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A Paradigm Shift in Total Cost of Ownership

Sustainability is driving innovation: from Silicon Valley companies to Washington, D.C., procurement agencies to suppliers in Shenzhen, and it has become a business necessity because it saves money, smooths operations, diminishes risk in supply chains and opens new business opportunities. By CDP

October 13, 2016

Forward-looking companies are experiencing one of the largest paradigm shifts in the history of business - one in which leading organizations are hardwiring sustainability into design, production, sourcing and end use in order to ensure the lowest cost to themselves, their customers and the planet.

Purchasers are driving innovation and producing dramatic savings by demanding sustainability throughout the life cycle of their acquisitions.

Acquisition decisions need to be made in consideration of the following questions:

  • How do environmental factors affect not only environmental but also financial and social costs?
  • How can embedding sustainability into a “total cost of ownership” (TCO) approach to purchasing drive innovation in product development?
  • How can we incorporate environmental benefits and cost savings into our products?

Understanding how sustainability shapes business goals has led to design and sourcing innovations at organizations as diverse as the U.S. Department of Defense, General Motors, Hewlett Packard Enterprise, Unilever and Walmart.

Addressing costs throughout the value chain and product life cycle leads to more collaboration among partners, vendors and buyers, greater financial savings, and innovative product design.

It also advances understanding of how sustainability initiatives affect business goals.

The major sellers and buyers mentioned above have emerged as leaders by creating a new framework for business in which sustainability is built into the core practices of product development, sales and procurement.

By taking a TCO approach and assessing environmental factors throughout the life cycle of products and services, they are able to transform societal and environmental challenges into business opportunities.


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