THE CHALLENGE

Hewlett Packard (HP) sets high standards for its suppliers� environmental performance. But it recognizes the burden that long, detailed environmental questionnaires place on suppliers. The trend among environment- and risk-conscious companies to require suppliers to fill out long questionnaires and provide various forms of documentation has been onerous and expensive to suppliers, many of whom have had to fill out similar questionnaires for multiple customers. The inefficiency of this repetitive workload taxed suppliers, the supplier-customer relationship, and the common-sense notion of minimizing repetition in work (which is, of course, a concern when asking a supplier to deliver value.)

The solution to the problem seemed to be the adoption of common tools�a standardization of supplier questionnaires that could be used by a number of firms to minimize the amount of duplicate work a supplier would be required to perform. Developing this solution is the subject of this case study, in particular, the standards developed by the Pacific Industry and Business Association (PIBA) and Computer Industry and Quality Conference (CIQC), the latter a network of U.S. computer system producers. Hewlett Packard�s experience, related here, is in developing the standard and applying it effectively.

The process of developing a standard questionnaire involves discussion of the use and implementation of the standard in procurement. A discrepancy, however, can occur between the objectives of environmental (E) and health and safety (HS) groups, which may want to ask detailed technical questions related to environmental performance, and the objectives of procurement groups, which want to ask a few critical process-related questions regarding environmental management.

Procurement at HP has worked with both the procurement and environmental groups that take part in the PIBA and CIQC fora to shape a supply-base questionnaire that is business and procurement focused and addresses important environmental issues.

THE SOLUTION

A number of companies that were already a part of the Pacific Industry and Business Association (PIBA), including HP, came together in 1995 and, in recognition of the problem of duplicate questionnaires discussed above, established a Supplier Management Forum. Together, the participants drafted a set of environmental practice questionnaires to help companies reduce business risks and enhance supplier relationships. Based on the PIBA questionnaires, CIQC developed its first environmental practice standard (CIQC STD 0014) in October 1996 as a common tool for gathering supplier environmental practice information and for optimizing the transfer of environmental performance information between purchasers and suppliers.

Discussing the reasons underlying the standardization movement, Hsia Choong, HP program manager of supply chain environmental programs for procurement of environmentally responsible materials, noted that a proliferation of customer queries on environmental performance has burdened suppliers. "Part of the reason we are involved in this initiative is for positive supplier relationships," says Choong, "We are a supplier ourselves, so we understand the difficulty. Part of our motivation is also to standardize it in such a way that the process is easier for our suppliers and for our worldwide procurement organizations for supplier environmental performance management."

A number of considerations figured prominently in the CIQC Environmental Committee�s efforts to draft the standard:

• The group chose to focus on environmental practices at supplier companies, rather than on environmental characteristics of suppliers� products. The group�s members believed that by addressing the suppliers� manufacturing environmental practices, the questionnaire could be used across a variety of industrial sectors that might represent the range of suppliers to electronics companies.

• Because so many electronics suppliers are international, the questionnaire was constructed to be useful across international boundaries and relatively easy to translate. For this reason, the questionnaire did not address specific legal requirements or laws and regulations that are country specific.

• A few important environmental issues were intentionally withheld from the questionnaires, because many companies already had systems in place to address these issues�namely ozone-depleting substances and the supplier�s obligation to comply with applicable legal requirements.

• Information in the questionnaire was not designed to satisfy international or domestic regulatory requirements. Rather, the questions chosen reflected the experience and judgment of participating environmental and purchasing managers in a selection of items representing current thinking on development of environmental management systems and processes to ensure legal compliance.

The questionnaire consists of two main parts and was designed to be completed in two hours or less by an environmental manager. A modular approach was taken so that the questionnaire could serve several purposes and to allow for ease of use by companies that wished to use only a portion of the questionnaire. Part I of the questionnaire gauges continual improvement and compliance assurance. Part II is for risk assessment contains additional questions used with critical suppliers, high-volume suppliers, or suppliers whose processes have major environmental aspects. The documents are recommended as particularly useful if used in conjunction with supplier reviews.

Once the standard is written, the core question for the members of the group is how it is used and how it is integrated into existing SCEM programs. This is primarily an issue for individuals to deal with at their own firms, however. At Hewlett-Packard, the company has a particularly well-defined set of supplier environmental expectations (see box) and the CIQC standard has been integrated as one of a number of expectations. Product environmental specifications, for example, are not addressed in the standard, but HP has a separate procedure and requirement for ensuring that its expectations for product environmental expectations are met.

By already adopting CIQC 0014 as a companywide standard, HP has demonstrated leadership within CIQC. Many of the other member companies are still working on the question of how the standard will be applied internally or else have implemented the standard in certain departments but not all.

HP�s statement to suppliers indicates the level of expectations that it sets for its suppliers� environmental management.

Important as statements of expectations are, ultimately the adoption of standards and statements of expectations are meaningless unless they can be used effectively by procurement. Purchasing is the critical juncture between suppliers and the environmental expectations established by the company. For environmental priorities to be effectively implemented, procurement needs good tools, and strong communication needs to exist among departments. At HP, the company has been working to bring together purchasing process realities and environmental ideals.

The first way this happened was the official addition in 1993 of environmental concerns to the list of criteria on which suppliers would be judged in the procurement process. Carl Snyder, executive director of procurement at HP, describes this transition in the company�s environmental procurement brochure. "For many years HP Procurement evaluated and favored those suppliers that best met our needs in the areas of technology, quality, responsiveness, delivery, and cost (TQRDC). In 1993 we added an "E" for environmental performance. As we look forward, we hope that each HP supplier will join with us in working toward protecting the environmental quality of our communities and our world." The procurement process involves TQREDC-E reviews, which are opportunities to talk to suppliers about standard 0014 and their responses, particularly to part one, the seven questions on environmental management.

These discussions are also good opportunities for discourse on environmental management, but effective implementation of environmental criteria in purchasing is still difficult. The tools need to be usable for procurement staff, which is why Hsia Choong has had an ongoing role in the PIBA and CIQC groups trying to introduce the procurement perspective into the drafting of the standard. Without procurement involvement at the drafting stage, she notes, groups of environmental staff have a tendency to write standards that are too technically dense, too long, or too complex for individuals with purchasing backgrounds to use effectively. She has been part of a movement to make the standards relatively short and simple, without neglecting the most important aspects of environmental management and risk assessment.

The standard that has been developed does adequately meet the needs of procurement departments, Choong believes. HP deals with the complications of enforcing environmental expectations largely by giving the responsibility for progress to the supplier. In their meetings with suppliers, HP asks suppliers to identify and outline their own opportunities and goals for improvement in environmental performance. At the next meeting, HP then reviews the progress made against the mutually agreed goals and what is left to be done. But the purchasing groups do not adopt responsibility for overseeing the changes. Noting the complications involved in the supply chain in today�s global marketplace, Choong says, "The procurement chain is getting very complex and is worldwide. It�s impossible for us to know everything about our suppliers or about their environmental practices. We can�t constantly be in charge of making sure that they comply; however, we do want to be sure that the processes are in place at the suppliers� facilities, and the suppliers are accepting responsibility for their own environmental practices."

THE RESULTS

HP has achieved several notable successes with regard to SCEM. The first is that they have eased the burden on suppliers by cooperating with other companies in PIBA and CIQC. By using the CIQC standard throughout the company, they have established a level of uniformity that is uncommon and indicates a trend toward standardization of supplier questionnaires. In the long run, as more companies adopt supplier questionnaires, these standards will be an important means of alleviating suppliers� workloads, building awareness, and focusing on compliance and continuous improvement.

It is not easy to meet the needs of everyone involved in the purchasing function. HP has established environmental expectations and determined that responsibility for compliance lies with the supplier in an effort to deal with these challenges. At the point of purchasing, the interests of suppliers, procurement and environmental organizations come together, and each group has different objectives, knowledge areas, and process systems. Achieving a clear outcome with these differences can be difficult; for one group to be successful, the needs of all three groups must be met. To moderate the issues of environmentally responsible procurement effectively, HP has established procedures that are mindful of differing needs and abilities. They have worked with others to see that the CIQC standard considers the needs of procurement staff as well as be helpful for suppliers. And they have established environmental expectations, while making it the responsibility of suppliers to meet them. By doing these things, HP provides one model of how the complex issue of environmentally responsible procurement can be addressed.

COMPANY INFORMATION

Founded in 1939, HP manufactures a variety of computer and imaging products, test and measurement products, and electronic, chemical, and medical products. Revenues in 1998 were $47 billion. Ranked forty-seventh in the Global 500, the company employs 124,600 people worldwide and has sales and support offices and distributorships in 120 countries.

CONTACT INFORMATION

Hewlett-Packard�s web site can be accessed at http://www.hp.com

The CIQX web site can be accessed at http://www.geocities.com/SiliconValley/Foothills/3719/CIQC.html