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. To procure in a sustainable way involves looking beyond short-term needs and considering the longer term impacts of each purchase. Sustainable procurement is used to ensure that purchasing reflects broader goals linked to resource efficiency, climate change, social responsibility and economic resilience, for example.
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.
Triple bottom line considerations
Procurement – the letting of contracts for goods, works and services on the best possible terms – has historically been based on two criteria, price and quality, with a view to maximizing benefits for the procuring organization. Sustainable procurement broadens this framework to take account of third-party consequences of procurement decisions, forming a "triple baseline" of external concerns which the procuring organization must fulfill.
Environmental concerns are the dominant macro-level justification for sustainable procurement, born out of the growing 21st century consensus that humanity is placing excessive demands on available resources through unsustainable but well-established consumption patterns. Sustainable procurement aims to promote conservation, reuse and responsible management of these resources, using renewable or recycled materials where possible and reducing waste.
This is a sufficiently influential issue that environment-centric procurement (green procurement) is sometimes seen to stand alone from sustainable procurement. The most straightforward justification for green procurement is as a tool with which to address climate change, but it offers the broader capacity to mitigate over-exploitation of any and all scarce resources.
Examples of green procurement range from the purchase of energy-saving light-bulbs to the commissioning of a new building from renewable sourced timber via organic food being served in a workplace canteen. The ultimate green procurement is the avoidance of the purchase altogether.
In support of Sustainable Development the organization should develop and publish a 'Sustainable Development Procurement Guidelines and Procedures'. When it comes to purchasing products or services, referral to these guidelines would help make the organization become a leader in environmentally responsible purchasing.
Although various corporate giants have publicly acknowledged adopting sustainable procurement and reducing their carbon footprint, they have miserably failed to match their promises. The most widely discussed examples include Disney's initiative to introduce sustainable paper sourcing policy in 2012 and 3M promising to reduce its greenhouse gas emissions.
Examples include addressing the needs – whether employment, care, welfare or other – of groups including ethnic minorities, children, the elderly, those with disabilities, adults lacking basic skills, and immigrant populations. Criteria for Socially Responsible Procurement can be applied to every stage of a supply-chain e.g. from mining to assembly and distribution.
Often differences in the purchase price between a non-sustainable and sustainable alternative are negligible. Yet even where the sustainable option costs more upfront, savings of energy, water and waste over the lifetime of the product or service can provide significant financial savings. On a macroeconomic level, it can be argued that there are economic benefits in the form of efficiency gains from incorporating whole-life costing into decision-making. [Note: in contrast to most arguments from sustainable procurement proponents, these can be purely private benefits accrued by the procuring organization.]
In addition, the creation of sustainable markets is essential for long-term growth while sustainable development requirements foster innovation. There are also potential global applications: sustainable procurement can favor fair trade or ethical practice, and allow extra investment to channeled towards developing countries.
On a micro economic level, sustainable procurement offers the chance for economic redistribution. Targets might include creation of jobs and wealth in regeneration areas, or assistance for small and/or ethnic minority-owned businesses.
Sustainable procurement policy and development
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
- Project set up and governance structure establishment
- In the project organization and set up in pilot country of Mauritius, the NFO (Mauritius public procurement office) set up monthly and biweekly newsletters on the purpose of public procurement which was then used as a communication device for later projects, activities, and events, along with other relevant information
- Assessment, review, and prioritization
- Recommended method of assessing the effectiveness of public procurement plans is conducting interviews with procurers as to assess the degree of training and knowledge. Recognize and understand the obstacles in the implementation of SPP in their respective administration as well as identifying products and services which are considered a priority for the well-functioning of such projects and policies. Some of the main obstacles in implementing SPP are informational, financial and managerial.
- Sustainable public procurement policy and action plan
- Drafting an SPP plan is necessary for the successful implementation of policies. It creates a clear path and provides a direction on sound basis on which to build coherent and efficient strategies. The SPP Action Plan should contribute to the country's sustainable development in terms of environmental protection, economic development, health, welfare, etc. In the UNEP pilot country of Chile, working to enhance previous e-learning platform for contracting managers from across the country, the UNEP agreement with the sovereign nation was modified replacing two different workshops for roughly 50 people each with the generic term "training" and the new materials for the electronic platform are currently being developed as to provide the entire Chilean public administration easier access.
The Marrakech Task Force on Sustainable Public Procurement (MTF or SPP) which was managed by Switzerland from 2006 to May 2011 established an approach for the effective implementation of sustainable procurement. This approach was named the MTF Approach to SPP. Since then, the United Nations Environmental Programme have worked together with the Swiss government to develop a project to implement sustainable procurement worldwide. The project named Capacity Building for Sustainable Public Procurement in Developing countries were piloted in 7 different countries, Chile, Colombia, Costa Rica, Lebanon, Mauritius, Tunisia, and Uruguay and since then, the list of countries adopting this newly designed approach to developing has increase adding even more advanced and industrialized nations to be used as case studies to measure the efficiency and benefits of the implementation of sustainable public procurement. In Brazil, the project involved recycled paper, in Costa Rica, the management services was redesigned, toner cartridges for laser printers was the main objective in France, in Hong Kong and China the nations aimed to improve traffic with LED traffic lights retrofit, organic food for school children in Italy, sustainable construction in England, consultancy and temporary staff services was renovated in Scotland, and in the United States, there was a push for the sustainable transportation of waste.
The eight case studies reveal a diversity of environmental impacts at various stages of the products’ life cycle. The purchase of remanufactured ink cartridges by the French Ministry of Education has led to a decrease in the amount of waste generated at the manufacturing stage. The construction or services case studies (Yorkshire and Humber Region, UK, and Oregon, USA) demonstrate significant impacts related to the reduction of CO2 emissions, of waste production, and of water consumption. The Ferrara study (Italy) and the recycled paper case (São Paulo, Brazil) show positive environmental.
Although the social component of sustainable development has often been considered as the most neglected one, the eight case studies show a strong commitment from public purchasers to tackle social issues. Employment and social inclusiveness issues are considered essential by the public entities who promote these priorities through their procurement processes. Some of the social impacts are directly targeted by tenders, such as the participation of companies employing disabled persons in the French case or the fight against illiteracy in Scotland. Other impacts are the results of the specific purchase, as in the State of São Paulo case (notebooks using recycled paper) which demonstrates a clear positive impact for waste pickers. The analysis of the case studies illustrates the diversity and strength of the recorded sustainable development impacts. Public purchasers can be clearly seen as key potential actors of society, able to impact a wide range of sustainable development fields.
The UK in 2005 pledged to be a performance-leader in sustainable procurement by 2009 and commissioned the business-led Sustainable Procurement Task Force to formulate appropriate strategy. Broad-based procurement strategies are prominent across the EU while it is an increasingly influential concern elsewhere, most notably Canada. The US federal government requires certain green procurement practices in its buildings and supports the wide and inclusive use of them. The General Services Administration, an independent establishment and government corporation, is responsible for promoting green procurement and provides federal agencies with selling and purchasing guidelines and suggestions. Green procurement is primarily done by federal contracting personnel and program managers – but it is not restricted to such professionals.
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.
To help local governments improve sustainability and reduce environmental impacts the California Sustainability Alliance, has developed a Green Procurement Toolkit. Green procurement can help local governments save money, create local green jobs and improve their environmental sustainability.
Under sustainable procurement criteria any procuring organization must therefore take a broad approach to sustainability, reflecting localized economic, environmental and social needs as well as cross-cutting sustainable development strategies such as Life Cycle Assessment.
ICLEI is a membership organization of local governments who recognizes the power of Sustainable Public Procurement to achieve environmental, social and economic benefits. It encourages Public Procurement of Innovation as a means for achieving sustainability. Among its various activities, it offers a Sustainable Procurement Resource Center and a Procurement Forum, which can be used by procurers or by anyone interested in these topics.
Procura+ is a network of European public authorities and regions that connect, exchange and act on sustainable and innovation procurement.
On December 8, 2006 the Greater London Authority became the first public-sector body to publish a sustainable procurement policy, promising to award a "distinct competitive advantage" to those companies which demonstrated a commitment to sustainable procurement concerns. The policy reflected the Mayor's enthusiasm for public procurement as a tool for fostering social inclusion, equality and environmental objectives.
The GLA also stated that their policy was "very much as a model for broader government procurement" but this expectation was not fulfilled in the UK Government's Sustainable Procurement Action Plan, published on March 5, 2007. The Action Plan, which incorporated answers to the Sustainable Procurement Task Force, was explicitly environment-oriented in approach (Ch 4.3) with wider social issues scarcely addressed.
This was perhaps surprising, as was press disinterest in the publication. Despite its acknowledged importance among senior politicians and business leaders, publication of the Action Plan received only one national newspaper report, and that was markedly flippant in tone.
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.
Acquisition of goods and services may account for over 50% of the company's expenses, and may exceed 80% in sectors such as in retailing, electronic and automotive industries - with all this purchasing power, the private sector has a great ability to influence markets. Influencing procurement practice within a private-sector firm is not straightforward for governments, meaning that the companies themselves often have to be self-motivated to embrace sustainability. It becomes a social responsibility for both businesses and workers to promote sustainable procurement in the workplace.
The UK's Sustainable Procurement National Action Plan argues that it is "something the best of the private sector is already doing – whether through enlightened leadership or shareholder pressure". It also argues that government purchasing power (circa £150bn in the UK alone) can apply sustainable procurement principles to present a persuasive case to those in the private sector resisting sustainable procurement practice.
Fair trade and sustainable procurement demands the implementation of responsible practices in relation to workers, environment and society to be followed by suppliers as to promote a chain of sustainability between production and consumption.
While there is no strict definition on how organizations implement sustainable procurement, there are two approaches that can be combined:
This is where an organization examines a products movement along the supply chain and assesses the environmental credentials of themselves and of their suppliers. This path is commonly used when an organization wishes to understand the impact of a product or product range for strategic and marketing purposes. This approach can also provide a vivid picture of supplier processes.
An organization may analyze the CSR management systems of a supplier and whether its practices conform with law and with the CSR standards of "buying" organization. Thus, the organization measures the environmental and social risk a supplier may impose upon them. Implemented effectively, this method will show whether a supplier meets the environmental standards of the organization, along with whether suppliers are meeting the requirements of law. Some assessments improve the whole supply chain by providing incentives for other businesses to be more sustainable.
In order to assess the CSR Management systems companies can use a variety of tools :
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- California Sustainability Alliance, Green Procurement Toolkit, Received October 28, 2010
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- http://www.ft.com/cms/s/75cb4c24-cb87-11db-b436-000b5df10621.html Financial Times, March 6, 2007, 'Government seeks green toilet paper'
- "Archived copy" (PDF). Archived from the original (PDF) on December 15, 2006. Retrieved December 15, 2006.CS1 maint: archived copy as title (link) 'Procuring the Future: Sustainable Procurement National Action Plan' by Sustainable Procurement Task Force