Poll

Purchasing Power - Can Savvy Institutional Buying Save our Planet?

Worldwatch Live Online Discussion

July 25, 2003 - 2:00pm EDT

While the environmental movement has worked for decades to green the choices of individuals, it has often overlooked the world's biggest consumers—institutions. With large-scale, systematic approaches to purchasing, a single decision made by one group can have a tremendous ripple effect, influencing the products used by hundreds or even thousands of individuals.

Shifting just a portion of institutional spending away from harmful goods and services can benefit ecosystems and communities around the world. Green purchasing can send a powerful message to the market, and is a powerful tool for helping shift patterns of production and consumption towards sustainability.

Join Lisa Mastny, author of Purchasing Power: Harnessing Institutional Procurement for People and the Planet, to discuss institutional green purchasing, the opportunities, the initiatives, and the returns.

Steve Conklin, Worldwatch Institute: Welcome to this week's Worldwatch Live online discussion. Lisa Mastny joins us today to discuss green purchasing, and the power of institutional procurement. Welcome, Lisa.

Lisa Mastny: Thanks, Steve. And welcome to everyone who's online for today's discussion. I look forward to answering your questions.

Gaithersburg, MD: Voluntary "Green" purchacing is fine. But don't we really need to adjust the market signals so that pricing, rather than philosophy, is the prime driver? Secondly, are there measurable examples of voluntary purchacing affecting industry-wide prices e.g., in wind or recycled paper products? If I sign up to buy wind generated electricity, is that really going to push the local production above the competitive threshold? Thanks

Lisa Mastny: I think you're absolutely right. Ultimately, nothing will change if pricing structures continue to favor environmental "bads" (esp. through heavy subsidization of destructive agricultural, logging and other practices) and place a premium on environmental "goods." This is why Worldwatch and other sustainability groups strongly advocate more environmentally sound economic instruments such as tax shifting (taxing the "bads," not the "goods"), elimination of subsidies, and full-cost accounting. Until prices accurately reflect the value (and scarcity) of resources, and incorporate the costs associated with pollution, waste, and other externalities, the market will continue to work against environmental solutions. Fortunately, there are growing examples of "green" products and services gaining enough legitimacy and market share to become economically viable. Consider the rapid rise of wind and solar power--rising in some places by more than 30 percent annually, much faster than fossil fuels. Of course, this isn't to say that "philosophy" isn't also an important driver of change....ultimately, it is human values that drive human behavior--including the setting of economic and social priorities and policies.

With regard to the influence of voluntary purchasing, I think again there is a threshold level (tipping point?) at which real change occurs... perhaps YOUR actions alone won't push local production above the threshold, but the combined actions of many can make a difference.

Of course, this change may occur much more rapidly if regulatory action is spurring the purchasing decision--e.g. the rapid adoption of Energy Star standards for computers was largely a response to changes in federal government procurement rules, which required federal purchasers to buy equipment with the higher standards. But consider also the many companies that are now making voluntary "green purchasing" changes--because they see the benefits, and because they want to be in good standing before government regulations eventually REQUIRE them to make these changes.

Hilo, Hawaii: About 1/5 of our electricity on the Island of Hawaii is generated by a geothermal powerplant. This facility has had a controversial history centered mostly around NIMBYism and partly on local religious beliefs. However, one argument against the facility specifically and geothermal power on the island in general appears to have some more tangible basis. That is the real cost of electricity from the facility is far higher than what is being charged, with subsidies accounting for the rest of the costs. How would one go about determining the true unsubsidized comprehensive costs of various generation method? What is the cost for oil-generated electricity if the part of our military budget allocated for protecting oil production and transport systems were included? What is the comprehensive cost of coal-generated electricity if environmental protection and damage mitigation were included?

Lisa Mastny: You raise good questions. I would imagine that if someone were to set out to calculate the "real costs" associated with fossil fuel use--including, as you mention, protecting oil production or mitigating environmental damage--the overwhelming economic inefficiencies of this energy source would be readily apparent. Unfortunately, these factors continue to be left out of accounting frameworks. Though valuable measuring tools such as full-cost accounting and life-cycle analysis have been developed, they are still very much in their infancy. But new breakthroughs are being made every day--giving hope that accurate answers to your important questions may soon be available.

Macomb, IL 61455: (1)Can you recommend any BRIEF resources (suitable for submitting to a VP of Finance at a university) that provide lots of examples of money saved via green purchasing? (2) What seems to be the best argument for gaining support if you can't assure cost savings from green purchasing? (3) Can getting green purchasing going work without a champion for this effort within the purchasing or finance department?

Lisa Mastny: There are a wide range of resources available on this topic. I would suggest starting with some of the websites that I've compiled for the Worldwatch website, at http://www.worldwatch.org/press/news/2003/07/25/. If you're looking for specific case studies, the US Environmental Protection Agency has published several reports giving examples of success and savings in local governments and leading businesses. See http://www.epa.gov/oppt/epp/documents/doccase.htm.

Regarding the best argument for support for green purchasing, I think it really depends on the audience. In the case of the business community, it is increasingly clear that financial figures alone aren't an indicator of success. Intangible assets, such as reputation and public perception, are increasingly important determinants of shareholder value. So being perceived as a good corporate citizen can be a valid argument for 'buying green', despite potential higher costs.

In response to question 3, I think it's often the case that having a champion in the purchasing department is not enough to ensure success. Without support from the higher levels--the CEO, CFO, or other top management--even the most ardent believer in green purchasing may not have the resources or the incentive to actually implement the practice. In some cases, going the "environmental route" may be seen as extraneous to the job, or as bringing unwanted burden or complication to the purchasing process. For this reason, it is important to get high-level approval. This isn't to say that efforts haven't succeed without high-level support, but this is generally harder.

Stockhol, Sweden: Do you believe that environmental demands on the procurement of It-products is one of the most important task for green procurement. Because It- product is a pollution source of flame retardants and other toxic chemicals as heavy metals and more? Best regards Amal

Lisa Mastny: For the reasons that you mentioned, IT equipment is one area where green purchasing can be very valuable. Unfortunately, most of this effort today focuses on buying computers that are more energy-efficient. Current IT green purchasing initiatives generally don't consider the toxic impacts of computers (esp. semiconductors), in part because the computer industry has had a harder time developing sound alternatives to choose from. Much remains to be done---including ensuring that manufacturers "take-back" and recycle computers at the ends of their useful lives.

London, England: I run a project working with UK and European stakeholders (businesses large and small, NGOs, designers, etc.) on integrating organic and ethical textiles sourced from smallholder farmers in least developed countries into their supply chains. While we have several models available for working with groups of resource poor farmers, the questions that always comes up is how to integrate these communities into information networks and thus decision-making networks to gain better leverage over price and market choice. We are looking into ways of using traditional communication methods, and also looking into how the fairly rapid extension of mobile phone networks in Africa can be harnessed, as well as the internet where available. Are there any useful experiences in using information systems to allow small farmers in developing countries to work with small and large businesses that might be applicable?

Lisa Mastny: Your project sounds very interesting, and gets at one of the important questions I raise in my paper, which is how to spread sustainable markets to the developing world. The most promising models seem to be in the fair trade movement, which works to link artisans, farmers, and other small scale producers in developing countries up with buyers in industrial countries, and to ensure fair and equitable prices. If you aren't already in touch with them, I suggest contacting IFAT, the International Federation for Alternative Trade, to see if they might have any leads. Canada?s International Development Research Centre (IDRC) has also worked on innovative projects to improve the connectivity of small-scale suppliers in developing countries to wider markets, often through the use of internet and information technologies.

Belo Horizonte, Minas Gerais, Brazil: Health Insurance Companies should include the consumption of organic foods as a preventive measurement in their orientation to affiliates. What do you think about that?

Lisa Mastny: It sounds like an excellent suggestion! However, I would caution that this type of initiative may have to wait until organic food become more economically competitive with conventional foods. In most countries, organic foods still cost more and are considered to be a luxury item that only the wealthy can afford. Until pricing evens out, favoring organics as a preventative health measure may introduce inequalities into health insurance calculations.

London: There is increasing interest in UK international NGOs in ethical policy to govern relations with donors, particularly corporates. Clearly, such ethical policies adopted by NGOs can and do form the basis of ethical procurement policies. Apart from reading Lisa Mastny's book, how can we be guided in our procurement choices and how can we promote such practice more widely?

Lisa Mastny: Fortunately, there are now a wide range of resources available on green or ethical procurement, particularly as more and more institutions adopt the practice. As I mentioned earlier, one starting point would be the list of resources I compiled for the Worldwatch website, at http://www.worldwatch.org/press/news/2003/07/25/. As for promoting the practice more widely, one way would be to lead by example---that is, "walk the talk"---and demonstrate the positive benefits that accrue. It's also important to raise awareness among those institutions that you (as employees and individuals) interact with on a daily basis, whether they are your vendors or your family supermarket. Several groups and networks now put out brochures and other tip sheets that can be easily passed on to busy executives that make the case for change. In Europe, your best bet for this type of information is ICLEI, at www.iclei.org/europe/ecoprocura/index.htm

College Park, MD: Many responsible labeling schemes include both social and environmental elements within their standards (e.g. the Forest Stewardship Council). Yet their promotional materials tend to highlight only one element of their approach (environment appears most common). This appears to be based on a need to focus their message where it will get the most traction. Given such limitations, do you believe broad-based corporate responsibility schemes will be less likely to survive (in the long term) than those more narrowly focused? Or do you believe they will likely narrow emphasis within their standards, as a way to reduce costs (or perhaps as a form of "consumer responsiveness")?

Lisa Mastny: I agree with you that labelling schemes have done a much better job in setting standards for environmental elements than for social elements. This is in part because it may be easier to develop indicators of environmental damage/impact than of social impact, which can be more subjective. (Though this isn't always the case.) But I believe that it is important to include both social and environmental standards in labelling initiatives--otherwise, the rating gives an incomplete picture of the "hidden costs" of the labelled item. The challenge, of course, is ensuring that the standard isn't so broad-based as to be meaningless. In other words, it is important that the indicators on which the standards are based are specific enough that they can be appropriately monitored and quantified.

Steve Conklin, Worldwatch Institute: Thank you everyone for all your great questions, and a big thanks to Lisa Mastny for joining us today. Be sure to check out her newest Worldwatch Paper: Purchasing Power: Harnessing Institutional Procurement for People and the Planet. We look forward to seeing you all next time on Worldwatch Live.

Lisa Mastny: Thanks, Steve, for the excellent moderation. And thanks to everyone who joined in the discussion today. If you haven't had a chance, please check out our green purchasing web pages for more information on how to make institutional buying more environmental responsible and socially sound. Best of luck in your efforts! Lisa