Kaiser Permanente And Factor Of Sustainability

The Sustainability Scorecard that KP has implemented is an amazing way to evaluate the corporate social responsibility of the manufacturers that they contract with. This scorecard allows KP to collect corporate and product-level environmental data for their use during the contract bidding process. They take into account the environmental impacts of procuring medical products that may have a detrimental impact on the environment around them through their extensive usage. KP has made it clear that not only will these scorecards be taken into account, but their significance will resemble that of product performance, effectiveness and cost. This means that the organizations that KP works with must hold themselves accountable in order to secure a contract with the organization.

Kaiser Permanente is the largest managed care organization in the United States which means that their implementation of this scorecard can have a strong influence on purchasing throughout the entire healthcare industry. Suppliers have to take into account the potential loss of revenue if they are not compliant with KP’s environmental sustainability scorecard which would have devastating impact on many organizations to lose out on their contract. The healthcare sector has been widely criticized in the past for not being environmentally conscious, but KP sets a great example going forward. This has been the biggest sustainability initiative taken by the healthcare industry yet. This move also has an impact on the future savings that KP will have because of this decision. Since they made changes to their environmental policies in 2008, they have seen savings of roughly 20 million annually. Not only is this great for revenue, but it will potentially pave the way for other healthcare organizations to follow in their footsteps. Robert Gotto, Executive Director of Kaiser Permanente’s Procurement and Supply Group stated that this initiative “is setting a national standard across the organization”(Guevarra 2). The savings from the implementation of the scorecard are also expected to increase the annual savings so they will continue to rise from the 20 million per year they have already had.

The goal of the scorecards is for KP to work with suppliers to push them to achieve their environmental sustainability standards for the greater good. It puts suppliers in a position where their corporate social responsibility will impact their bottom line. When that is the case, there tends to be more action towards making those changes in order for the organization to continue to do well. KP gives suppliers the scorecard and after they are filled out it is used to make comparative ratings of products and their suppliers. This has been proven to be effective in the short time that it has been implemented evidenced by some of KP’s top suppliers already laying out plans to begin this change. If this is any indication of the future, environmental sustainability will become increasingly important putting suppliers in a position to get ahead of the curve by beginning the change now.

It seems that there was more effort put into KP’s Sustainability Scorecard in comparison to WalMart’s 15 questions. Although this is a big step for WalMart considering they have a similar influence on retail as KP does in healthcare, but it was a move that was more hype than action. WalMart’s 15 questions do not address product level at all whereas KP has five questions addressing product levels of their suppliers. WalMart’s goal was to become more transparent and layout a plan to take more steps towards that in the future. This is not to say that WalMart's method is ineffective, but they are not trying to hold their suppliers accountable.

Evidence of this lies in the fact that there is no actual ranking or grading system from suppliers so there is no benchmark set to assess the performance of these suppliers. The reason this may prove to be an issue is because WalMart could continue working with suppliers that are not good, but they are better than the rest so it seems as if the attempt was there to make the “benchmark.” Another problem exists where WalMart failed to address energy efficiency of products or their recyclability at the end of their use. It seems that WalMart did not want to deep dive into the evaluation of the companies by going in depth about information such as specific product details, but this was a decent start. In the future, it the company has given the impression that they will improve from this initiative. Mike Duke, CEO of WalMart believes that “If we work together, we can create a new retail standard for the 21st century”(Makower 2). By we, he is referring to the collaboration that he wants to have with suppliers, retailers, NGOs and Government to develop a global database of information on the lifecycle of products. They have stated that they will provide some funding for the initiative, but are not looking to spearhead or own the index. Although this statement sounds good, it will likely be several years before the company takes larger steps towards environmental sustainability.

There are some similarities between KP and WalMart considering they are both asking for similar information including greenhouse gas emissions and strategies that organizations have in place to increase their progress towards environmental sustainability. Both companies are asking for specific target marks in their data to ensure that organizations are actively making moves to improve their commitment to this initiative.

There should be weights added if we were to combine the responses of corporate questions and product-level questions. I think that the corporate questions’ weight should stay constant regardless of the company, but I believe that product-level questions should have variable weights. The reason being that KP may use one company’s product more often than they use another therefore it is important for them to consider their usage more heavily when that is the case.

I believe that Kaiser Permanente did a pretty good job with the questions they asked both corporate and product-level. One of the questions they could have included would be to ask how suppliers work to resolve issues regarding social compliance evaluations. This would be to ensure that the logistics behind these guidelines are in place so that they are consistently enforced and improved when necessary. It would be helpful if they could document any corrections or improvements that are made during these issues.

I believe it is more than appropriate for Kaiser Permanente to factor sustainability into the selection of patient care products. This shows that their organization is willing to go above and beyond the minimum environmental standards considering they are not enforced in healthcare. It proves that they are willing to challenge their suppliers to differentiate themselves from the norm. Setting this standard could lay the foundation for a future where environmental sustainability efforts become a key aspect of contract bidding not only in the healthcare sector, but in other industries as well.