How to Implement a Green Procurement Strategy
Buying green has become a key part of corporate social responsibility and an increasingly important part of the supply chain. With the European Commiss...
Buying green has become a key part of corporate social responsibility and an increasingly important part of the supply chain. With the European Commission having announced a review of public procurement laws and increasing pressure on corporations to prove their green credentials, the green procurement market is a growing concern.
The European Commission’s move to overhaul public procurement laws is a step in the right direction as it acknowledges a need for greater flexibility in procurement rules. For Stefan Foryszewski, co-founder of OB10, the electronic invoicing network, the evaluation of EU procurement legislation has come at the right time.
“Two years ago, it was quite a hot topic,” says Foryszewski of the e-procurement industry, “and there was quite a lot of activity looking at electronic solutions such as ours; but I will say, with the credit crunch, I think a lot of companies put their focus elsewhere. If we’re talking corporate social responsibility, I think it had dropped down the agenda.”
Now though, with companies around the world emerging from the recession, albeit cautiously, green is once again becoming more important. “This has been more evident in the US. The US government is promoting the green agenda and, as a result of that, it is starting to get higher on the buyers’ agenda,” he adds.
The European Commission’s evaluation of procurement will not be completed until Spring 2011, when “the findings will be used to inform reflection on the need for a modernization of EU procurement rules”.
In the meantime, there have been some significant advances in green buying, with OB10 just one of many companies behind a green solution. The way its electronic invoicing network operates is to allow suppliers to create invoices on their computer systems, then transmit the data directly to OB10, which submits the data straight into the corporate accounting system. It may seem a rather simple answer to the paper invoice but its environmental implications are quite astounding. When you consider that in excess of 30 billion paper invoices are issued each year, and that OB10 has so far been responsible for saving 8,000 trees, the potential for e-invoicing could transform procurement globally.
“CSR and green targets are forming one of the components of corporate buying decisions; more and more so, they’re moving to electronic trading, electronic invoicing being one of those components,” explains Foryszewski.
He refers to a specific agenda in the European Commission to promote the use of electronic invoicing. Again, there is evidence that this would have a huge environmental impact. “If all European businesses moved to electronic invoicing, then the saving over five years would be a staggering 238 billion euros,” he says, citing figures published by the Commission.
The UK has remained dedicated to green purchasing, with the Mayor of London’s Green Procurement Code demonstrating just that. The Code helps businesses based in London to reduce their environmental impact through responsible purchasing.
On the other side of the Atlantic, the U.S. Environmental Protection Agency’s Environmentally Preferable Purchasing (EPP) scheme supports the federal government in its commitment to buying green and, in doing so, stimulates market demand for green products and services.
The North American Green Purchasing Initiative (NAGPI) argues the case for green procurement for governments and companies alike. With the Canadian federal government the largest single buyer in Canada, with C$11.6 billion spent on products and services each year, the NAGPI believes it can have a huge impact on green buying trends in the country. The NAGPI has formed a Steering Committee comprising groups and agencies working with green purchasing in North America. One of its aims is to create a “unified voice” to engage manufacturers, purchasers, politicians, the media and the general public. In turn, this will help the committee develop a database of supporting tools and procurement policies for use across North America.
Like Foryszewski, the NAGPI believes more can be done to address the growing interest in green procurement and to promote its benefits to businesses. While North America is acting on the demand for support for green purchasing, Europe is waiting on the European Commission to take the lead. Whatever happens, companies like OB10 will continue to play their part in green procurement.
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”