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Green Expectations

Author(s):

Tina Bova
Tina Bova is the manager of supplier diversity and sustainability for Baxter International Inc. in Deerfield, Illinois.

February 2011, Inside Supply Management^® Vol. 22, No. 1, page 32

Sustainability: Responsible Supply Management
Baxter develops green criteria to engage its direct and indirect suppliers in reducing environmental impacts.

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As a global healthcare company, Baxter International Inc., headquartered in Deerfield, Illinois, relies on about 35,000 suppliers in more than 100 countries to help the company securely deliver the right products to the right places at the right time. As with many large corporations, these supply chain activities make up a significant amount of the company's overall carbon footprint. In 2009, for example, an estimated 38 percent of Baxter's overall carbon footprint was represented by its supply chain.

Since 2008, Baxter has been evaluating ways to reduce the environmental impact of its supply chain, while at the same time maintaining continuity of supply and managing costs. In 2009, the company launched its Global Supplier Sustainability program. As part of that program, Baxter developed 20 green criteria to provide direction and establish expectations for its global purchasing team and suppliers. See the sidebar for a complete list of Baxter's 20 criteria.

The company also identified 100 of its top suppliers — based on spend, importance to supply continuity and carbon footprint. The top suppliers were surveyed to assess their performance in these 20 criteria areas and identify opportunities for improvement and collaboration. In 2009, 10 percent of the 70 survey respondents met Baxter's definition of 'green,' which meant they responded positively to having green programs in progress in at least 90 percent of the criteria.

While the results of the survey indicate there's room for improvement, the effects of Baxter's efforts to procure raw materials and other goods and services with reduced environmental impact have already gained traction with employees and suppliers.

In 2009, for example, a supplier approached Baxter to see if it could make changes in the way a rubber component used in Baxter's manufacturing facilities is manufactured. By switching the technique used to mold the products, the supplier can reduce the use of energy and raw materials. After working with the supplier to ensure the component retained the same quality and functionality, Baxter agreed to the new method of manufacture. Baxter also received cost savings, as the new method was slightly less expensive to use — a win-win collaboration the company expects to see much more of as the program grows.

Three Lessons to Keep in Mind

To help supply management professionals develop their own supplier sustainability programs, here are three steps Baxter found to be imperative during the development of its global supplier sustainability program.

1) Embed. Sustainability must be embedded into every supplier touch point. Suppliers receive information about Baxter's program in nearly every interaction with the company. This extends from day-to-day purchasing policies and procedures (such as requests for proposal and standard service/product supplier contracts) to the meeting agendas for Baxter's sponsored supplier events.

Because the program is managed by Baxter's global purchasing and supplier management department, this embedded information has led to more buy-in from the organization's employees than might have been the case had the program been instituted by another department. Having strong support from Baxter's senior management team — made evident through discussions at employee meetings and inclusion in employee performance evaluations — also helps drive endorsement and attention to the program internally.

2) Collaborate. Any endeavor to green a company's supply chain must be approached as a joint venture with suppliers, not as a program that demands compliance. Baxter considers its key suppliers an extension of its business and is committed to building partnerships to share knowledge and help improve supplier performance. In fact, many of Baxter's successful ideas to help reduce environmental impacts in its supply chain have come from supplier collaboration.

During the first half of 2010, for example, Baxter collaborated with one of its corrugate suppliers in the United States to establish a more efficient way to load its corrugate orders onto delivery trucks. The initiative reduced the number of deliveries and related fuel and emissions. This one simple change will reduce Baxter's shipping costs and decrease associated greenhouse gases by an estimated 162 metric tons of carbon dioxide equivalent each year.

3) Recognize. Finally, it's essential to develop incentives to help build employee and supplier buy-in to a company's efforts to green its supply chain. In 2009, Baxter launched its E-Impact program to communicate suppliers' sustainability success stories and to recognize Baxter employees and suppliers for environmental initiatives.

When stories surface of employee collaborations with suppliers to reduce natural resource use or greenhouse gas emissions, or enhance product stewardship, Baxter works to highlight the partnership in internal and external company materials. The company presents the employee and supplier with a certificate acknowledging their efforts. Baxter's global purchasing and supplier management team is also considering launching a supplier award program, which would include sustainability as one criterion in supplier recognition.

Benefits Outweigh Challenges and Costs

The success of Baxter's supplier sustainability program has not happened overnight, however. Baxter's global purchasing and supplier management team was met with — and continues to face — challenges throughout the initiative's implementation. For example, as Baxter first began developing its supplier survey, the team wasn't sure what criteria the assessment should evaluate. The program also faced the challenge of limited availability of resources (for example, employees to verify suppliers' survey responses), as well as a lack of established policies, industry standards or best practices to draw from for reference. In addition to a dearth of standard procedures for implementing this program, the team had to overcome cultural differences within global regions and suppliers, and work to displace preconceived notions within the organization and among suppliers that green costs more.

When confronted with each obstacle, however, the team worked to align its efforts with Baxter's overall corporate sustainability priorities and goals. It also recognized the organic nature of implementing this type of program. The expectation is that many changes will take place as the supplier sustainability program grows. The program is growing, and with it, evidence (also shared with suppliers) that many sustainability efforts can lead to cost savings for both Baxter and its suppliers. It also helps show that the benefits gained from Baxter's commitment to greening its supply chain continue to outweigh the costs of the program.

Overall, this program is helping the company gain a competitive advantage by enhancing corporate reputation, procuring products and services with reduced environmental impact, and collaborating with suppliers to support true corporate social responsibility.

For more information, send an e-mail to author@ism.ws.