Govt agencies need to buy sustainable products

22 August 2006

Businesses and government agencies need to buy sustainable products and services to avoid being damaged in a "perfect storm" of market risks.

Businesses and countries are running risks of being caught off-side by climate change, pollution and health, a globalization backlash, the energy crunch and an erosion of trust.

Prepared to act against businesses that get it wrong in managing those risks are five demanding stakeholders, including green consumers, activist shareholders, civil society groups, government regulators and financial institutions.

The New Zealand Business Council for Sustainable Development's Chief Executive, Peter Neilson, says in a speech to the Complex Infrastructure Project Management Conference at Wellington today, that companies and countries which work sustainably – with more than a focus on the single bottom line of profit – stand to better survive the storm and also make major gains.

Mr Neilson says there is a sound business case for managing sustainably. The benefits include boosting shareholder returns, attracting and keeping talent; boosting appeal to markets and investors, lowering risks, improving efficiency and identifying new opportunities.

"When BP very publicly acknowledged climate change was a serious issue it set itself a target to reduce its 1990 level green house gas emissions by 10% by 2010. It achieved this by 2002 and saved the company US$650 million," Mr Neilson says.

The United States' biggest retailer, Wal-Mart was also profiting from a major new focus on sustainable development.

Wal-Mart is approaching its environmental and social role by posing questions like coming up with a plan to save customers US$6 billion a year on their power bills. If it encourages its customers to buy energy efficient light bulbs that is what they will save. It's the equivalent of two million cars worth of greenhouse gas emissions – and it will stop a billion incandescent light bulbs (which fail earlier) going to landfill every 12 months.

Some New Zealander retailers and businesses were also leading the way in making sure they procured from sustainable suppliers who not only competed on price, but also treated their people and the environment correctly. The cost of getting it wrong could be huge. Cadbury estimates that its product recall of salmonella contaminated chocolate in the UK will make a 20 million pound (NZ$60 million) hit on its bottom line.

"Focusing on your triple bottom line makes good business sense and is also important to maintaining and growing the country's clean green image abroad.

"As a result businesses and government here needed to stop procuring on the up front price alone, rather than the whole-of-life cost.

"Some state buyers are still awarding contracts apparently based on the acquisition cost only, not the on going cost of provision," Mr Neilson says.

"If the government is serious about showing leadership then its tendering process must prefer those companies who have the Environmental Choice, Forest or Marine Stewardship Certification, Energy Star or other independent programme verification. These have been described to industry as effectively 'tickets to entry' but suppliers who don't have a ticket are still allowed into the game.

"All buyers from the public and the private sector need to make clear in their tender documents what they consider important, and specify they want the whole of life cost of goods and services.

"We now need a concerted central and local government effort to help boost change through their procurement policy. Each year they can influence decisions on more than $5billion in spending on goods.

"Just as Governments and big global players such as Wal-Mart can influence change, each of our organizations buys from the SME's which make up 96% of New Zealand's business. We can encourage them to reduce their environmental impacts by demonstrating that this is important to us - by preferring them to others."

Companies and consumers need to actively choose suppliers who behave sustainably.

"Don't choose suppliers who haven't got a ticket to the main game when others have."

ENDS

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