The Environmental Sustainability Puzzle in Purchasing Can Be Solved by Adding CO2-Values to the Technology Dimension in Multi-dimensional Dynamic Sourcings

In addition to the technology development at suppliers, purchasing has the task to find and internalize completely new products and product attributes presented by suppliers. Herein digitalization allows a practical and at the same time fast measurement and valuation process of technical characteristics and innovation value added. Digitally, the technology dimension can be integrated in the supplier sourcing decision additional to the price by capturing a product characteristics utility value, which is expressed in form of total cost of product ownership. Calculating utility values therefore is an important key to also measure sustainability values, in particular herein CO2-values of purchased products. This book chapter shows why product innovation by suppliers and within this sustainability attributes must be an element in the scope of purchasing. After addressing several pitfalls in innovation management with suppliers, a model is developed how utility values of product characteristics combinations can be transferred into a preference curve of the buying firm taking reservation prices and target utility values such as maximum CO2-values into consideration. As a next step, supplier offers are translated into product characteristics’ utility-price combinations presented in a feasibility curve. Preference curve and feasibility curve are compared with the customer target price as well as with the target utility values. This creates a solution space for dynamic sourcings based on supplier innovations and sustainabilty values such as CO2. In other words, CO2-values shall not be artificially translated into money, but can be added to the technology dimension allowing for multi-dimensional and dynamic sourcings.