Can sustainability be an USP for BPO vendors?

Usually sustainability is thought of as cutting down CO2 emissions and planting more trees. But sustainability is more than just acquiring a green image. It is another way to look at your own company, the external environment and thus also your sourcing strategy. Organizations can actually profit from better financial results by a smart application of the modern aspects of this theme. Two situations as examples.

A large oil and gas company outsourced a part of its BPO activities to Asian supplier. This supplier had contracted another co-supplier for data-entry activities who used illegal under aged employees. A non-governmental organization found this out by accident which resulted in a lot of negative press for the oil and gas company. In order to outperform the competition they outsourced several activities, but this backfired due to severe image damage.

Several clients which outsourced part of their IT activities to a Tier 3 vendor indicated that they needed more insight in their carbon footprint as part of their corporate governance policies . The IT firm was taken by surprise by this request, as their sole focus was on the realization of a new data center concept based on Platform-as-a-Service (PaaS).

In the first example the oil and gas company miscalculated the risks related to sustainability, which caused damage to their image as well as to their financial advantages of the outsourcing deal. The IT vendor in the second example were managed by two directors whose main focus was on internal affairs and the latest technologies. They were taken by surprise by the effects of environmental developments on their business process. In both cases there was too much internal focus and too little understanding of the external developments.

Wal-mart is an example of an organization that is able to combine sustainability and high performance. They defined thirteen networks related to a number of sustainability related themes. The Wall-Mart networks are built upon different external and internal stakeholders and have a primary target on reducing the ecological pressure.
For the supply chain network this means not only a reduction of package material but also an estimated reduction of $3.4 billion in the period from 2008 to 2013.

More and more senior businesses managers will demand similar action from parts of the organization that are not under their direct control (like IT, facility management, F&A). A senior manager wants for example be able to explain to his clients that the whole organization defines and meets sustainability target, not just his own business process. So also staff functions will have to start making up their minds on topics like social responsibility, human rights, ethics and environment. Staff functions which are often (partially) outsourced or shared.

In the first situation mentioned before, the oil and gas company as a whole encountered problems because there was not sufficient internal control over outsourcing support activities. The reputation risk of the deal was considered zilch as the contract did not involve any primary business processes. The managers directly and indirectly involved were however very unpleasantly suprised when the whole deal backfired on them, when newspapers reported the violation of human rights by its vendor.

In the second example, the IT firm was caught by surprise by the request of its clients to provide more insight in the power usage of the IT systems. Insight in the total power usage is however only a minor aspect of the Total Cost of Sustainability (TCS). For many organizations insight in and allocation of power costs are however still a challenge, but more smart meters and other equipment is coming on the market to tackle at least this issue. Measuring the total carbon footprint or the total score of an organisation on 'sustainability' is still 'work under construction' (= business opportunity for BPO and ITO vendors).

With the economy (and outsourcing market) showing signs of recovery, generating additional revenue becomes again the prime focus point for companies instead of cutting cost. More revenue means putting differentiators and USPs in the market, customers base their purchase decision on. Differentiators like sustainability (e.g. we now have this commercial running in Dutch cinema's from Ben & Jerry's, highlighting their sustainability practices).

This makes sustainability also a topics to think about for vendors active especially in the BPO space. With differentiation on price and service quality becoming ever more difficult, vendors should also think about other aspects they can compete on.