Strategic Sustainable Procurement

Law and Best Practice for the Public and Private Sectors

Colleen Theron, Malcolm Dowden

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351274463
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Procurement is playing an increasingly strategic role as a lever for sustainable development and social and environmental responsibility. Greater regulation on sustainable procurement in the public sector, including significant changes to the EU Directive in April 2014, are driving this change.This comprehensive guide to sustainable procurement by practising legal experts Colleen Theron and Malcolm Dowden distils key developments in EU and UK public sustainable procurement legislation, government guidance and policy; provides an introduction to sustainable procurement more broadly; provides case studies and practical examples on contractual aspects of procurement; shows you how to set up a sustainable procurement strategy; and contributes to the development of sustainable procurement policy. There is also increased emphasis on "clean" supply chains in the private sector, as best practice seeks to mesh with public sector requirements and reduce the risk that bids for public contracts might be undermined by adverse environmental impacts or social misconduct along the supply chain.Private sector companies should act now to establish best practice sustainable procurement principles to minimize the risk of litigation; several international standards are embedding the principles of sustainable procurement into their requirements.The book also offers practical examples of what sustainable procurement entails, whether the organization is bidding for public sector contracts, in need of meeting tender requirements, looking to obtain certification for a standard, or is simply seeking to improve its supply chain management and implement best practice.

Chapter 1
Introduction

WHY DO PRIVATE SECTOR ORGANISATIONS need to understand and adopt public sector procurement principles and procedures? Quite simply because many large private sector organisations are seeking access to the estimated €1000 billion a year worldwide trade flows from public procurement,¹ and those private sector bidders must ensure that they, and their supply chains, meet the requirements set by contracting authorities which are, in turn, driven by the need to comply with procurement law, regulation and policy objectives.

The strategic role of purchase and supply as a lever for sustainable development and corporate social and environmental responsibility is increasingly important. It is not only manifested in greater regulation on sustainable procurement in the public sector, including significant changes to the EU Directives adopted in April 2014, requiring implementation within two years by EU Member States. There is also increased emphasis on ‘clean’ supply chains in the private sector, not least to reduce the risk that bids for public contracts might be undermined, or even ruled out that the pre-qualification stage, by adverse environmental impacts or social misconduct along the supply chain. Private sector companies are also increasingly seeking to establish best practice sustainable procurement principles to minimise the risk of litigation. Several international standards are embedding the principles of sustainable procurement into their requirements as well. In both the public and the private sector there are moves to improve the environmental and social performance of companies through supply chain management.

However, sustainability and sustainable development are neither the sole nor even the principal objectives of procurement. Indeed, until relatively recently public sector procurement procedures could not legitimately be used to advance broader social policy objectives such as environmental performance or sustainability unless a clear and objective connection could be made with ‘value for money’. The use of public sector purchasing power as a lever for broader policy objectives depends in large measure on the ability to move from evaluation and award criteria geared to the lowest price and towards criteria designed to identify the Most Economically Advantageous Tender (MEAT). The MEAT approach allows procurement professionals to achieve the ‘five rights’ – the right quantity of the right quality at the right time, from the right source and at the right cost.

Beginning with legislation, international standards and the scope for legal challenge, this book provides direct and actionable guidance to professionals who need to write sustainability specifications, design and implement evaluation and award criteria and manage delivery of contracts, using risk management enhanced by adopting a more sustainable approach. A key issue to be tackled by organisations over the long term will be addressing the relationship between sustainability and value creation.

During a series of preliminary workshop sessions that led to production of this book, we developed and discussed a series of case studies designed to contextualise, explore and test the principles. They are set out below, and referred to throughout the text.

Sustainable Procurement Case Study

The Central Counties Purchasing Organisation (CCPO) is one of the UK’s largest public sector professional buying organisations. It operates on a not-for-profit cost recovery basis and is committed to delivering best value to its customers, suppliers and local communities. CCPO is also committed to the promotion and adoption of e-procurement and to embedding the principles of sustainable procurement.

CCPO primarily serves:

• the education sector (schools, academies, colleges and universities)
• local authorities
• central government agencies and ministries
• the NHS and emergency services (‘blue light’ services)

CCPO is currently working on the following matters, intended to serve as best practice models:

procurement of energy solutions for local authority housing and education:

The overall brief is to achieve measurable reductions in 1) energy costs, 2) greenhouse gas emissions and 3) energy efficiency ratings. A key challenge for CCPO is to achieve those results across a mixed portfolio of properties. Participating contracting authorities are also keen to promote local employment and business opportunities and to demonstrate strong sustainability credentials. To that end, CCPO has been instructed so far as possible to consider how far the overall project can be broken down into lot sizes likely to attract bids from small and medium-sized enterprises within the areas served by the contracting authorities. There is also a strong policy directive from the contracting authorities to ensure that the process promotes the development of innovative technologies and techniques.

Procurement of catering services for a major new leisure and conference facility associated with a new arena to be used by a premier league ice hockey team and as training facilities for the national ice skating association’s elite skaters:

The venue is to be used for conferences, weddings and other large-scale social events. The ice rink is convertible for use as a concert venue. Freehold ownership of the scheme is to remain with the contracting authority. Catering services are to be procured directly by the contracting authority and sublet to private sector organisations using the facilities, including the national ice skating association. CCPO’s remit is to ensure that the catering services meet the highest standards of sustainability, and the contracting authority has made it clear that it is committed to supporting the Fair Trade initiative and to ensuring that any events held at the facility can be certified ‘carbon neutral’. They are also wondering if they should adopt ISO20121 as a benchmark.

procurement of clothing, linen and laundry services for hospitals and ‘blue light’ services:

CCPO recently commissioned a research report that highlighted the environmental impacts of laundry services for hospitals and ‘blue light’ services. Based on that report a group of contracting authorities within CCPO’s region have commissioned CCPO to develop a procurement approach that would significantly reduce the relevant impacts. CCPO’s remit specifically includes an instruction to consider issues such as the sourcing of uniforms, linen and other materials required for the efficient operation of the relevant services.

Chapter 2
Defining Key Concepts

What is sustainable procurement?

THE WORKING DEFINITION of sustainable procurement proposed by the Sustainable Procurement Task Force (https://www.gov.uk/government/publications/procuring-the-future) is: ‘A process whereby organisations meet their needs for goods, services, works 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.’² Sustainable procurement is broader than, and must not be confused with the term Green Public Procurement (GPP),³ which emphasises only the environmental impact throughout the lifecycle of goods, services or works. Sustainable Procurement isn’t simply about being ‘green’; it includes social and economic considerations, too.

A joint paper by PWC and Ecovadis4 (‘the PWC report’ – http://saulnierconseil.com/wp-content/uploads/2011/01/Value-of-Sustainable-Suppliers-INSEAD-Dec-2010.pdf) describes sustainable procurement as ‘taking into account economical, environ mental and social impacts in buying choices. This includes optimising price, quality and availability, but also environmental life-cycle impact and social aspects linked to product/services origin.’

Environmental life-cycle

The significance of environmental life-cycle impact was highlighted by a project that formed the basis for our case study concerning the procurement of clothing, linen and laundry for hospitals and ‘blue light’ services. That case study stemmed from an exemplary project conducted by the City of Zurich in 2008–09. The project involved the procurement of workwear, initially for the police force.

http://ec.europa.eu/environment/gpp/pdf/casestudy8.pdf

A pilot was conducted in which 525 100% organic cotton shirts were purchased and presented for user and laboratory tests. On the basis of better performance and user satisfaction, a tender procedure for the annual purchase of approximately 4000 shirts was launched, using the following criteria:

Subject matter of the contract: Procurement of 100% organic cotton police shirts.

Specification: 100% organic cotton, non-iron long and short-sleeved shirts with detailed finishing. Fabric must comply with the Eco-Tex Standard 100 Class II or equivalent. The criteria underlying this standard set limit values for potentially harmful substances at all stages of processing for textiles which are in direct contact with skin. The standard also sets requirements for the use of biologically active and flame-retardant products and minimum levels of colour-fastness.

While the raw material costs for organic cotton are higher than non-organic, the overall effect on the price of the finished garments is minimal – the cost per shirt is approximately 10% higher. However, the higher initial purchase price must be assessed in light of the improved quality and corresponding longer life expectancy of the shirts. 1000 police officers have benefited from these higher-quality and lower-impact garments since 2009.

The production of non-organic cotton is an intensive agricultural process, with the use of pesticides and mineral fertilisers affecting soil and water quality and biodiversity, as well as generating greenhouse gas (GHG) emissions. Further GHG emissions accrue at the spinning, dyeing and finishing stages, as well as during transportation and use of the finished product. Zürich identified a potential difference of 5 kg CO₂e per kilogram of cotton fibre when organic and non-organic production methods were compared. Further reductions were realised by the use of 20% hydropower at the spinning mill and heat recovery at the dye house. While the total volume of GHG emissions saved is relatively low, the cost per tonne of CO₂e reduction compares favourably with other possible measures (such as building improvements), making the purchase of textiles a ‘low-hanging fruit’ for authorities wishing to implement greener purchasing.

BS8903⁵ defines sustainable procurement as ‘good procurement and should not be viewed as an abstract, idealistic goal but as a practical and achievable objective for all organisations, large and small’.

The Queensland Government (www.hpw.qld.gov.au/SiteCollectionDocuments/SustainableProcurementDefinition.pdf) defines sustainable procurement as ‘a process whereby organisations meet their needs for goods, services and capital projects, 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, the economy and the natural environment’.

All of these definitions highlight the integration of economic, social and environmental issues as part of the consideration in developing a sustainable procurement strategy to deliver value for money.

Are sustainable and ethical procurement the same thing?

According to the CIPS (www.cips.org/Documents/About%20CIPS/CIPS_Ethics_Guide_WEB.pdf), ethical procurement can be defined as procurement processes that respect fundamental international standards against criminal conduct, such as bribery, corruption and fraud and human rights abuses, including human trafficking.⁶ In companies that apply an integrated approach to managing their risks, ethical procurement requirements will fall under their sustainability framework and within their sustainable procurement strategy.

To address business risk of unethical procurement, many businesses will have established a code of conduct, setting out the minimum standards and parameters for procurement. Codes of conduct refer to an expected way of behaving. They can be supplemented by mainstreaming their ethical values throughout the procurement policy. For example, the procurement policy may include identifying those practices that are unacceptable (such as slavery and fraud) and how the organisation will deal with conduct that violates the organisation’s policy and any code of conduct signed up to by the supplier.

Organisations should therefore ensure that principles set out in their codes of conduct are reflected in their procurement strategy and purchasing decisions.

To what extent are ethical considerations relevant to sustainable procurement?

The screening of bids based on ethical considerations is often limited to a requirement for certification that a supplier has not recently violated any laws that prohibit bribery, environmental compliance or employment issues. There is often a gap that under the current requirements where business ethics do not extend to compliance with human rights. In the International Corporate Accountability Roundtable (ICAR) (http://accountabilityroundtable.org/wp-content/uploads/2014/01/ICAR-Government-Procurement-Project-Geneva-Summary-Document-Final.pdf) summary study on what human rights are applicable to US government procurement, they suggest that this gap should be made more clear and potential or real violations in a tenderer’s supply chain should be evaluated.⁷

Nonetheless, the tendency to require ethical considerations in tenders is likely to grow. An example of how a government and governing o...