Sustainable Procurement

Procurement is the process of finding, acquiring, buying goods, services or works from an external source, often via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works the best possible price, when aspects such as quality, quantity, time, and location are compared. Procurement is considered sustainable when organizations broadens this framework by meeting their needs for goods, services, works, and utilities in a way that achieves value for money and promotes positive outcomes not only for the organization itself but for the economy, environment, and society. This framework is also known as the triple bottom line.

Sustainable procurement is a spending and investment process typically associated with public policy, although it is equally applicable to the private sector. Organizations practicing sustainable procurement meet their needs for goods, services, utilities and works not on a private cost–benefit analysis, but with a view to maximizing net benefits for themselves and the wider world. In doing so they must incorporate extrinsic cost considerations into decisions alongside the conventional procurement criteria of price and quality, although in practice the sustainable impacts of a potential supplier’s approach are often assessed as a form of quality consideration. These considerations are typically divided thus: environmental, economic and social.

Sustainable procurement involves a higher degree of collaboration and engagement between all parties in a supply chain. Many businesses have adopted a broad interpretation of sustainable procurement and have developed tools and techniques to support this engagement and collaboration.

Sustainable procurement policy and development

State government – For central governments, sustainable procurement is typically viewed as the application of sustainable development criteria to spending and investment decisions. Given high-profile socioeconomic and environmental concerns such as globalization and climate change, governments are increasingly concerned that our actions meet the needs of the present without compromising the needs of the future.

Public spending, which accounts for an average of 12% of GDP in OECD countries, and up to 30% in developing countries, wields enormous purchasing power. Shifting that spending towards more sustainable goods and services can help drive markets in the direction of innovation and sustainability, thereby enabling the transition to a green economy. Through Sustainable procurement practices, governments can lead by example and deliver key policy objectives. Sustainable procurement allows governments to mitigate key issues such as greenhouse gas emissions, improve resource efficiency, recycling, among others. The key international organizations already increasingly recon gnize public procurement as a means of changing the unsustainable patterns of consumption and production.

The United Nations, including its many affiliated agencies, recognize their own responsibilities in contributing to more sustainable patterns of development, maintaining a market behavior which is credible, inspirational and exemplary, and proving that UN agencies stand behind the principles they promote. Through the development of procurement criteria that support sustainability principles, requisitioners and procurers can send strong signals to the market in favor of goods and services that promote sustainability. The United Nations agency destined to develop and promote resource efficiency and more sustainable consumption and production processes, including the promotion of sustainable resource management in a life cycle perspective for goods and services in both developed and developing countries, The United Nations Environmental Programme, UNEP, drafted sustainable public procurement implementation guideline to aid in the consideration of society, economy, and the environment in procurement processes

Local government – At market-level, sustainable procurement is typically instrumental: authorities seek to address policy through procurement.

Government departments and local bodies can use procurement to address certain chosen agendas in buying solutions that will contribute to community or environmental goals, or to diversity or equality targets.

Private sector – Sustainable procurement outside of the United Nations is happening everywhere, in the international community, in states and local authorities, in the private sector and in the civil society. Sustainable procurement is as applicable to the private sector as the public sector, and certainly its proponents aspire to seeing its application across all areas of the economy due to a vast amount of material available on the internet for organizations and companies wishing to improve their sustainability performance.

Sustainable Procurement Relevance

In both private and public sectors, there is increasing pressure from customers, clients, government and the public to put sustainable procurement into practice. The 2002 World Summit on Sustainable Development stated that relevant authorities at all levels should: “promote public procurement policies that encourage development and diffusion of environmentally sound goods and services”. In response to this, Business Operators and Professionals have been very fast to institute policies and strategies embedding sustainable development concerns; for example the UK Strategy for Sustainable Consumption and Production. As a step towards implementing this strategy, the Government established the Advisory Committee on Consumer Products and the Environment. A Europe –wide study published in August 2009 found out that 80 percent of buyers initiated sustainable procurement programmes in 2008, while 90 percent see them as “critical” to the survival of their business.

Organizations practicing sustainable procurement meet their needs for goods, services, utilities and works not on a private cost-benefit analysis, but with a view to maximizing net benefits for themselves and the wider world. In so doing they must incorporate extrinsic cost considerations into decisions alongside the conventional procurement criteria of price and quality. These considerations are typically divided thus: Environmental, Economic and Social (also known as the “triple baseline”). The important areas of environmental concerns are; more efficient use of raw materials in manufacturing operations, pollution and waste, and energy savings.

Sustainable Procurement Benefits

A review of existing literature can reveal that if implemented effectively, sustainable procurement has the potential to cut costs, shorten timescales, enhance stakeholder relationships, increase sales, reduce risks, enhance reputation and improve margins. Kennard M. indicates that benefits to an organization in adopting a Sustainable Procurement Policy will be to:

• control costs by adopting a wider approach to whole life costing
• Improve internal and external standards through performance assessments.
• Comply with environmental and social legislation
• Manage risk and reputation
• Build a sustainable supply chain for the future
• Involve the local business community

A broader list of potential benefits sustainable procurement practices may have for an organisation adopting such practices in its operations is availed as including;

• the existence of a defined procurement strategy and the value outcomes – the improved social, environmental and economic impacts
• compliance with national and international sustainability standards and regulations
• to have a better understanding of risks in the supply chain
• contributes to the sustainable organisational strategy
• better commercial/economic decisions from understanding of issues that impact on the procurement decision (whole life cycle)
• potential benefits in a long term relationship, innovation, better materials, alternatives, technical advice, emerging technologies
• if the objective is `grab the cash’ it’s not sustainable, build a more sustainable platform and achieve savings year on year
• better quality of purchasing staff with more satisfying goals and improved performance
• education of suppliers
• much more proactive internal dialogue and challenge with demand side
• more effective evaluation of proposals and bids
• more ‘sustainable’ source of supply.

Sustainable Procurement Impact

Sustainable procurement is now used by organisations to rethink and retool business processes (in this case the procurement process) to meet some of the `greener’ options.

During the sourcing process, sourcing companies are becoming more selective when determining sources of supply. Suppliers of ‘more environmentally friendly products’ are given priority. Good practices now require incorporation of environmental performance criteria in the supplier selection-evaluation stages. Also ‘World Class Organizations’ now incorporate environmental requirements in their product or goods/service procurement specifications. The incorporation of environmental issues in product design, evaluation and selection (also supplier selection) processes is paramount.

At the procurement (product/service) evaluation level there is need to assess whether the intended procurement (product/service) represent optimum value in terms of whole-life costing and quality so as to minimize any environmental impact. For evaluation of Suppliers, Organisations need to work out their supply chain partners to develop sources of supply, which support a culture of improvement of social environmental performance. An orgnaisation should also adopt specifications, which develop socially and environmentally preferable goods and services at competitive prices. There is need to encourage environmental impact assessments of products in the design stage and tailor policies to specific products and issues, drawing from a ‘tool box’ of measures which include voluntary agreements, taxes and subsidies (August 2003 Published report on ‘towards sustainable products’).

At the level of evaluation of offers and selection of suppliers; organisations need to incorporate sustainability issues in their contract evaluation strategy. The strategy should incorporate Sustainability Criteria as part of the quality evaluation process. The criteria here may be based on the availability of sound Sustainability Policies. Supplier selection is considered as a process of selecting key suppliers based on pre-established set criteria; this traditionally revolved around price-but the now followed multi-criteria approaches require extension of such criteria to include among other issues: quality, delivery times, service, technical capabilities etc. emerging offer evaluation and supplier selection frameworks are pursuing sustainable development goals (sustainable procurement goals and objectives tend to rhyme with those of sustainable development). For the selection process issues relating to institution of sustainable procurement or environmental procurement policies in Organisational Corporate Policies, Certification with environmental regulatory bodies e.g. National Environment Management Authority (NEMA) International Standard Organisation (ISO) etc., compliance records among others provide clear basis for the relevant selection criteria. Humphrey, P. K. (2003) provides a framework on incorporating environmental criteria into the supplier selection process. Ideally, Storry’s second question must be answered hear. The best evaluated tender/bid should be the one that offers the best in all the three sustainability aspects.