4.5. Sustainable Procurement

4.5.1. Introduction

Sustainable procurement (SP) is about taking social and environmental factors into consideration alongside financial factors in making procurement decisions. It involves looking beyond the traditional economic parameters and making decisions based on the whole life cost, the associated risks, measures of success and implications for society and the environment. Making decisions in this way requires setting procurement into the broader strategic context including value for money, performance management, corporate and community priorities.

Sustainable procurement is the process by which organizations buy assets, supplies or services by taking into account a number of factors including:

  • Value for money considerations such as, price, quality, availability, functionality.

  • The entire life cycle of products.

  • Environmental aspects; the effects on the environment that the assets, supplies and/or services have over the whole lifecycle ("green procurement").

  • Social aspects: effects on issues such as poverty eradication, inequality in the distribution of resources, labour conditions, human rights, Fair-trade.

  • Sustainable or recycled materials/products.

4.5.2. Aim and challenge

Traditional procurement has focused upon value for money considerations. The aim and challenge of sustainable procurement is to integrate environmental and social considerations into the procurement process, with the goal of reducing adverse impacts upon health, social conditions and the environment, thereby saving valuable costs for public sector organizations and the community at large. Sustainable procurement forms a key part of an overall push for sustainable development by governments and UN organizations [7] .

4.5.3. Potential benefits

Potential benefits of sustainable procurement include:

  • long-term efficiency savings

  • more efficient and effective use of natural resources

  • reducing the harmful impact of pollution and waste

  • reducing the impact of hazardous substances on human health and the environment

  • encouraging innovation

  • providing strong signals to the sustainable products market

  • practical expression of organizations’ commitment to sustainable development.

4.5.4. Procurement as a mechanism to further economic, social and environmental development

Procurement can be used as a mechanism to further the economic, social and environmental development of recipient countries and/or regions. As such, sustainable procurement should incorporate a number of safeguards and checks in the procurement process to positively assist in the following areas:

  • human rights

  • labour rights

  • environmental impacts

  • local entrepreneurship

  • empowerment women

  • poverty eradication

  • governance.

Human rights

Human rights are increasingly being seen as a business issue. They are inextricably linked to corporate risk and reputation management. By continuously expanding supplier sourcing strategies, as well as by increasing sourcing from developing countries procurement officers are increasingly exposed to companies operating in countries with repressive governments, ethnic conflict, and weak rule of law or poor labour standards. The procurement function must include processes that are designed to identify companies that flaunt their responsibility to uphold universal human rights towards their employees and toward the communities in which they operate.

Labour rights

With globalization and increasingly extending global supply chains, procurement officers have the unique opportunity as well as responsibility to ensure that the procurement function serves to protect workers rights. Companies operating in global markets are increasingly expected to assume some level of responsibility for labour practices along their supply chains. This responsibility can and should also form an integral component of the procurement function, by ensuring that contracted companies operate within the universally accepted International Labour Organization’s (ILO) core conventions on labour standards. Procurement officers should be aware of a potential supplier’s performance in the following areas:

  • freedom of association and the right to collective bargaining

  • child labour

  • non-discrimination

  • bonded or forced labour

  • achieving decent working conditions.

Adverse environmental impacts

Procurement can play an integral role in promoting sustainable production and consumption patterns. It is widely recognised that industrial development will only be truly sustainable if it is built on firm ecological foundations.  The growing attention to issues of sustainable production and consumption is a natural outcome of decades of work on cleaner production and eco-efficient industrial systems. It represents the final step in a progressive widening of the horizons of pollution prevention; a widening which has gone from a focus on production processes (cleaner production), to products, (eco-design), then to product-systems (incorporating transport logistics, end-of-life collection and component reuse or materials recycling) and to eco-innovation (new products and product-systems and enterprises designed for win-win solutions for business and the environment). Procurement is in the unique position to help influence industry by encouraging it to develop and adopt policies and practices that:

  • support a precautionary approach to environmental challenges

  • are cleaner and safer

  • make efficient use of resources

  • ensure adequate management of chemicals

  • incorporate environmental costs

  • reduce pollution and risks for humans and the environment.

Supporting local entrepreneurship

Strategic procurement can provide a framework to ensure that local content becomes an integral component of the procurement policies and practices. In this manner the procurement function can be adapted and utilized to achieve good practice in the goals of an organization  in terms of:

  • gender and the empowerment of women

  • poverty eradication

  • governance.

Gender and the empowerment of women

The Millenium Development Goals (MDGs) addressing this issue set a target for “the elimination of gender disparity in primary and secondary education preferably by 2005, and to all levels of education no later than 2015”. The procurement function can assist this issue by adopting practices that promote the contracting of minority businesses, particularly those owned by women. A straight forward and simple approach is to use an evaluation preference that favours minority business by a certain percentage (similar to the World Bank’s Domestic Preference policy).

Poverty eradication

The MDG calling for the eradication of extreme poverty and hunger set two targets that require the world to:

  1. “Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day”.

  2. “Halve, between 1990 and 2015, the proportion of people who suffer from hunger”.

International aid agency procurement has a role to play in the eradication of poverty, by providing capital investment through local and regional sourcing strategies in the respective economies. By ensuring that supplier sourcing takes place in the countries and regions where the outcome of the procurement function is to occur procurement is able to influence:

  • job creation opportunities

  • increases in income

  • capacity in spend categories

  • advances in economic opportunity within communities

  • contribution toward economic development.

Governance

The procurement function plays an important role in achieving and ensuring good governance. It is an integral component of a government’s capacity to provide the required goods and services. A well functioning procurement system ensures; better value for money, increased efficiency and effectiveness of delivery, reduces the potential for corruption, positive impact on a country’s investment climate, non-discriminatory practices, transparency and accountability. Good governance encompasses a functioning regulatory system, as well as institutional set-up, well designed processes and proven capacity. Strategic approaches to procurement, as well as the knowledge transfer of good procurement practice and capacity building within procurement functions toward National government procurement entities assist in the development of good governance practices.

4.5.5. Benefits, barriers and drivers

Benefits

The main benefits from sustainable procurement can be summarized as follows:

  • controlling costs by adopting a wider approach to whole life costs

  • achieving internal and external standards

  • complying with environmental and social legislation

  • managing risk and reputation of the organization

  • creating new, vibrant markets

  • ensuring security of sustainable supply for the future

  • ensuring maximum community and financial benefits.

Barriers

The main barriers to achieving sustainable procurement appear to be:

  • habit and the difficulty in changing procurement behaviour

  • lack of suppliers of sustainable assets, suppliers or services

  • complexity of comparing costing/value for money assessments

  • the difficulty of including factors broader than environmental considerations

  • a perception that the process and outcomes are more costly or time consuming.

Drivers

The main drivers towards achieving sustainable procurement are:

  • effective organization wide policies to ensure that everyone is aware of the strategy

  • training and guidance to help all of those involved in procurement to understand sustainable procurement and whole life costing;

  • regular audits and monitoring to assess where your organization is in the context of sustainable procurement and where you could make further progress in this area

  • commitment to sustainable development as an organizational policy

  • supporting and educating suppliers/creating markets

  • linking up with other organizations to learn from their experience

  • pooling procurement by forming procurement consortium where relevant.

4.5.6. Sustainable procurement in the procurement process

The sustainable procurement process does not differ greatly from the traditional procurement process. It incorporates an initial stage to determine the effect of the procurement action in terms of a desired outcome that is both environmentally and socially benign, as well as an additional stage at the end of the process to monitor and assess, and if need be adjust the net effect of the desired outcome. Other sustainable interventions are incorporated throughout the various stages of the procurement process. Each of these stages is summarized in the following table and further in the text examined below.  

Stage

Description

1

Planning and needs assessment of a procurement activity.

2

Planning the requirement.

3

Requirement definition.

4

Sourcing.

5

Solicitation

6

Evaluation and contracting.

7

Monitor and control.

8

Monitor and assess the desired ‘outcome’ achieved.

Note: For further detail refer to the UNDP/IAPSO ‘Sustainable Procurement Guide’.

Planning and needs assessment of a procurement activity

Decisions are required on the sustainable outcome a procurement process is meant to achieve; these are assisted by a number of analyses, such as a sustainable procurement risk assessment, supply market analyses, stakeholder analyses, demand analyses, etc. The type of analyses used and the decisions will depend upon the sustainability issue(s) that may be affected by the procurement action.

Planning the requirement

Procurement planning involves the transformation of a stated requirement or organizational goals and objectives into measurable activities to be used to plan, budget and manage the procurement function within the organization.  As with the traditional procurement process, procurement planning and forecasting is vitally important to ensure an effective, efficient, strategically viable and sustainable result.

Requirement definition

Developing and using generic specifications is as import in the sustainable procurement process as it is in the traditional procurement process. During this stage, human/labour rights and environmental performance criteria should be translated into specifications that meet specific requirements of the specified outcome, desired by the procurement action.

The specification stage is key to all types of contract. Building in environmental and social considerations at this early stage, provides a clear indication to suppliers that sustainability is important to the UN organization. Consider available alternatives which are less environmentally and socially damaging. Consider all the phases of a product’s life cycle (e.g. production, transportation, maintenance, disposal, etc) when determining its cost and environmental impact. Assess the overall environmental and social integrity of suppliers by looking at their policies and practices.

The table below provides some examples of criteria to consider when determining potential environmental and social impacts of goods , services and works [8] : during the requirement definition stage.

Criteria

Factors to consider

Environmental

Fit for the purpose and provide value for money

Ensure that the product you are considering does the job you want it to do for all potential users, including groups with specialist needs where appropriate.

Biodegradability

Some products may be suitable for composting. Where that is the case, ensure that the materials can break down speedily and safely.

Design for disassembly

When products are made up of thousands of different types of materials, particularly plastics and metals, it helps if they are designed to be easily taken apart or disassembled so that the materials can be recycled. This is particularly relevant to electronic and electrical products such as fridges, televisions, personal computers and printers.

Minimum use of virgin and non-renewable materials

Wherever possible, the use of recycled or re-used materials should be encouraged, as these generally have a much lower impact on the environment. Examples include computer processor cases or road aggregate.

Resource, energy and water efficiency

Running costs are often overlooked when procuring products. Seek equipment that is energy efficient, such as Energy Star rated products. Also check that your product does not have a ‘knock-on’ effect of using more resources, eg specifying paper towels over hand-driers may increase the volume of paper you dispose of, which also has a cost.

Fault controls to prevent unnecessary waste

When specifying plant equipment, such as boilers, ensure that you specify metering and monitoring equipment. Whilst it might increase acquisition costs it will alert you to inefficient use and enable you to reduce running costs, spills or waste problems.

Maximum durability, reparability, reusability, recyclability and upgradeability

Essentially this is a quality issue. Seek long-life products, that will survive being mistreated, that can be repaired, reused and ultimately recycled. Importantly, seek products that enable you to upgrade them and improve performance over time rather than having to buy new equipment to do the same job.

Minimum packaging

Most products are bought with excessive levels of packaging, either to add cosmetic value, or to enable the product to survive poor handling. Packaging has to be disposed of once it has performed its task, and in most cases the cost of disposal falls to the customer, not the supplier.

Maximum use of post-consumer materials

There are many grades of recycled materials. Where possible seek materials that have been used once and are being reused to perform a repeat or new function, rather than materials that have been reused from a manufacturing process waste which has never been used by the consumer.

No (or reduced) polluting with minimum use of toxic chemicals, CFCs, ozone and other pollutants.

Not only do these products help reduce your environmental impact, but choosing low-polluting alternatives often means you can avoid lengthy COSHH assessments and training, e.g. cleaning staff or lab technicians.

Social criteria

Health and safety standards

These should never be overlooked and it is sensible to evaluate many products with a qualified health and safety officer. Examples include electrical equipment, vehicles, cleaning chemicals and furniture.

Local production

Sourcing your purchases from local suppliers means that the economic benefits can be felt in the communities in which you live and work. This inward investment can help ensure the ongoing economic sustainability of your local area through job creation.

Ethically sourced

You should seek to ensure that the products you buy are not exploiting child labour, or labour and economies in the developing world and that you meet recognised fair trade standards wherever possible.

The specification of a particular sustainable requirement may occasionally result in a purchase that costs more than a less sustainable preferable product or service, even after taking account of whole-life costs. There is no reason why this extra cost can’t be justified on sustainable grounds, although care should be taken to ensure that a proper balance is struck between the cost and the perceived sustainable benefits. A justification of higher acquisition costs can be made through longer-term paybacks, or because your organization has made equally valid commitments to reducing waste to landfill or CO2 emissions, for example. Buying ‘future-proof’ equipment that will meet future sustainable standards can have significant long-term financial benefits, even if the acquisition cost may have seemed comparatively high.

There are a number of tools and approaches that can be used to determine the requirement criteria, these range from various standards, industry agreements, labels and approaches such as life cycle costing. For detailed information on these please refer to the ‘Sustainable Procurement Guide’.

Sourcing

Supplier sourcing and evaluation strategy enables the procurement function to address gender and empowerment as well as poverty eradication issues. This can be achieved by including suppliers from identified minority groups and/or from specific geographic and demographic regions and ensuring local content and representation in the bidding process.

These environmental and social issues can be considered during supplier pre-qualification exercises. If assessment shows that the majority of impacts are in the raw materials stage, the focus should be on the supplier’s own environmental supply chain management policies. If the impacts are in the manufacturing stage, then the focus should be on the supplier’s environmental management system for their business.

A supplier’s environmental performance should be one of the key criteria used in supplier selection. Equally, where relevant, the supplier’s approach to managing its social impacts should also form part of the assessment. When reviewing the response to any questionnaire, of particular importance is that the supplier’s environmental and social policies actually address the key impacts of their business. For example an environmental policy from a chemical manufacturer needs to deal with the environmental issues of making chemicals rather than looking at its paper consumption and car policy, which whilst valid are not the main impacts of this business.

For a sample questionnaire and assessment procedures please refer to Annex 3.

Solicitation

Solicitation documents should incorporate sustainability specifications and requirements designed in the previous stages. Potential suppliers must then be able to show they are able to meet those requirements.

Evaluation and contracting

The evaluation and contracting stage makes use of the standard evaluation methods; however, it should place specific emphasis on use of weighted and ranked criteria incorporating the specific performance criteria and specifications that address sustainable procurement factors. The evaluation process should also include a risk analysis, a cost analysis and modelling and a life cycle analysis (cradle to grave) particularly if the procurement process features environmentally sensitive issues.

Sustainability evaluation criteria

Assessment of a tender is a key part of the procurement process. The degree to which tenders are scored is dependent upon a number of factors. Tender assessment is the opportunity to go into more specific detail about how the supplier is going to deliver the requirements from a cost, quality and sustainability perspective. Through risk assessment, sustainability criteria may have been set that are so important that a supplier must have them in order to bid, typically these are addressed through the specification and are considered as pass/ fail criteria. Items that are important but not vital are dealt with through asking the supplier for information that is then scored, called sustainability criteria.

Sustainability evaluation criteria are key to undertaking thorough and consistent assessments of sustainability performance of suppliers’ bids and proposals. UN organizations should determine environmental evaluation criteria to suit their own needs. Some recommended environmental evaluation criteria to consider in tenders are:

  • Air pollution - to include measures taken to reduce emissions, particularly of key pollutants, and looking at efforts to exceed statutory requirements.

  • Biodiversity and habitats - a specific aspect of land use, where biodiversity and important habitats are recognised and measures taken to protect and enhance them.

  • Climate change - measures taken to monitor and reduce greenhouse gas emissions should be highlighted in this criterion.

  • Resource use and intensity - to include energy, water, raw materials and land as resources, and to focus on the efficiency of their use. Linked to waste, air pollution and water pollution.

  • Transport - to consider measures that reduce overall transport requirements, and to encourage a modal shift away from road transport (people and freight).

  • Waste - to include measures to reduce, re-use and recycle wastes.

  • Water quality - to include measures to reduce discharges, particularly of key pollutants, and looking at efforts to exceed statutory requirements, and rewarding efforts to meet water quality objectives and targets.

For further examples on evaluation criteria and procedures please refer to the ‘Guide to Sustainable Procurement’.

Monitor and control

This stage involves monitoring suppliers’ performance throughout the contracting period, meeting delivery deadlines and setting quality standards as well as installation, after sales services and warranty provisions.  Where sustainability criteria have been set, these should be monitored during this stage.

Monitor and assess the desired ‘outcome’ achieved

The final stage of the sustainable procurement process, is measuring the results against the outcome that was initially set.  The results and lessons learned should then be fed back into stage one. The outcome may be difficult to measure, or may need to be measured in intervals over a certain time period. Specific indicators may also need to be developed to facilitate meaningful measures.

4.5.7. Conclusion - environmental and social criteria

While the concept of sustainable procurement is becoming more widely accepted and practised in the private sector as well as the international public sector, it is still relatively new with its origins only emerging in the mid 1990’s. As such, it is an approach that is under constant development. What began as green procurement incorporating only environmental product criteria has grown to encompass social performance criteria as well as economic goals to further the notion of sustainable development.  The limited literature available on sustainable procurement is often weighted towards environmental aspects of sustainable procurement, as the social aspects of sustainable procurement are not yet as well developed.

Product and company environmental performance are readily quantifiable and measurable, but social aspects relating to human rights and labour standards are more difficult to include as quantifiable requirements within solicitation documents. Progress is however being made, standards such as the SA 8000 provide procurement officers with a means of integrating complex social issue criteria while providing a means to verify claims made by prospective suppliers. As more companies subscribe and abide by standards and agreements such as the Global Compact, ISO 14001, EMAS, SA 8000, OHSAS 18001, etc. the more readily the principles and criteria outlined by these will be able to be integrated into biding documentation and processes.

Another important factor to consider in the implementation of sustainable procurement is the nature of the sector where it is being implemented, for instance, it is no great surprise that the advancement of sustainable procurement is greatest within the private  and in some countries the local and national governmental sector. It is here where changes to procurement policy are relatively easily integrated and adopted. Within the intergovernmental sector such as the UN system of organizations, implementation of sustainable procurement criteria and processes becomes more complex, primarily due to the existing rules and regulations governing competitive bidding particularly on an international basis. Implementing changes to a procurement system that can be seen as favouring suppliers from particular countries or regions simply because they are further advanced in the environmental and social performance proves to be a very difficult proposition. It is at this point that the integration of sustainable procurement has thus far been stilted within the UN procurement system. Work is however continuing to overcome this impasse.



[7]  The Yorkshire & Humber Assembly: Towards Sustainable Procurement: A guide for public sector organizations. January 2004.

[8]  Source: Purchasing for Sustainability, Forum of the Future.