Inspiring solutions

Sustainable procurementThe world is warming up, the population is growing and we are using resources at un-sustainable rates. If we are to face down this triple threat businesses and governments need to work together in a manner unprecedented since the second world war.

The era of self delivers is long gone. Most public and private organisations do things through their supply chains and have the potential to use their spending power to influence more sustainable behaviour but few maximise this opportunity. In order to really make progress organisations need a common set of standards to work from, they also need significant behaviour change to consider wider aspects of procurement, innovation and assurance.

New era – new standard
2011 will see a new era for sustainable procurement; a subject that was virtually unknown five years ago is now one that is well known but not necessarily well defined or practised.

September 2010 saw the publication of the world’s first formal standard to describe overall sustainable procurement practice. This is BS 8903, which I hope will be enable the UK to lead the world in this discipline by adopting BS 8903 as an ISO standard in future in a similar way that the quality assurance world adopted BS 5750 as ISO 9001, the global benchmark for good quality assurance. This was quickly followed by a book on the subject from BSI publications, and guidance for the construction industry from the Construction Industry Research Association (CIRIA), both published in early 2011.

All this means that sustainable procurement is coming of age. Five years have passed since the publication of the government’s sustainable development strategy ‘Securing the Future’, which contained the blindingly obvious conclusion that government may be able to influence markets with an annual spend in excess of £175bn. ‘Procuring the Future’, published a year later, gave us the Flexible Framework, devised to summarise advice from major businesses on how the public sector may set about this task. The Flexible Framework was designed as a strategic guide to the enablers necessary to deliver sustainable procurement, it does not tell you how to do it. BS 8903 and the CIRIA guidance help to fill that gap by describing the fundamental business drivers, organisational enablers and how procurement practice needs to be done differently.

Over the past five years, many public bodies have adopted the Flexible Framework and this has made a difference. It is now time to move on to a more formal guidance standard and then eventually to an ISO standard. Public bodies could do worse than to mandate the standard to their first tier suppliers and insist on an independent evaluation against the requirement.

Changing behaviour
Standards are an important aspect of behaviour change but it is not as simple as this. In order to do something different, an organisation needs to have a reason to do so.

Organisations may have a variety of reasons to be sustainable; they may be led by personal vision, such as the late Anita Roddick of The Body Shop, by market leadership like Marks & Spencer, by competition like the automotive sector, or by public duty, like utilities and public bodies. All organisations have a unique mix of these motivations and it is vital to understand them in order to make decisions about how you need your supply chain to behave.

An example of this would be Marks & Spencer’s brilliant Plan A. This concept is ubiquitous in their stores and their offices, the vast open plan office is awash with Plan A sceensavers, posters, mugs and suchlike. They are doing this because they genuinely believe they can create a market for more responsible retailers. As part of their work on carbon footprint, they discovered that a significant portion of this footprint is in the way in which their customers wash, dry and iron their clothes. This led them to demand products from their supply chain that can be washed at low temperatures, require less tumble drying or ironing. This is a great example of a core business direction, thoroughly thought through; leading to a substantial change in the expectations of a supply chain.

Businesses and cash-challenged public bodies need a strong reason to do anything, It is no longer acceptable to have sustainability as a bolt-on extra because “it is the right thing to do” or because it is “good PR”. If you don’t have a good reason (or reasons) to be sustainable, then don’t do it. However, businesses should be aware that if you don’t do it you may not have a business for much longer.

All about cost
For public bodies the challenge is all about cost. Although treasury guidance is clear about using whole life cost as a value indicator, solutions that require capital expenditure greater than the current budget are unlikely to find favour. There is also the silo budget syndrome, one department is unlikely to spend more money to generate long term savings in another.

The perception that sustainability costs more is one encouraged by the market, many of whom will try to present sustainable solutions as premium products in some way. The most blatant example I saw was through some work I did for a major construction supplier to the public sector. Their timber merchant was happy to supply 100 per cent FSC timber at no extra cost but the joinery supplier wanted a 20 per cent premium.

The interpretation of the EU procurement rules by some public bodies does not help in some cases. The ability to negotiate and challenge this supplier behaviour is perceived to be limited. Training, guidance and good advice about what can really be done and not done under the rules is needed.

It is therefore essential to prove the link between cost savings and sustainability. It should be obvious that buying things that have less waste, use less energy, require fewer materials and support the socio/economic objectives of the public body concerned will lead to better value. Case studies are hard to find. I am pleased to say I am donating some of the hard earned social enterprise budget from my organisation, Action Sustainability to make a small contribution to the evidence base by independently reviewing and publishing some key case studies from the London 2012 programme to help prove the case. We are not being paid for this, it is an independent evaluation of the evidence. It won’t be conclusive but it will be a contribution.

The idea of innovation to support sustainability (eco-innovation is the fashionable term) is as compelling as it is challenging. I recently had a fascinating discussion with a potential client who was very interested and passionate about eco-innovation and wanted some help to get more of it into her supply chain. We had a long conversation about how all this may work when she added “….but of course we would expect the product to have a 3-year track record of reliable service, that’s our minimum standard”. By definition it can’t be innovative can it? Needless to say we did not take the conversation much further and I had to put the time down to experience of dealing with yet another procurement professional that does not get it or does not have the wit, courage or authority to take a risk.

Innovation is all about risk; if you don’t have an appetite for risk then there is no point is pretending you are encouraging eco-innovation or any other sort of innovation for that matter. It is about finding out what the market may be able to provide in the future rather than specifying things you have always had. To quote Henry Ford: “If I had asked my customers what they wanted they would have asked for more horses”. Are you the sort of buyer who asks for more horses? Or will you take a chance on something new?

For the public sector, there is a perceived clash between public duty and risk taking, which will need to be managed carefully. There is a difference between careless risk taking and risk management.

It is not all bad news. I have been leading a project recently that we call Green Dragons. The format is a bit like TV’s Dragon’s Den – CPOs get to quiz small suppliers of innovative products and decide if they are interested in having the product in their supply chain. This bit is all great fun but to be honest it’s just the beginning – positioning the product at an appropriate point in the supply chain, dealing with sceptical technical people and others is a long haul but it is worth the effort when you help a small, truly innovative supplier break new ground, deliver cost savings, environmental benefits, new jobs and local prosperity.

Until recently the application of sustainable procurement was limited to sending a standard questionnaire to all suppliers, performing some rudimentary evaluation to keep the environment people happy and making sure it is never used to make a procurement decision. The question “how do you know” was not often asked.

Times are changing though. I chair an organisation called the Commission for a Sustainable London 2012. This is an official but independent body responsible for assuring the sustainability of the London Olympics. My role reports directly to the Mayor and the Olympics Minister and I have a free hand to tell the public whether the Games are as sustainable as they were claimed to be in the bid. Other assured prequalification services such as that provided by Achilles are developing more focused sustainability criteria.

Whatever your sector; the world of procurement is changing and a shift in focus from lowest price regardless of any other consequences to consideration of wider impacts.

United Utilities
United Utilities (UU) a UK PLC based in North West England, providing water and wastewater services, embarked on a comprehensive development of sustainable procurement in 2008. UU began by providing training to all its’ supply chain staff in its organisational sustainability goals and how they could make a difference in terms of supply chain management. Staff received a combination of classroom style teaching, interactive workshops, one to one ’surgeries’, a 10-strong Knowledge Group and many informal meetings/coaching sessions.

Training of supply chain staff included:
• clarifying the scope and reach of the 12 sustainability themes that United Utilities has identified as important to their operations
• how to assess the risk and impact of these themes on a category and sub-category basis
• how to produce six-year category action plans
• how to build sustainability into the procurement process for example including sustainable questions into the pre qualification and tender documents, assessing supplier responses and setting supplier improvement targets that align to the overall UU sustainable targets.

Employee opinion surveys across United Utilities over the last three years show a significant improvement in staff perception around sustainability; specifically, UU asks their employees if they know how to take action to make the company more sustainable.

In 2008, survey results showed that less than 40 per cent scored favourably in the supply chain department; since the introduction of the sustainable supply chain strategy, this percentage has risen to over 90 per cent. This has also contributed to the retention of key talent in the department and sustainability is now a key driver for any new recruitment.

Skanska has created a comprehensive sustainability strategy aimed at supporting their corporate objective to be the “greenest construction company in the world”. A key element of this strategy is the support their suppliers on the journey “from vanilla to deep green” over a period of time and to achieve “five zeros” related to defects, accidents, environmental incidents, ethical breaches and losses. This is used to assess all projects, and helps Skanska measure and meet its sustainability objectives.

The organisation recognises that it cannot deliver its objectives without the support of its key supply chain partners and wants to engage with a supply chain that mirrors its commitment to undertake activities in a sustainable and responsible manner.

To clearly communicate its expectations and requirements Skanska has created a supply chain strategy document that sets out its sustainable procurement policy, key targets and objectives. The policy sets out very clear requirements and suppliers are being encouraged to join Skanska on the journey to deep green.

FMC Technologies
FMC is a part of a global organisation and make subsea Christmas trees for the oil and gas sector. Their current sustainability achievement is remarkable: zero waste to landfill in 2010, 28 per cent reduction in carbon emissions by 2010 compared to 2005, and 25 per cent reduction in water consumption in the same period.

The next stage of their journey is also rather incredible. They have planning consent to build a 1.5mW wind turbine on their site to generate electricity and they plan to make carbon part of their competitive evaluation in the near future as they strive for a zero carbon supply chain in the long term.

For the past two years they have been donating money related to the emissions of their flights (necessary to support their equipment in the field) to a fund called Greenshoots. This is used to fund carbon reduction projects in the community. For two years they have been inviting their clients to “pay” for the carbon embodied in their product by contributing to the fund, which has been met with indifference until recently. In the past few months two very large clients have decided to get involved, which has led to the Greenshoots Fund being established as a charity and an application will shortly be submitted to the Scottish Charity Regulator.

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