Sustainable procurement
Encyclopedia
Sustainable procurement (or Green procurement) is a spending and investment process typically associated with public policy
, although it is equally applicable to the private sector
. It is linked to the wider agenda of sustainable development
.
Organisations practising sustainable procurement meet their needs for goods, services, utilities and works not on a private cost-benefit analysis
, but with a view to maximising 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 (also known as the “triple bottom line
”).
There is no single definition of sustainable procurement – not least because sustainability is a contested concept – and applications vary across organisational hierarchy and sector. However, there is a general acceptance that it 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.
A research by INSEAD Business School has demonstrated that Sustainable Procurement could yield positive economical benefits for private companies in terms of "Risk Management", "Cost Reduction" and "Revenue Growth".
- 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 maximising benefits for the procuring organisation.
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 organisation must fulfil.
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 renewably-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.
, such as inclusiveness, equality
and diversity targets, regeneration and integration.
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.
Socially sustainable procurement is sometimes amalgamated with economic issues under a “socio-economic” header and, in a similar fashion to affirmative action
in the USA, is frequently met with the criticism that it is subjectively-founded social engineering.
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 favour fair trade
or ethical practice, and allow extra investment to channelled towards developing countries.
On a microeconomic 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.
, governments are increasingly concerned that our actions meet the needs of the present without compromising the needs of the future.
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.
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 organisation must therefore take a broad approach to sustainability, reflecting localised economic, environmental and social needs as well as cross-cutting sustainable development targets such as whole-life costing.
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.
’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.
and assesses the environmental
credentials of themselves and of their suppliers. This path is commonly used when an organisation 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.
systems of a supplier and whether its practices conform with law
and with the CSR standards of "buying" organisation. Thus, the organisation 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 organisation, along with whether suppliers are meeting the requirements of law.
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...
, although it is equally applicable to the private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
. It is linked to the wider agenda of sustainable development
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...
.
Organisations practising sustainable procurement meet their needs for goods, services, utilities and works not on a private cost-benefit analysis
Cost-benefit analysis
Cost–benefit analysis , sometimes called benefit–cost analysis , is a systematic process for calculating and comparing benefits and costs of a project for two purposes: to determine if it is a sound investment , to see how it compares with alternate projects...
, but with a view to maximising net benefits for themselves and the wider world.
In doing so they must incorporate extrinsic cost considerations into decisions alongside the conventional procurement
Procurement
Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...
criteria of price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
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 (also known as the “triple bottom line
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
”).
There is no single definition of sustainable procurement – not least because sustainability is a contested concept – and applications vary across organisational hierarchy and sector. However, there is a general acceptance that it 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.
A research by INSEAD Business School has demonstrated that Sustainable Procurement could yield positive economical benefits for private companies in terms of "Risk Management", "Cost Reduction" and "Revenue Growth".
Exogenous considerations: the “triple bottom line”
ProcurementProcurement
Procurement is the acquisition of goods or services. It is favourable that the goods/services are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location...
- 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 maximising benefits for the procuring organisation.
Sustainable procurement broadens this framework to take account of third-party consequences of procurement decisions, forming a “triple baseline
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
” of external concerns which the procuring organisation must fulfil.
Environmental
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.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
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
, 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 renewably-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
Sustainable development
Sustainable development is a pattern of resource use, that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for generations to come...
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.
Social
Sustainable procurement is also used to address issues of social policySocial policy
Social policy primarily refers to guidelines, principles, legislation and activities that affect the living conditions conducive to human welfare. Thus, social policy is that part of public policy that has to do with social issues...
, such as inclusiveness, equality
Social equality
Social equality is a social state of affairs in which all people within a specific society or isolated group have the same status in a certain respect. At the very least, social equality includes equal rights under the law, such as security, voting rights, freedom of speech and assembly, and the...
and diversity targets, regeneration and integration.
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.
Socially sustainable procurement is sometimes amalgamated with economic issues under a “socio-economic” header and, in a similar fashion to affirmative action
Affirmative action
Affirmative action refers to policies that take factors including "race, color, religion, gender, sexual orientation or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination.-Origins:The term...
in the USA, is frequently met with the criticism that it is subjectively-founded social engineering.
Economic
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 organisation.]In addition, the creation of sustainable markets is essential for long-term growth while sustainable development requirements foster innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
. There are also potential global applications: sustainable procurement can favour fair trade
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
or ethical practice, and allow extra investment to channelled towards developing countries.
On a microeconomic 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.
Central Government
In central government, sustainable procurement is typically viewed as the application of sustainable development criteria to spending and investment decisions. Given high-profile socio-economic and environmental concerns such as globalisation and climate changeClimate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
, governments are increasingly concerned that our actions meet the needs of the present without compromising the needs of the future.
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.
Devolved and 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.
To help local governments improve sustainability and reduce environmental impacts the California Sustainability Alliance
California Sustainability Alliance
The California Sustainability Alliance is an organization funded by the California IOUs to bring together key stakeholders needed to overcome the obstacles of sustainability. The Alliance was designed in 2008 to help meet the State’s aggressive climate, energy and other resource and environmental...
, 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 organisation must therefore take a broad approach to sustainability, reflecting localised economic, environmental and social needs as well as cross-cutting sustainable development targets such as whole-life costing.
Private Sector
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. 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.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.
Policy development
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 MayorKen Livingstone
Kenneth Robert "Ken" Livingstone is an English politician who is currently a member of the centrist to centre-left Labour Party...
’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.
Approaches to Sustainable Procurement
While there is no strict definition on how organisations implement sustainable procurement, there are two approaches that can be combined:Product-based
This is where an organisation examines a products movement along the supply chainSupply chain
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...
and assesses the environmental
Natural environment
The natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....
credentials of themselves and of their suppliers. This path is commonly used when an organisation wishes to understand the impact of a product or product range for strategic and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
purposes. This approach can also provide a vivid picture of supplier processes.
Supplier-based
An organisation may analyse the CSR managementManagement
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
systems of a supplier and whether its practices conform with law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
and with the CSR standards of "buying" organisation. Thus, the organisation 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 organisation, along with whether suppliers are meeting the requirements of law.
External links
- Sustainable Procurement Task Force
- Mayor of London, the London Assembly and the Greater London Authority
- ICLEI - Local Governments for Sustainability, Sustainable Procurement Team
- Serco Institute Resource Centre: Sustainable Procurement publications
- European Union Green public procurement (GPP)
- Buy Smart - Information about green procurement
- Switzerland http://www.bafu.admin.ch/produkte/02076/index.html?lang=en
- British Standard 8903. Principles and framework for procuring sustainably. Guide.