Three opportunities for sustainable procurement
Companies that have set decarbonization goals have increasingly started to look at procurement to drive reduction targets, but most procurement teams are not equipped for this. We’ve collected some low-hanging fruits that procurement professionals can capitalize on.
Companies that have set decarbonization goals have increasingly started to look at procurement to drive reduction targets. Most procurement teams that we’ve spoken to are not equipped for this. Working with suppliers to measure and reduce emissions is easier said than done, and while, for many organizations, there is no alternative, for others, there are a few low-hanging fruits that you could capitalize on.
Geography has been shown to be one of the greatest sources of variability in carbon emissions for energy-intensive products. The opportunity can be as large as 80% for certain materials like aluminum and its derived products. The reason is that electricity grid mixes are different around the world – from some being solely reliant on fossil fuels to others that have a more diverse fuel mix. These mixes are also changing at varying rates determined by national energy strategies and climate change commitments. Consequently, the products manufactured using electricity from these grids have vastly different climate change impacts. The more energy intensive or complex the supply chain is, the more influence the grid has on the product’s carbon footprint.
Knowing the impact of your current sourcing location and the opportunity to relocate supply is not trivial. It has traditionally required intensive supplier engagement and experts spending months, if not years, to determine these scenarios for a specific product. This targeted, expert-led approach is not scalable, and when everyone is scrambling to find such experts, it is not even tenable.
It is, however, crucial to get it right when trying to make the business case for changing the sourcing location, which could inevitably mean – changing your supplier and everything that has to do with it.
With Makersite, this is simple and was used by Schäffler to do just that for their battery raw material supply. On average, we have seen projects that identify 40% or more in savings being implemented successfully.
Using recycled materials is a popular approach to reducing the environmental impact of your products. Its benefits go beyond just carbon and help alleviate neighboring problems of resource extraction and waste. Unfortunately, most of the products we make today were never designed with recycling in mind. Collecting, disassembling, separating, and recycling require attention to product design and supporting the waste collection and management systems. Consequently, most of the materials used in products today cannot be reclaimed with high enough purity and volume at a reasonable cost.
There are, however, success stories in the aluminum, steel, paper, and glass industries, and there are enormous savings to be made. In aluminum-based products, this can be up to 90%. Regulations and technical requirements may preclude using recycled materials in your products, but these applications are well known. In all other cases, it’s prudent to understand where recycled materials can be used instead of primary materials and where to source them.
Makersite will be releasing a new feature in Spring 2023 that will allow customers to understand the potential for increasing the recycled content in the products they buy and make more easily.
Collaboration with Product Development
Procurement professionals often have little insight into why they’re buying what they’re buying. They typically get specifications, go into the market and try to get the best price and quality with the shortest delivery time.
Without background information on the specifications, there is little to no room to find alternatives that may also be fit for the purpose. One of our customers once joked: “A customer says: I want a car. The engineer designed a tank. Procurement bought bicycle parts.” Parallels can be drawn to the unnecessary environmental impacts that result from this inability to collaborate effectively.
None of today’s systems enable the trade-off decisions that need to happen between product development and procurement. These trade-offs involve understanding how technical specifications affect the cost, environmental performance, regulatory compliance, and other aspects of the final product. It is crucial to do so in real time and without the need for experts to drive these conversations forward.
This is why we built the MCDA or Multi-criterial Decision Analysis application with our customers. It solves this problem by enabling expert-supported (rather than expert-driven) trade-off conversations between product development and procurement teams.