Offshore outsourcers face green pressures from clients

Green policy credentials are high on the agenda of companies looking for outsourcing partners and outsourcing vendors — and those that fail to demonstrate environmental policies risk being dumped, according to a report by outsourcing consultancy Brown-Wilson Group.

Corporations are shifting their responsibility for environmental concerns to the supply chain, said the firm in its report, “Black Book of Outsourcing: 2007 Green Outsourcer Report”.

The report is based on an independent study of outsourcing industry decision makers and analysts with a survey of 20,000 outsourcing users. Almost half — 43 per cent — of companies choosing to use a supplier for the first time included green factors in their decision making process for choosing suppliers. And more than 94 per cent of executives from listed companies are planning to add “green” clauses in their renegotiation processes, compared with only 36 per cent of privately owned companies.

More than 88 per cent of executives said that the environmental commitment of suppliers would influence their outsourcing selection process. And 21 percent of U.S. and European companies that already outsource have added green policies and performance indicators to outsourcing agreements this year, according to the research.

Almost 25 per cent of companies are asking their vendors to reduce their carbon footprint to have “zero impact.” Further, 45 per cent of companies expect suppliers to assure public trust by tracking and demonstrably measuring green effectiveness. Over 40 per cent want outsourcers to develop new green technologies, products and services, which reduce wastes, save energy and increase efficiency.

Brown-Wilson said in the report that the increasing popularity of green policies benefits investors that purchase stocks in green outsourcing companies, as stocks will go up. Similarly “socially responsible companies can gain a competitive advantage over their peers through cost reductions, quality improvements, increased profitability and access to new and growing markets. Environmentally responsible companies also have less risk of environmental liability, which could have a major impact on future stock prices.”

The report states, “We predict that the next few years will be critical for firms to establish their roadmap to green leadership, not only for their clients but as global businesses impacting the entire earth.” And it said the impact of an outsourcer on the environment is becoming an “increasingly critical” issue for companies.

The Brown-Wilson report also ranked the top 50 green suppliers. The top ten were: Accenture & Accenture HR, CSC, Hewlett Packard, SAIC, Logica CMG, IBM Global, Pitney Bowes, UPS Supply Solutions, Johnson Controls, and Unisys.

Many US and European-based suppliers already have demonstrable green policies. However, as more outsourcing moves to developing markets that have less restrictive and loosely enforced environmental laws, suppliers in India and China face pressures to respond to demands for environmentally sound practices.

Scott Wilson, partner at Brown-Wilson and co-author of the report, said: “While many outsourcing vendors, particularly European and US based vendors have already established proactive green corporate policies, there will be a flurry of activity among offshore firms from India and China to retain competitive appeal. The offshore perspectives of these suppliers, traditionally focused on cheaper and faster, did fortify the strategic importance of the environment on the decision-makers within North American and European clientele, hence the frantic catch-up mode to set green agendas.”