Sustainable Procurement Information Network (SPIN)

Sustainable Procurement (SP) subject matter to be dealt with for topics listed on home page.

The ODPM Circular 03/2003 on Best Value and Performance Improvement states that:

“ Within procurement the Government’s definition of ‘best value’ is the ‘optimum combination of whole life costs and benefits to meet the customer’s requirements. This approach enables sustainability and quality to be taken into account. For example, the consideration of whole life costs allows factors such as fuel efficiency and replacement cycles to be taken into account”.

The National Procurement Strategy for Local Government published by the Government in 2003 makes requirements of local government to introduce changes into procurement practices and reiterates the need to look to procurement decisions to meet the wider community benefits, including those of the environment.

Greengage Consulting when commissioned in 2003 by East Midlands Regional Assembly’s Sustainable Development Steering group to undertake research into sustainable procurement both in the region and nationally determined that their ‘working’ definition of sustainable procurement, for the purpose of the research would be:

“ Sustainable procurement is the process of acquiring goods, works and services from a supplier that provides the optimum combination of whole life costs and benefits to meet the customer’s requirement”

The researchers were of the view that this meant that environmental, social and economic costs and benefits of alternative procurement decisions should be considered when making a purchase. Not surprisingly during the course of their research they established through conversations with practitioners that this ‘appears’ to take into account:

· the contribution different alternatives make to the local economy by using local suppliers from the private and voluntary sector.

The National Procurement Strategy’s key theme of stimulating markets and achieving community benefits includes the following expectations the Government has of councils and other local authority bodies:

Councils should engage actively with suppliers, use procurement to help deliver corporate objectives including economic, social and environmental objectives set out in the community plan.

- the relationship of procurement to the community plan, workforce issues, diversity and equality and sustainability

- how the council will encourage a diverse and competitive supply market, including small firms, social enterprises, ethnic minority businesses and voluntary and community sector suppliers.

Every council should build sustainability into it’s procurement strategy, processes and contracts.

By 2005 every council should include in invitations to tender/ negotiate for partnerships a requirement on bidders to submit optional priced proposals for the delivery of specified community benefits which are relevant to the contract and add value to the community plan.

‘Findings during the research work currently being undertaken highlight that there is still uncertainty as to what sustainable procurement entails and a restating of the ‘appears to take into account’ from the Greengage work’.

Set out below is a starter for a practical ‘working ‘ definition of sustainable procurement. This is supported by a range of key features of sustainable procurement. The intention behind this supporting information is to make the working definition meaningful to as wide a range of people involved in procurement as possible.

Providing ‘key features’ of sustainable procurement acknowledges that a definition of sustainable procurement will never be enough to ensure that the concept is understood in terms of people’s everyday work in local authorities and the wider public sector. However, there is a need to improve on earlier definitions and these improvements need to be as much (perhaps for some more) about the ‘practical/ working’ focus as they do about ‘semantics’.

‘Sustainable procurement 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

Sustainable procurement should consider the environmental, social and economic

re-use; recycling options; disposal; and suppliers’ capabilities to address these

The focus for most of the recent changes in public procurement have been about the ODPM’s efficiency requirements of local authorities and much of the work to date of the Regional Centres of Excellence has been to support local authorities with this work. e-procurement and all that it embraces in terms of e-invoicing, e-auctions, use of p-cards and the market place will have brought about some improvements in terms of efficiency, cost savings related to not using the same volume of paper/number of envelopes and stamps and this can in turn contribute to associated environmental improvements.

As organisations embrace some of the key features set out below their procurement should move along the ‘sustainable procurement continuum’ and become more sustainable. An appreciation that we can view the effects of changes in procurement practice a part of a continuum perhaps needs reinforcing with some involved in procurement.

Sustainable procurement will embrace many of the improvements already being introduced in local authorities and wider public sector. A key challenge for those ‘championing’ sustainable procurement in local authorities is to establish the understanding amongst an increasing number of their colleagues that much of what they do and, often aspire to on a daily basis, actually contributes to making the local authorities procurement practice more sustainable. In the meantime local authorities often ‘underestimate’ what they are doing in terms of sustainable procurement through a lack of understanding of the terminology. This is often added to where there are ineffective means within a local authority to recognise and share good sustainable procurement practice.

For the purpose of establishing a better understanding of sustainable procurement price and quality, environment, social considerations and ethical/reputational are used as four groupings under which a range of key features can be added. Each key feature will be made more meaningful by the addition of an example/description of how this is currently being applied (ideally with contact details for those wanting more information).

- Use of accreditation as mark of quality eg Protection of Designation of Origin (PDO’s) and Protection of Geographical Indication (PGI’s)

- Collaboration with supplier to reduce costs and maintain quality after the award of the contract

- Sub-dividing large contracts into separate lots where this can be justified in terms of cost

- Weightings for quality and price, including sustainability, as part of best value criteria for overall evaluation.

(Every council should have built sustainability into its procurement strategy)

- Requirement of supplier to be prepared to follow a sustainable food procurement strategy

- contract conditions that wherever possible seek to implement the ‘authorities’ sustainability policies, for example use of 20% recyclables/re-usables in construction work

- section 106 agreements with developers will introduce environmental improvements alongside capital projects.

- Capital build projects incorporate requirements for % renewable energy production on site

- Increase the range and quantity of items procured that have % recycled content

- a clear indication of the weighting of sustainability considerations in the overall evaluation.

(By 2005 every council should include in invitations to tender/negotiate for partnerships a requirement on the bidders to submit optional, priced proposals for the delivery of specified community benefits which are relevant to the contract and add value to the community plan).

- Local employment, in particular in an environment where the volume of work is declining

- Requirement to actively participate in the economic regeneration of the locality

- Social (benefit) clauses are systematically considered and applied in contracts where possible to deliver community benefits linked to ‘worklessness.

- Social enterprise is fostered and encouraged as new way of delivery and adding value to delivery of services.

- Delivery of broader, shared community strategy of well being objectives, for example social cohesion.

- Support and encourage local distinctiveness and neighbourhood vitality [ LM3 approach].

- The local authority will not knowingly buy foods that are genetically modified or contain genetically modified ingredients

- The local authority will not buy products that have been tested on animals where alternatives are available that are of equal quality and are comparable in price

- Consider animal welfare when making food purchases and, where it is available and the price is competitive, seek to purchase food that guarantees the welfare of animals

- Encourage the purchase of products where there is evidence that the producers are fairly paid and work in reasonable conditions, particularly where the products originate from sources overseas.

The following General points are useful to have in mind when drafting and/or revising a range of local authority plans, strategies, policies and procedures:

- appropriate reference in the specification that accurately ties in and/or interprets ‘authority’ strategies, plans and policies

- it is essential to follow through an authorities sustainable procurement policies

- aligning procurement with overarching sustainability objectives and cross referencing such objectives to corporate plans, community strategy, sustainable procurement strategy and policy.

IDeA in their publication ‘Sustainability and local Government Procurement’ identify the following factors as contributing to the business case for sustainable procurement:

Sustainability and Local Government Procurement, IDeA Nov 2003, sect 1.26, p14.

Sustainable procurement can play a key role in achieving the ‘overarching sustainability objectives’ of a Local Authority. These should be clearly set out in the local authorities Corporate Plan and/or the Community Strategy and embrace economic, social and environmental considerations. The Community Strategy is seen by Central Government as the means by which local government will contribute to the delivery Sustainable Development across the UK. It is not common to see such overall sustainability objectives stated explicitly and/or succinctly in either Corporate Plan or Community Strategy. Identifying these objectives so clearly at this stage helps with the cross referencing of these to other documents not least the sustainable procurement policy and associated guidance notes.

There is a growing body of environmental law that must be given effect through procurement decisions.

Some of the early examples of ‘green products’ lacked the quality that was required and this contributed to the view that Best Value was not being achieved through ‘greener procurement’. The quality of most ‘greener products’ has now improved and this coupled with a whole life costing approach can demonstrate that cost savings can be achieved.

Continuous improvement in environmental management can itself bring about cost savings through reducing waste. Increases in resource efficient design and construction and the incorporation of greater percentages of material re-use and use of recyclates in buildings and highways programmes bring cost savings. Whole life costs can be significantly reduced with energy efficient design, given recent increases in energy costs.

Local Authorities with significant buying power in particular markets can, for example:

- encourage suppliers to develop new products with higher environmental specifications

- stimulate markets for recycled products or those with high recycled material content

- stimulate markets for services delivering the function of products at lower environmental costs.

The reliability and quality of supply of goods and services can also be influenced by the extent of involvement of local stakeholders in the delivery of services.

Forum for the Future undertook a survey of procurement professionals for the Sustainable Procurement Task Force and reported their findings in a Final Results Report in February 2006.

The following section summarises information contained in that report that relates to ‘barriers’ to sustainable procurement.

A questionnaire was distributed to 800 procurement professionals drawn from business and public sector including 400 local authority Heads of Procurement. 150 responses were received. Follow up consisted of 29 qualitative interviews with sustainable procurement professionals and question 2.1 related to ‘barriers’ to sustainable procurement.

Q2.1. Many people involved in procurement cite a range of barriers, perceived or real, to implementing a more sustainable approach. Have you encountered any of the following as barriers?

In the study barriers were scored 1-10 with 10 a significant/frequent barrier and 1 an insignificant/infrequent barrier.

The most problematic barriers are in essence financial. Most respondents felt that they were held back by the additional costs of more sustainable options(1) and an inability to offset whole life cost savings against short term budgetary limits(2). They also lack mechanisms to demonstrate the economic value of social and environmental costs and benefits (3). Simple lack of time and resource to do anything other than what is conventionally expected is also a common barrier(4). Whilst public and private sectors share these to four barriers there is a striking difference at fifth place. For public sector this is the complexity and fragmentation of the procurement processes, this is relegated to 13^th position by private sector.

The lowest scoring barriers included several which are often mentioned anecdotally as more significant. For both public and private sector respondents three of the four least significant barriers are the same: EU rules are seldom a barrier in reality. Few respondents struggle to identify and prioritise more sustainable options and the complaint that these options perform less well is comparatively rare.

Perceptions of organisational leadership vary across the sectors. For private sector lack of leadership within an organisation is amongst the four least significant barriers, wheras public sector respondents put this factor five places higher up.

Responses suggest that barriers differ depending on the extent of engagement with sustainable procurement. Organisations just beginning the work tend to cite ‘soft’ barriers-awareness, lack of information, lack of capacity amongst staff. Further in the picture becomes more complex with ‘soft’ barriers complemented by a range of issues such as resources, costs, culture and context.

3.1 Where you have been able to pursue a more sustainable approach what has helped overcome these difficulties? % saying that they had found that factor useful. The responses are incorporated into Table 2 on the next page.

The final question (5.2) asks respondents to consider which of a list of potential barriers have hindered their progress in the past:

5.2. The following have been identified as likely barriers for the public sector. Have any of the following hindered your approach to sustainable procurement in the past? Please score 1 (never) to 10 (always).

The responses from local government officers responding are set out in Table 3 below.

· Guidance to help all those involved in procurement to understand sustainable procurement and whole life costing

· Regular audits and monitoring to assess progress towards sustainable procurement and identify areas for improvement

Green procurement.

Environmentally responsible, or ‘green’ procurement is the selection of products and services that minimise negative environmental impacts. In certain cases ‘green’ procurement can bring about positive environmental impacts.

In many organisations a desire to be a ‘greener’ consumer is set against worries associated with cost, quality, legal requirements and misleading green claims. Such worries can often be unfounded and according to Leicester City Council’s Environmentally Friendly Purchasing Guide,

‘there can be significant cost savings from taking an environmentally aware approach to purchasing’.

Modern green products are in most cases more energy efficient and cost less on a whole life cost basis.
Over recent years there have been substantial increases in ‘green’ technology and excellent and effective alternatives are available with many products meeting a range of certified standards.

Leicester City’s guide also sets out what they consider to be the legal basis for including environmental considerations in the specifications for goods and products.

‘The City Council can specify and purchase products to exacting standards so long as we obtain value for money and the quality of the products is satisfactory’.

(See the full guide under Strategies, Policies and Guides).

Green Public Procurement (GPP) is much more than just purchasing recycled paper for offices. It is about tapping into a huge market and reducing a whole range of environmental impacts from the production, use and disposal of goods and services of all kinds.

The website gives details of Buying Green, The Handbook on Green Public Procurement. This can be downloaded from the linked website:
http://ec.europa.eu/environment/gpp/index.htm

Community well-being is a concept that refers to ‘an optimal quality of healthy community life’ which is the goal of the various processes and strategies that aim to meet the needs of people living together in communities. It is a complex concept meant to recognise the social, cultural and psychological needs of people, their family, institutions and communities.

Most of the factors that affect ‘ happiness and well-being’ are local and manifest in relationships within the family, with people in the neighbourhood, at schools and at work and how people feel about their immediate environment.

The interventions that can increase well-being are delivered at local level and are under the control of local government and other agencies. The Local Government Act 2000 had several principal purposes one of which was to:

· give powers to local authorities to promote economic, social and environmental well-being within their boundaries

This power was translated into a target for all local authorities and incorporated into the The National Procurement Strategy. [more info]

- Local employment, in particular in an environment where the volume of work is declining

- Requirement to actively participate in the economic regeneration of the locality

- Social (benefit) clauses are systematically considered and applied in contracts where possible to deliver community benefits linked to ‘worklessness,.

- Social enterprise is fostered and encouraged as new way of delivery and adding value to delivery of services as well as delivery of broader, shared community strategy of well being objectives ( social cohesion, local distinctiveness and neighbourhood vitality [ LM3 approach].

A lack of joint working at local level has been one of the key reasons given as to why there has been limited progress in delivering sustainable economic, social and physical regeneration or improved services that meet the needs of local communities.

Local Strategic Partnerships (LSP’s) were set up to bring together at local level the different parts of the public, private, community and voluntary sectors; allowing different initiatives and services to support one another so that they can work together more effectively. From 2007/08 LSP’s will operate in the context of a Local Area Agreement (LAA) and will need to demonstrate how they are narrowing the gap between the most deprived areas and the rest, contributing to community well-being.

Between 1995 and 2000 we lost one fifth of our local shops and services including post offices, banks, butchers and grocers. In 1960 small independent retailers had a 60% share of the food retail market. By 2000, their share was reduced to 6% while the multiples share increased to 88%.

We have witnessed the changes in our local high street and the loss of shops in villages and town centres taking with them cinemas, cafes and other services. With an average loss of 17,000 farmers per year over recent years we are losing local food producers which are overwhelmingly the small and family farmers.

The net result of these changes is that money is being drained out of the local economy.

Buying local products at locally owned businesses keeps money circulating closer to where you spend it. This creates a ripple effect a those businesses and their employees in turn spend your money locally. A little can go a long way and if everyone in a community spent a greater % locally, the multiplier effect turns that small amount into a more significant amount for the local economy.

The LM3 model was developed by the New Economics Foundation (nef) to give people a simple and understandable way to measure their economic impact.

nef determined this was needed to get people thinking about local money flows and how to practically improve an organisation’s local economy impact, as well as influencing the public sector to consider the value of social enterprise. It was designed to be quick and relatively easy, and to highlight where an organisation can improve its impact.

Thanks in part to concerns about climate change more people are stopping to consider the impact that everyday goods, including food, have on the environment. One such impact is associated with ‘food miles’ which measures the distance travelled from field to plate. Agriculture and food now account for nearly 30% of goods transported on our roads.

Food miles have become accepted as a convenient indicator for sustainability; and has led to a general movement towards local production and local consumption in order to minimize them.

There are compelling arguments for treating suppliers fairly and for being concerned about the source of supplies, whether from the UK or oversees. First is the need for sustainable supplier relationships. Mutually beneficial terms, fair practice and trust should improve the reliability of your suppliers.

Second is reputation risk. Good, ethical practice can enhance an organisation’s integrity and reputation. Organisations usually express their core ethical values and responsibilities through an ethics policy. A code of ethics sets out the way the organisation intends to conduct its business, including commitments to stake holders and guidance for staff. In addition, a specific code or standard of ethics may cover issues not covered by law concerning a particular function, such as procurement.

Research by the Institute of Business Ethics suggests that approaches to ‘ethical procurement’ often concentrate on suppliers standards and practices rather than the organiastions own policies and practices. However, ethical issues arise mainly in the following areas of procurement practice and all three should be considered:

Making the right procurement decisons can have far reaching enviromental, economic and social impacts. The volume of public sector procurement in the UK and wider EU is sufficiently large enough for it to be seen as an area that can help tackle a wide range of central policy issues, such as climate change, providing the right goods and services are procured.

The action plan produced by the Government's Sustainable Procurement Task Force identified a number of key commodity groups that would have the widest sustainability impact, and which would produce a step change in public sector procurement.

Eastern Shires Purchasing Organisation has led the way in carrying out an EU compliant procurement initiative across the key commodity groups and in October 2007 launched a new 'Sustainable Products and Services Catalogue'.