice.
· When Ben & Jerry’ s decided it wanted to use environmentally sensitive cleaning products in its more than 170 U.S. “scoop shops” , it contacted an outside consulting firm to recommend appropriate products.
Approved products lists can quickly become outdated. New products are continually be introduced that incorporate additional environmental attributes, enhance existing ones, improve performance and/ or lower costs.
Establishing Single-Environmental Attribute Purchasing Programs
Many companies begin with an emphasis on a single environmental attribute. There are programs that focus on energy and water efficiency, or on purchasing products with the highest recycled-content levels.
“Buy-Recycled” Programs
Several companies found “buy recycled” programs easy to introduce because employees and customers recycle at home and have been exposed to “buy recycled” messages since the early 1980s. Additionally, many manufacturers and suppliers promote and su
pply a wide variety of recycled-content products.
· Since 1990, McDonald’ s and its more than 24,000 franchises have spent nearly $3 billion on the purchase of recycled-content items. At the time the program started, recycling markets were poorly developed, but the company pledged to spend $100 million on such products to help strengthen the demand. They currently spend $350 million a year on a wide range of recycled-content products including dining trays, construction materials, chairs, tables, carpeting, insulation, playground equipment, tiles, and paper products.
· Sun Microsystems is making it easier for employees to buy recycled office supplies by identifying products’ recycled-content percentages in its internal electronic office supply catalogue. Although Sun’ s office products supplier provides a wide variety of recycled-content products, it stocks relatively low volumes of them. This prevents it from earning volume discounts and makes the products more expensive for customers. As a result of the price difference, Sun’ s purchases account for only 3% of its total office supply purchases. For future office supply contracts, Sun may factor the ability of the supplier to provide recycled-content products in its vendor selection process.
Energy and Water-Efficiency Programs
· At the time of this writing, Anheuser-Busch was expecting to save 500 million gallons of water, 2 billion BTUs of energy, and $60 million a year by 2000 as a result of its emphasis on reducing utility use and cost. Its purchase of energy efficient chillers for its SeaWorld of Florida theme park is saving more than 1.5 million kilowatt-hours and about $100,000 in energy costs annually. They expect to save an additional $40 million a year as a result of its purchase and installation of bio-energy recovery systems. Decreased energy consumption reduces the pollution associated with electricity generation.
· In 1993, McDonald’ s joined EPAs “Green Lights” program – it encourages organizations to conserve energy by purchasing and installing energy-efficient lighting. The company has converted 50% of its U.S. restaurants, including all of its company-owned and a third of its franchises. The average restaurant saves 30,500 kilowatts of energy and reduces its lighting bill by 40%.
Through “The Energy Efficient McDonald’ s (TEEM)” program, the company is building highly energy-efficient restaurants that use 15-20% less energy than a typical McDonald’ s. Each TEEM restaurant involves the purchase of an array of energy-saving technologies such as skylights, computer-controlled heating and A/C systems, advanced energy efficient equipment, and sensors to regulate energy use.
Considering Multiple Environmental Attributes
Some companies examine only those attributes of importance to the company, while others rely on detailed life-cycle assessments to compare products.
· To encourage employees to examine the environmental impacts of their purchasing decisions, Warner Bros. Established a company-wide purchasing policy emphasizing multiple environmental considerations. Several departments are purchasing environmentally responsible paper, janitorial supplies, construction materials, transportation products, computers, copiers and printers.
Warner Bros. Purchasing Policy Warner Bros. recognizes that purchasing practices can have a profound impact on the environment. Purchasing environmentally will help create and sustain markets for products and technologies that reduce waste, conserve resources, prevent pollution, and enhance worker health. Warner Bros. has already established itself as a leader in environmental purchasing, and we are committed to continued growth in this area. Please make sure your department adheres to the following policies and plan your purchases environmentally. Printed on 20% post-consumer recycled paper |
- · After examining its parts washing operations from a multiple environmental attribute perspective, Anheuser-Busch, over a three-year period, reduced the associated costs by 30% and the associated hazardous
- · After examining its parts washing operations from a multiple environmental attribute perspective, Anheuser-Busch, over a three-year period, reduced the associated costs by 30% and the ass
ociated hazardous waste generation and air emissions by 80%. When examining alternative cleaning products, the company developed a spreadsheet comparing attributes such as pH, flash point, price, and whether the products was solvent- or water-based. It selected products it might not have considered otherwise that benefited both the bottom line and the environment.
- · In 1991, Patagonia commissioned a life-cycle analysis of its four major fabrics (polyester, nylon, cotton and wool) that showed cotton to be the most environmentally harmful. The company began to purchase organically grown cotton. Although it’ s more expensive, Patagonia believes its customers equate it with higher quality and are willing to pay more for it. Patagonia is using the results of the analysis to reduce the impacts of its dyes and the metal and plastic components in its products. It shares the environmental impacts of its products and the company’ s attempts to minimize them with customers in its catalogues and on its website.
· Using its “Environmental Priority Strategies” (EPS) tool, Volvo compares environmental life-cycle impacts of different materials before purchasing them for use in its automobiles. EPS allows the company to measure each component’ s energy and resource consumption and air, land and water emissions throughout the component’ s production, use and ultimate disposal. Based on this information, Volvo assigns each component an environmental impact index. When designing a new car, Volvo computes an Environmental Load Unit (ELU) for each new product design based on the environmental impact indices for each component.
· Herman Miller conducts an abbreviated life-cycle analysis on all its new products to quantify the environmental and economic impacts of its designs. As a result of one analysis, the company redesigned a chair to eliminate the use of foam rubber, using a plastic and fiberglass mesh frame instead. Life-cycle analyses have also encouraged the company to switch to water-based and powder-based coating systems, to increase the use of recycled wood, and to continue its policy of using certified wood.
· With databases containing information on more than 800,000 products and components, DaimlerChrysler examines multiple environmental attributes when making purchasing decisions. The databases include information on toxicity, chemical exposure and release, and recyclability, and products can be compared based on potential hazards and costs. Once a product has been identified as preferable, the database ensure its is purchased.
· Canon formally announced its multiple-attribute green purchasing program in 1997 with the publication of the Green Procurement Standards and the Green Procurement Standards Guidebook. They include an index for evaluating purchases based on potential environmental impacts of the product and the product’ s manufacturer. The index rates potential suppliers’ corporate environmental structure along 35 parameters in 7 categories and examines 28 product-specific parameters in 11 categories. A product’ s preferability is based on the overall combined score. Canon established a preference for products above a predetermined threshold.
Resolving competing attributes
Companies sometimes discover that improving one environmental aspect harms others or adversely affects other important attributes such as price or performance. Consequently, companies must decide which attributes are most important. Companies make these determinations in a variety of ways:
· Patagonia debated whether to whether to switch to organic cotton in all of its product lines. While the switch would significantly reduce the company’ s “footprint” without reducing (and perhaps increasing) product quality, organic cotton was much more expensive. Some of the extra costs would have to be passed along to customers or the company would have to wait until prices dropped.
After a great deal of internal debate, Patagonia decided that, as an outdoor company committed to making the outdoors an enjoyable experience, it had to make the switch. Enabling customers to enjoy the outdoors means ensuring there is an outdoors to enjoy. In its catalogues, Patagonia presents its use of organic cotton as part of its commitment to quality.
Determining the “environmentally correct” course of action isn’t always easy. While water-based garment coatings are available to protect colour and enhance durability, Patagonia continues to use solvent-based coatings for these purposes. Less volatile organic compounds (VOCs) are released and fewer toxins are used with water-based coatings, but they are not yet durable enough to meet the company’ s performance standards. Patagonia believes that durability is more environmentally important.
· IBM also balances competing environmental, cost and performance issues. In mid-1990s , the packaging department significantly reduced the packaging required to safely ship products, which generated enormous cost savings and environmental benefits by reducing material consumption.
IBM is increasingly designing products to be easily disassembled so that equipment can be easily upgraded or recycled if it becomes outdated. As a result, products are less sturdy and require additional packaging during shipping. Although more packaging is used for some designs, the company believes that overall environmental performance is improved.
In another example of environmental trade-offs, IBM considered requiring its suppliers to eliminate polyurethane foam from the packaging used to ship components in favor of a more biodegradable material. While this would have slightly reduced the impact associated with polyurethane foam, it also would have eliminated the revenue IBM earns from recycling polyurethane. After examining the costs and benefits, they left well enough alone.
Working closely with suppliers to enhance environmental performance_
In order for many companies to implement environmentally preferable purchasing activities, they must work with suppliers to ensure they adequately understand the company’ s requirements. Numerous companies now survey suppliers to assess their ability to help the company achieve their environmental objectives:
· The Body Shop’s Ethical Audit and Environmental Departments developed a ratings system to evaluate existing and potential suppliers. Suppliers are evaluated on a number of environmental and social justice criteria and rated on a scale from one to five. Vendors with higher ratings receive a larger percentage of business. Anheuser-Busch, Canon, Collins & Aikman, Herman Miller and Sony have similar evaluations in place although each uses slightly different performance measures.
· Volvo requires each of its 500 worldwide suppliers to complete a detailed environmental self-assessment to ensure they are in compliance with their policies.
· DaimlerChrysler requires is suppliers to disclose their material content in self-disclosure certifications. After comparing analyses, each vendor is assigned an environmental rating, which is part of the supplier’s total rating.
Companies are also redefining their relationships with vendors. Many companies perceive vendors as partners in the production process rather than solely as product providers.
· Herman Miller holds semi-annual conferences for its employees and invites all its suppliers. They include nationally recognized experts in waste minimization, pollution prevention, life-cycle analysis, environmental design, and packaging.
· PSE&G and Perrigo have similar relationships with chemical suppliers. The supplier tracks the company’s on-site chemical inventories to maintain proper levels. If an employee mistakenly orders a product that is already on site, the vendor will alert the employee rather than delivering more product. Perrigo took the additional step of establishing financial incentives for its suppliers to reduce the quantities of chemicals purchased. The company shares the cost savings that result.
· When Collins & Aikman was trying to reduce the volume of VOCs in its carpet products, it worked closely with several suppliers. A few suppliers completely reformulated existing products or modified manufacturing processes.
· To increase its recycling rate and decrease its waste volume, Anheuser-Busch worked with suppliers to establish a standard for the plastic strapping used to bind shipments of incoming materials. Prior to this effort, they were unable to recycle the strapping material in any significant volume because of the wide variety of colors and plastic resins each supplier used. Recognizing it was buying not only the product but also the strapping, they worked with suppliers to establish two, color-coded single-resin plastics for use in strapping materials. The color-codes indicate resin type for easy separation and recycling. The company now recycles some 700 tons a year. They also encourage suppliers to use reusable packaging.
Conclusions
Private-sector companies are increasingly adopting environmentally preferable purchasing policies. Applying these principles saves money while reducing energy and water consumption, decreasing use of limited natural resources, reducing waste and minimizing use of hazardous substances. Companies increasingly promote the environmentally preferable attributes of their products.
This trend will expand as more companies learn about it. As more and more entities adopt environmentally preferable purchasing practices, it becomes increasingly easier for others to do so. The U.S. Department of Interior, for example, would not have piloted biodegradable plates and soup bowls with the purchasing power and interests of private-sector companies with similar concerns stimulating demand for and availability of such products.
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| Holly Ellwood has worked for the U.S. EPA’s Office of Pollution Prevention & Toxics since 1993. She is a member of EPA’s Environmentally Preferable Purchasing Project Team, and has previously worked on the EPA’s Environmental Accounting Project; the Partnership Program Coordinating Committee; and in collaboration with the Japanese government on development of Japan’s Toxic Release Inventory. Contact her: Elwood.Holly@epamail.epa.gov Scot Case has been supporting EPA’s EPP program for 5 years as part of his work with Eastern Research Group, an environmental consulting firm headquartered in Lexington, MA. He also works at the Center for a New American Dream teaching state and local governments to purchase environmentally preferable products. [sorry this link is no longer available] Contact him: scase@erg.com 301 891-3683 x107 |
Excerpted FROM Greener Management International, Spring 2000. Greener Management
This article is excerpted FROM Greener Management International, a SustainableBusiness.com Content Partner.
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