Caveat emptor — buyer beware! Sustainable procurement is the way forward for business. But it’s easier said than achieved. Jon Herbert considers how and why.
Few companies can avoid procurement — sourcing, buying, using and disposing of everything that makes sound businesses tick. But purchasing decisions are almost always fraught with risks. Yes, sustainability can increase your risks. However, for savvy companies, there are significant opportunities too, with help available through the tangled maze.
The problem is that buying involves unknowns. Good risk management to minimise exposure is well established. But what happens when the rules change?
In simple markets, prices rule. Real markets are seldom so simple. In practice, quality and delivery have to be balanced with reputation and efficiency. Governments also make major strategic changes when they decide to intervene and skew basic market frameworks for high altruistic reasons.
Sustainability is a prime example. It puts “stakeholders into the price tag”. Social and environmental issues become as important as making money. As a result, solutions may cost more. But at the same time new competitive markets are created. Although not everyone has exciting path-finding solutions to sell, this can be a major opportunity for flexible and innovative companies.
One enterprising New York power company is often quoted as a textbook example of sustainability in action. It made profits by teaching people how to save energy, because that is how the regulator structured the market. Success can be about adaptation.
Sustainability changes the procurement ground rules still further. The new factor in the equation is the “whole-life” cradle-to-grave concept. Suddenly, you find yourself having to work within an extended supply chain. Its origins can be in remote parts of the world, its finale years into the future when materials and energy are returned back to nature. Time and geography quickly become your concern. Those at the beginning of the supply chain directly affect your own sustainable profile. You in turn are part of the sustainable credentials of your customers higher up the chain. And so on, ad infinitum.
It is here that sustainability can make life more difficult. Risk assessment is based on a four-part basic calculation. It is important to pinpoint all causes that can affect someone else — aspects. What and how severe will the effects be — impacts? What is the chance of these happening? And what steps can be taken to avoid or minimise the effects?
It is worth remembering that not all impacts are necessarily bad. “Good” risks, where the outcomes make life better, are called opportunities. Turned into a transferable benefit, they can create a distinctive competitive edge.
However, extended sustainable supply chains can generate potentially challenging risk assessment problems. Sound risk assessment depends on reliable knowledge and information.
With local sourcing, the effects of risk can be quite immediate and easy to spot. How can hard-pressed facilities managers possibly do more complex sustainable supply chain calculations? Part of the answer is that the people who might seem to be making life harder are also working to make it easier.
Whilst governments and their agencies skew markets for sustainable objectives, they also work to provide solutions. International conventions and protocols, such as procurement standards, can help to transfer and share risks quite legitimately so confident purchasing is possible.
FSC timber is a case in point. By insisting on a closely policed certification system, responsible sourcing is taken away from the individual buyer and accepted centrally. Nevertheless, there is still much more that companies can do to take the initiative.
There is no hard and fast definition of sustainable procurement. The Sustainable Procurement Task Force sees it as a process where organisations “meet their need for goods, services, work and utilities in a way that achieves value for money on a whole-life basis in terms of generating benefits not only to the organisation but also to society and the economy whilst minimising damage to the environment”.
The Environment Agency (EA) goes further. Sustainable procurement is not an add-on, it suggests. Given the market framework, sustainable solutions can often cost less over the purchase’s complete life cycle.
The Agency notes the growing realisation over 20 years that “we are living beyond our means” on a global scale. This makes us all inextricably linked in a vast supply chain. Therefore, its own approach and advice go beyond current government commitments.
Like many businesses, the EA estimates that some 70% of its own environmental impacts come from goods and services it buys from suppliers. This highlights the need to work very closely with members up and down the supply chain in delivering innovative answers.
Before detailing its approach, a swift overview of why purchasing is complex in the modern world helps to colour in more of the back-drop.
The sea change created by sustainability is a much greater awareness of the many ways in which industrial activities can affect people and the planet in a world connected by swift transport links that faces troubling factors such as climate change.
This means taking a fresh look at everything. For example, it is important that all feed-stocks, products and raw materials in manufacturing processes cause no damaging effects at the place where they are used. But it is just as vital that they inflict no harm where they are originally created or finally released back to the environment.
This extends to health, community/environmental and working condition circumstances at source. In a globalised world, this includes imported minerals, plus low-cost goods from developing nations.
Similarly, waste can have a long life. The sustainable answer is that there is no waste, other than controlled hazardous substances. Waste is a commodity in the right hands. Car manufacturers in Europe must now design vehicles for full, final sustainable disposal.
Conversely, tales of hazardous electronic or toxic waste abandoned in developing countries for disposal that never happens are still common. In an online world, nothing remains secret for long.
The implication for facilities managers is to think at three levels: historically, in the present and into the distant future. A tall order? Clearly, this is a hard task for single companies unaided. But help is at hand. For example, firms must account for the provenance of all chemicals that they consume or produce under REACH legislation introduced across the EU four years ago. Approximately 30,000 different chemicals are estimated to be in common industrial use. REACH creates a requirement and also a solution to formally classify common chemicals, albeit an ambitious project that could take many years to achieve.
Competitive markets are responding with other sustainable solutions, such as green energy. Larger UK companies must now cut their carbon emissions to meet EU standards. Smaller firms are encouraged to do the same. Using non-fossil-based fuels is part of the answer. Their higher price encourages greater energy efficiency, which in turn should bring both business and environment gains.
Most primary UK power suppliers now provide energy guaranteed 100% from renewable sources such as wind-power, bio-mass, hydropower and an increasingly wide range of inventive sources not based on oil, gas or coal.
You cannot prove at first-hand that these energy sources are green. But it is entirely reasonable to assume that the claims of established major household brand names are correct.
Another trusted brand developed deliberately over recent years is the Fair Trade label that applies particularly to agricultural, horticultural and food products.
Public to private sector
Green procurement had its genesis in public sector policy and the triple-bottom-line accounting measures of “people, planet, profit”. This is now highly formalised in government transactions. Additional principles are inclusiveness, equality, diversity, regeneration, integration, plus the care and welfare concerns of minorities, children, the elderly, disabled and people lacking basic skills.
Keeping this in mind can be important for businesses trying to sell into the public sector. For public sector buying managers, the codes to which they must adhere are contained in Government Buying Standards, with cost, carbon and waste-to-landfill cuts as high-level aims.
There are currently some 50 standards in 10 priority groups designed to meet minimum mandatory specifications. Specifically, the standards have been developed to procure goods and services that are cost-effective across their whole-life, from cradle to grave. Even the ultra cost-conscious Treasury sees sustainable procurement as good procurement.
Ask yourself tough questions
Interestingly, this raises key questions relevant to facilities managers. For instance, if a product is made of recyclable material but needs to be replaced annually, is it more sustainable than a non-recyclable item that lasts for five years?
Similarly, is it better to buy a more energy-efficient but imported product shipped via long transport routes than an alternative that consumes more energy but is manufactured and maintained locally? These are core sustainable questions.
The EA has developed sustainable procurement tools that it is happy to share with other organisations — a key aspect of sustainability is to circulate ideas and good practice.
It also poses some more interesting questions for most purchasing managers:
- “Is there an opportunity NOT to buy?” In other words, can existing resources elsewhere in the organisation do the same job?
- “Can you re-think the need?” A lower spec product might do just as well.
- “Are you making the best use of technical innovation?” Fast-moving changes in IT are an example.
Further questions might be, “Are you buying as little as possible? Could you reuse or buy recycled? Do you have any policies, commitments or targets to meet?” Buying sustainable FSC timber is an example here.
Particularly high-risk areas identified by the EA include civil engineering, building, textiles, plant and equipment, hospitality and design and print. The Agency’s tips include getting board-level support so that your whole organisation buys into the sustainable purchasing concept.
It is equally important to carry out very careful analysis and category management to have an exact picture of what you are trying to achieve. Always focus on high-risk areas first. Always challenge the need to buy. Always consider the social and financial aspects of sustainability, and not just the environmental. Consider life-cycle impacts. Use product standards. Share knowledge with suppliers and networks. Work closely with your suppliers and clients. Recognise the benefits of diversity and equality. Finally, make sure you market your sustainable activities.
BS 8903, published in 2010, is designed to help businesses apply sustainable procurement principles, with initial advice for newcomers and a roadmap for the more experienced.
The construction industry has had its share of sustainability problems. ISO 10845-3: 2011 formalises the relationship between suppliers and contractors in a primary area of industry that for many years has lagged behind in material, energy and waste practices.
Sustainability means opportunities as well as responsibilities. Help is available. Meanwhile, a good starting point is to consider the big picture as imaginatively as possible.
Last updated on 12/02/2013
First published by Croner-i on 12 February 2013