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Can sustainable energy procurement reduce business costs?

Can sustainable energy procurement reduce business costs?

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Can sustainable energy procurement reduce business costs?

By strategic Sourceror

It’s become increasingly common for companies to attempt to incorporate sustainable product sourcing into broader business strategies, but there is one barrier many firms continue to run into in this effort: cost. Often, sustainable goods simply require suppliers to expend more time and manpower in order to produce them. And even though environmentally unsafe practices may end up costing businesses more in the long run, the lure of short-term cost reduction remains strong.Granted, as sustainable production has become more widespread, the expenses associated with these items have gone down somewhat, and this trend is likely to continue. But certain types of green products remain quite costly to procure – and energy is chief among these.

Weighing return on investment

In a post for Procurement Leaders, analyst Karen Moorhouse outlined the set of problems surrounding sustainable energy sourcing as centered on the issue of whether the investment really creates business value. This consideration is complicated by growing customer demand for green practices among companies in the consumer product market.

“For procurement professionals the question comes back to cost versus quality, with the added factor of pressure to be seen to be sustainable,” Moorhouse wrote. She also noted that some of this pressure came from governments that have instated regulations punishing environmentally harmful energy consumption and policies encouraging wind, solar and other green power sources.

Ultimately, the answer to this question is in the hands of companies themselves and relates to their specific business needs. Firms in consumer-facing sectors, for example, may have a much harder time justifying their choices not to move toward green procurement when it comes to energy. Moreover, it’s possible to start small and make a preliminary investment in sustainable energy rather than a wholesale transition. Customers are likely to look favorably on even a modest effort.

Renewable doesn’t mean cheap

Nevertheless, the high price of sustainable energy remains problematic. The Economist recently pointed out that these prohibitive expenses may have unfavorable – and un-green – implications in the short term.

“One danger is that sharp rises in energy prices will drive manufacturers to set up in less ‘green’ countries, which might mean citizens end up consuming more carbon, through imports,” the source noted.

Such a practice would be unsustainable – certainly for the environment, and potentially as a business strategy. Companies that can afford the expense may find they need to make the initial investment in green energy in order to avoid introducing undue complications into their supplier networks and reducing agility.

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