Sustainable procurement has taken major hold among New Zealand executives with the greatest buying power.
A recent survey showed 44 percent of people with the personal authority to spend more than $100,000 on behalf of their organisations now buy solely or mostly on whole-of-life cost basis, not just day-one price. This is up from 36 percent last year. This will affect billions of dollars year in buying decisions.
Whole-of-life buying means the true cost of using goods and services is considered, often including their environmental and social impacts. Recent nationwide ShapeNZ research covering 1245 business decision-makers, commissioned by the New Zealand Business Council for Sustainable Development, shows close to half of the most powerful buyers have shifted to sustainable procurement.
We are fast reaching tipping point where cheaper day-one price deals become poor way to do most business. Businesses and governments, which have introduced sustainable procurement, report between eight percent and 30 percent efficiency improvements – which go straight to the bottom line.
Applied in New Zealand, this could save the central Government alone more than $1.6 billion year. Sustainable procurement is often cheapest long term – and businesses and tax and ratepayers stand to save millions as it takes hold.
At the New Zealand Business Council for Sustainable Development we believe whole-of-life cost buying should be extended to local government throughout the country. Other ShapeNZ research shows 75 percent of New Zealanders support this, including 88 percent of Act voters, 79 percent each of National and Labour voters and 89 percent of Green voters.
The principles of value-based tendering, as opposed to price-based, should also be adopted for major projects. This includes using whole-of-life costing in financial assessments and sustainability assessment criteria.
The fast shift of the most powerful Kiwi buyers to sustainable procurement reflects worldwide trends to more sophisticated procurement practices built on the sustainability values of consumers and voters.
Recent experience has played part as well. Companies which bought traditional energy-inefficient six-cylinder cars for lower day-one price got burnt when they could only be sold for $10,000 to $15,000, while more energy-efficient cars were selling for more and had been less costly to run since day one.
Also according to GSB Supply Corp, the country’s leading vehicle-buying specialist, if GPS device were deployed on all central and local government tool-of-trade vehicles, the total cost of ownership over their lease life would be cut by more than $50.2 million. GSB describes this as “completely doable”.
We have this low-hanging fruit ripe for the picking. The concern is that many of our overseas competitors have already done so and have been enjoying the benefits for years.
Peter Neilson is chief executive of the New Zealand Business Council for Sustainable Development.
www.nzbcsd.org.nz www.shapenz.org.nz
