21 Aug Green Purchasing – Part One – What is ‘Green’ Purchasing?

What is Green Purchasing?
…or Sustainable Procurement?
…or Environmentally Preferable Products?
…or Responsible Supply Chains?

Well, they all have the same basic concepts at their foundation.

Green purchasing is often defined as the acquisition of products and services that have one or more of the following environmentally preferable characteristics:

1) Contain recycled content or are easily recyclable
2) Bio-based or bio-degradable
3) Facilitate energy or water efficiencies
4) Use alternative fuels or renewable energy in their operation or manufacture
5) Eliminate or significantly reduce hazardous or toxic chemicals when compared to the alternative
6) Are locally sourced, grown, or produced to reduce transportation and packaging waste

Are Green Products inevitably more expensive?

It really depends on the category or commodity under discussion. Today, when we look to buy organic vegetables at the grocery store or farmer’s market, for instance, we often find that the prices are higher per pound, gallon, or bushel. Many people, however, gladly pay the higher price because they value the better taste, nutrition, smaller carbon footprint, or social implications associated with locally grown produce.

The discussion of ‘the cost of going green’ changes dramatically when we talk about many of the common goods and services purchased by large organizations and governments. Janitorial products and services, landscaping services, Energy Star appliances, CFL (compact fluorescent lights) lighting, re-manufactured printer toner cartridges, and other products have significant costs savings with little or incremental price increases. These products generally have no requirement of upfront capital investment.

Other categories of sustainable products have relatively high upfront costs and may require capital investment, but pay for themselves quickly over the useful product lifecycle. These items might include alternative fuel vehicles and landscaping machinery, commercial-grade all-in-one multi-user printers, EPEAT rated computers and servers, high efficiency HVAC units, and roof-mounted or on-demand water heaters.

The third category are products that are often more expensive, but have attributes on which a person, company, or society may place importance. Like the aforementioned organic fruits and vegetables, items such as recycled and chlorine free paper, Forrest Stewardship lumber, and solar panels are sometimes more expensive, but provide value beyond the initial acquisition costs.

If criteria other than initial purchase price are considered when making a purchase, or if decisions are based on ‘best value’ to the organization during the lifecycle of the product or service, there is a dramatically different outcome from the lowest-price option.

One of the most common formulas for determining the Lifecycle or Total Cost of Ownership is as follows:

Lifecycle = P + (O+M+T+L+E) – S

Where:
P = Initial Purchase Price
O = Operational Costs
M = Maintenance Costs
T = Training and Customization Costs
L = Logistics Costs (Inventory, Transportation, Packaging)
E = Environmental Costs (Disposal, Emissions, Certifications, Permits)
S = Salvage Value (Recycle, Scrap, Resale Value)

This is Part One of a Green Purchasing series. This will serve as a starting point for more specific discussions about the philosophical trade-offs, public policies, potential commercial opportunities, and emerging businesses involved in the movement we call sustainability.

Until next time – Aiden

© 2009 – Aiden Cohen