Sustainable Supply Chain
Every day, health care supply chain professionals balance a variety of factors when making product purchasing decisions. Providing quality patient care is paramount, but cost, value, and employee health and safety are also considered. In terms of its overall spending, the health care industry is resource intensive - 17.9 percent of the U.S. GDP in 2010 and rising - and it represents a significant carbon footprint. Since supply chain managers affect almost every purchasing decision in the health care industry, they are in a unique position to reduce the impact the industry's spending decisions have on human health and the environment.
In recent years, sustainability has been added to the list of factors that supply chain managers consider when making purchasing decisions. According to Executive Order 13101: Greening the Government Through Waste Prevention, Recycling, and Federal Acquisition, sustainability means choosing "products or services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose." This has led to the shift towards environmentally preferable purchasing (EPP).
|"[T]he major cause of the continued deterioration of the global environment is the unsustainable pattern of production and consumption, particularly in industrialized countries." United Nations Agenda 21|
EPP specifically asks how much energy, water, and materials are involved to make a product. In turn, it also looks at the pollution, waste, and emissions generated in the production process. All costs associated with a product's life are factored into purchasing decisions, including material extraction, manufacturing, transportation and distribution to the purchaser; the product’s use and durability, and its end-of-life considerations.
Cost/Benefit Analysis. In making more environmentally friendly choices, purchasers must analyze their options differently than in the past in terms of both the process of assessing the cost of the product and the range of material and impact on human health. In addition, with the burgeoning of the “green market,” purchasers must also be sure to verify performance claims through credible third-party sources.
Rethinking Product Costs. Traditional purchasing approaches have typically employed first costs to compare products, but this approach may not reflect the actual overall cost of the product from cradle to grave.
Life Cycle Costs. When making product and service comparisons, purchasers can use a life cycle cost analysis (LCA) to provide the environmental and social costs assignable to each, making it easier to identify the least resource-intensive choice. LCA includes costs related to resource extraction, manufacturing, transportation, and use and disposal of materials throughout the supply chain process, as illustrated in the diagram below.
Total Cost of Ownership. A total cost of ownership (TCO) approach attempts to include less apparent costs of ownership that are more likely to be overlooked. A TCO analysis requires factoring in soft costs like additional compliance or insurance costs, employee health and safety issues, employee satisfaction, community support and associated value to public affairs, impacts on work practices, and the actual utilization and expected life of the product. TCO is a new way to explore the true cost of a product. To learn about how to use TCO, see the Roadmap’s Performance Improvement Measure.
Rethinking Product Attributes. The practice of environmentally preferable purchasing reduces a facility's impact on the environment while reducing the energy use and disposal costs associated with products purchased. The EPP process considers the same factors supply chain professionals are already familiar with - price, performance, and availability - but also takes into account the environmental and human health impacts of these products.
Relevant product attributes that affect the health of the environment could include:
- Recycled content in the product and/or packaging
- Energy and water efficiency in product production
- Product's total contribution to greenhouse gas emissions
- Toxicity (Does the product contain any PBTs, DEHP, flame retardants, or bisphenol A, or is it low in VOCs)
- Renewable resource content (Is the product made from renewable plant-based materials?)
- Durability (Can it be upgraded? Easily fixed?)
- Packaging issues (Is the packaging recyclable? Stackable? Does it minimize volume of packaging?)
- Disposal issues (Is the product recyclable? Is it hazardous or regulated waste? Does it create any compliance issues? Is it compostable?)
Product attributes affect the health of hospital staff, patients, and visitors. Reduction of certain product attributes can have a broad impact:
- Reduction of irritants that cause asthma: "Health care workers accounted for 16 percent of work-related asthma cases but only 8 percent of the workforce; caused mainly by inhaled irritants, including cleaning products and latex." "Work-related asthma among health care workers" in American Journal of Industrial Medicine (March 2005).
- Neutral effect on indoor air quality: Some materials and products have a negative impact on indoor air quality (IAQ), which in turn affects the health of building occupants. In a report to Congress, the EPA estimated costs associated with poor IAQ to be in the "tens of billions of dollars per year."
- Reduction in hazardous chemical content: A 2009 study of health professionals found that "each participant had at least 24 individual chemicals in their body." Four of these chemicals are on the EPA list of priority chemicals for regulation. (Physicians for Social Responsibility)
- Tools and calculators to help with cost/benefit analysis are located on the Implementation pages of this website, under Performance Improvement Measures. If you have tools and calculators you can share please contact us, our intention is to serve as a clearinghouse for these resources.
Verifying Product Claims. With the increased interest in green products, misleading claims (or “green washing”) does exist. It is important to know what terms mean so you can make an informed decision. Terms such as eco-safe, environmentally friendly/safe/preferable, earth smart/friendly, essentially non-toxic, degradable, biodegradable, compostable, CFC-free, ozone-friendly, recyclable, etc., can be misleading and misrepresentative of the environmental impact of a product or service.
Purchasers should scrutinize the performance claims of green products and ask for evidence that supports or verifies them such as: a third-party verification or audit; Material Safety Data Sheets (MSDS); signature of chemist; right to audit manufacturing/processing facility, etc.
Third-party verification labels, sometimes called "Ecolabels," are useful if the label is credible and/or reputable and represents the specific performance attributes you want to encourage. Ecolabels that are widely recognized as sources of information include the list below, but note some are industry funded and some are independent verifiers. Both can provide useful information but it’s important to know the difference. When purchasing a product, if there’s an “eco certification program,” appreciate the benefits and limitations of any logo.
Environmental Choice (EcoLogo): The oldest North American environmental standard for a variety of products. This meets the international ISO 14024 standard for environmental labels. (www.ecologo.org)
Green Seal: Provides science-based environmental certification standards for hundreds of products and services, used widely in healthcare for cleaning product standards. Green Seal also provides technical reports on products in a variety of categories (www.greenseal.org)
GREENGUARD Environmental Institute: A resource for chemicals and in particular low-emitting products. Has evaluated more than 75,000 chemicals, including volatile organic compounds (VOCs), carcinogens, and reproductive toxins. (www.greenguard.org)
Green Label/Green Label Plus: An indoor air quality rating system developed by the Carpet and Rug Institute - the industry trade group. It tests carpet, adhesives, and foam for VOCs. (visit website)
The Forest Stewardship Council: Independently certifies paper products to ensure the pulp sources come from forests that are managed to meet the social, economic, and ecological needs of present and future generations. (www.fsc.org)
Scientific Certification Systems: A third-party provider of certification, auditing, and testing services. Also provides standards and has a certified products database for a variety of products ranging from paint to textiles. (www.scscertified.com)
USDA Organic certification: The U.S. Department of Agriculture National Organic Program (NOP) develops, implements, and administers national production, handling, and labeling standards for organic agricultural products. (visit website)
Five of the largest GPOs have been working with PGH to develop a list of standard questions to define environmental attributes for boiler plate language when purchasing common products in health. It turned out that many GPOs and purchasing departments were asking similar environmental questions but they were phrased in many different ways so one of the objectives is to minimize confusion in responding to a similar question so that a yes answer, for example, will mean the same thing. For more information, see the Performance Improvement Measure on the Standardized Questions Compliance Considerations.
Health care organizations have an opportunity to anticipate the regulation of materials and practices that are harmful to public health and the environment and take proactive measures that both minimize risks and demonstrate their commitment to good stewardship in the broader community.
Regulations are slowly being introduced that will directly or indirectly affect the health care supply chain. For example, in California, Proposition 65: The Safe Drinking Water and Toxic Enforcement Act requires, at least annually, publication of a list of chemicals known to the state to cause cancer or reproductive toxicity. Several states ban the use of fluorescent bulb crushers. And, while not yet regulated, several chemicals are of particular concern, including mercury, Biphenyl A, flame retardants, and di (2-ethylhexyl) phthalates. The public is becoming increasingly concerned about and aware of these chemicals.
Legislative, policy, and compliance considerations for strategic operations, contracted services, and products can be found within the individual Performance Improvement Measures throughout the Roadmap.
Executive orders are edicts issued by the President of the United States. Executive Orders 13514 and 13423 require federal agencies to purchase environmentally preferable products and services. While executive orders put forth mandates that might not be required for your facility, valuable guidance and experience can be gained from public sector experiences.
- Executive Order 13514: Federal Leadership in Environmental, Energy and Economic Performance requires federal agencies to advance sustainable acquisition by acquiring products that are energy-efficient, water-efficient, biobased, environmentally preferable, and non-ozone depleting; contain recycled content, or are non-toxic or less-toxic alternatives.
- Executive Order 13423: Strengthening Federal Environmental, Energy, and Transportation Management requires federal agencies to use sustainable environmental practices when acquiring goods and services, including acquisition of biobased, environmentally preferable, energy-efficient, water-efficient, and recycled-content products.
Because the health care sector purchases such huge volumes of materials, it is in a unique position to lead the change to healthier practices and workplace environments, and to move the marketplace to provide more sustainable products and services at equal or lower prices. Some studies have suggested that a number of purchasers in the marketplace have been hesitant to implement an Environmentally Preferable Purchasing policy because they believe green products don’t “do the job” as well as others, however, performance studies show that green products perform as well as conventional ones.
Leading Positive Change. A 2009 survey found that 57 percent of North American organizations had either a formal or informal “green” purchasing policy and 54 percent of organizations without one planned to implement one soon. TerraChoice EcoMarkets Summary Report, 2009.
Retaining Employees and Improving Morale. According to the 2008 Society for Human Resource Management Green Workplace Survey Brief (http://www.shrm.org/): "Companies that implement environmentally responsible programs cite improved employee morale, a stronger public image, and a positive financial bottom line among other things."
Moving the Market. Hospital supply chain managers have the opportunity to leverage purchasing power for change. Through contract language hospitals can both notify and educate the marketplace of their interest in purchasing environmentally preferable products.
Three common ways to do this are:
Signal: "Hospital X will require mercury free products in our next contract."
Preference: "Hospital X prefers products that are mercury-free." (You may want to award points to bidders for the proportion of Hg-free products they would supply, etc.).
Requirement: "Hospital X will only purchase mercury-free products, and they must have prices equal to or lower than conventional products."
The Roadmap is designed to help facilities understand what constitutes environmentally preferable purchasing decisions. The Roadmap will also guide facilities in developing and integrating the policies and systems necessary to support and communicate their commitment to sustainability goals. You can click on Roadmap sections to learn more specifics about taking next steps, but the following are essential in in the journey towards a sustainable supply chain:
- Ten essential elements to getting started or enhancing your sustainable purchasing and supply chain management program can be found under the Management Plans section under the Strategies tab on this website.
- Provide organizational strategy recommendations that acknowledge that leadership and staff must participate for goals to be reached.
- Set purchasing targets that prioritize Green Light projects.
- Develop and implement good operating policies and procedures that can be embraced by leadership and staff.
- Encourage program measurement to validate that actions have intended consequences.
- Add language to RFPs and/or contracts to make your organization’s commitments clear and to hold the vendor accountable (see sample contract language).
- Select verification measures.
- Choose vendors that know what is in the products they sell and are willing to provide product data on environmental concerns on a regular basis, research and verify certification claims, work with testing and certification organizations to pilot new products, and consider implementing design/manufacturing/formulation changes.
- Communicate impacts and costs of purchasing decisions within and across the organization.