Embedding Sustainability into the Procurement Process

Forum for the Future

Stuart Williams

Why sustainability matters: living within environmental limits

Population increase from 6 to 9 bn

Consumption per head increases 4 - 6x

Clean air & water, Stable climate

Viable forests & fisheries, Biodiversity

Source: The Natural Step

Beyond the environment: the triple bottom line

CLIMATE

BIODIVERSITY

& RESOURCES

WASTEWATER

SHORTAGES

POLLUTION

Living within environmental

limits:Ensure natural

resources to support life remain unimpairedEMPLOYMENT

LABOUR

RIGHTS

HEALTH

Ensuring a strong, healthy & just society:Meet diverse needs of all; promote wellbeing, inclusion & equal opportunity

GROWTH &

REGENERATION

Achieving a sustainable economy:Strong, stable, efficient & fair

What is Sustainable Procurement?

Acquiring goods & services that:

• Meet users needs

• Deliver long term Value for Money

• Maximise social and economic benefits

• Minimise damage to the environment and health

UK Public Sector Spend£150 bn

Some general principles

• Fossil fuel usage• Water consumption• Transport• Excess packaging• Disposable items• Hazardous materials• Sweatshop labour

LESS

• Energy & resource efficiency • Renewable energy• Recycled & reusable items• Local supply• Sustainably managed resources

MORE

Why buy sustainably?1. Whole life cost savings

Increasing costs• In 2004, NHS gas bills rose 57%;

Council energy bills rose £100m • Landfill tax will continue to rise to

£35/tonne• EPC “Cap and Trade” will place

cost on CO2 emissions• Domestic water bills rise 19%

over 5 years

Sustainable Products• Use less energy, water,

emissions and consumables• Create less waste and easier to

recycle• Are less hazardous to use and

dispose of• Have a longer life (reusable vs

disposable)

Use collaborative procurement to raise standards and leverage prices

Why buy sustainably?2. Reduces risk and protects reputation

Risk• Anticipate potential new

legislation and costs• eg WEEE and ROHS directives

• Avoid supply shortages by reducing dependence on scarce resources• eg Use of sustainably managed

timber

• Anticipates changing environmental constraints• eg Buildings designed to operate

in hotter, dryer summers

Reputation• Many examples of organisations

tainted by poor procurement decisions• Government offices using

illegal tropical hardwood• Electronics and clothing firms

using sweatshop labour• Contaminated battery eggs

causing health scares

Why buy sustainably?3. Government expectations

Procuring the Future: UK Action Plan• all Chief Executives held accountable • mandatory minimum environmental standards • performance measured against the Flexible

Framework • investments and auditing based on

sustainable Long Term Value for Money rather than short term cost cutting

Why buy sustainably?4. Central Government targets

All Central Government departments must:• Be Carbon Neutral by 2012

By 2020• Recycle 75% of the waste • Reduce waste by 25%• Reduce water consumption by 25%• Increase energy efficiency by 30 % per

square metre

Councils should aim to meet or exceed these targets

Why buy sustainably?5. Delivering long term Value for Money

• Spending public money in the long term public interest• Without undermining health, environment and

opportunities

• Delivering pan-public sector savings• Kick starting innovation and new

technologies

Sustainable procurement = Good procurement

Think upstream

Improvesuppliers

Demand review Specifications Evaluation Supplier development

Tender Process

Infl

ue

nce

TimeIn design and procurement, the ability to influence cost and performance declines with time

Prequalification

Favour sustainability

Specifysustainability

Shortlistresponsiblesuppliers

Reduce demand

Raw materials extraction & processing

Manufacturing Transportation Usage Disposal

Consider the whole life cycle

Minerals, timber, oil, water, electricity, fossil fuels, pesticides, labour, £

Heavy metals, greenhouse gases, agrochemicals, dioxins, landfill waste, traffic congestion & accidents, £

Recycling & Reuse

Source PlanSource Plan

Use the SP Tool to help plan your tenders

Ease of ImplementationEasyHard

Low

? Medical consumables

? IT equipment

? Printing &stationery

? Waste contracts

? Electricity

1 2 3

1

2

3

“Quickwins”

Long term objectives Top Priorities

Ease of ImplementationEasyHard

Low

? Medical consumables

? IT equipment

? Printing &stationery

? Waste contracts

? Electricity

1 2 3

1

2

3

“Quickwins”

Long term objectives Top Priorities

PrioritisedCategories

Sustainable Procurement ToolPrioritisation Matrix

ContractsDatabase

ProcurementPlan

Demand Review Action Planning Whole Life Costing

The outputs from the SP Tool should direct the tender process

Prioritise the best opportunitiesIm

pac

t

High

Ease of ImplementationEasyHard

Low

1 2 3

1

2

3

Quickwins

Long term objectives

Top Priorities

⊚ Building contracts

⊚ Medical consumables ⊚ IT equipment

⊚ Printing & stationery

⊚ Waste contracts

⊚ Transport

⊚ Medical implants

Reduce or eliminate demand

Purchase avoidance reduces health and environmental impacts and saves money

Identify impacts, opportunities and procurement interventions

Supplier Pre-qualification: limited opportunities

Shortlist most responsible suppliers:

• Exclude those with recent prosecutions

• Demand EMS for on site services• Demand proof of fair pay and

working conditions

Encourage local SMEs and Social Enterprises

As a minimum:• Advertise locally• Minimise red tape

Consider:• Local lotting to break down

contracts • Ring-fencing a pilot contract • Encouraging collaboration and

subcontracting• Briefing suppliers prior to ITT

Use specifications to design-in sustainability

• Use specifications as minimum standards

• Specify out undesirable features; specify in positive aspects

• Always market test your specifications • They must be challenging but

deliverable and affordable

Process / Production• Organic / free range• Sustainably managed timber • Renewable energy

Attributes• Recycled content• Mercury free• Hybrid engines

Functional / Performance• Energy / fuel efficiency• Carbon emissions• Water efficiency

Evaluation:Beware the last minute, half-hearted approach

DON’T• Use evaluation criteria as a

substitute for robust specifications• Give sustainability a 10%

weighting then forget about it• Evaluate on “purchase price”

alone

DO• State sustainability as a criteria in

the OJEU notice• Reward performance above and

beyond specifications• Reward strong “method

statements” and credentials• Ensure products durable & “fit for

purpose”• Evaluate on Whole Life Costs

Contract award and monitoring:Are you getting what you paid for?

• Ensure the delivered products & services continue to meet your original specification

• Monitor quality, performance and durability• Use incentives / penalties / caps to

encourage good performance:• Gainshare energy savings with building

contractors or energy firms

• Cap waste costs to encourage waste contractors to minimise waste

Ts&Cs should support your specifications and be defined from the start of the Tender Process

What you can’t achieve through tendering:Target through Supplier Development

Example NHS contracts

Laptops and Desktops• Energy saving, recyclable, upgradeable, low hazardous content, recyclable packaging• Over 30% saving for some Trusts

Waste minimisation• Gainshare incentives, new recycling schemes, non-incineration technology• Cost neutral with future savings expected

Surgical gowns and drapes• Switch from disposable to reusable• Purchasing and clinical waste savings

Multi-functional Devices• Printer replacement and smart software• Up to 40% savings anticipated

The challenge for the public sector

Barriers

Perceived:• Too expensive / poor VFM• Against EU procurement

directives

Solutions• Whole life costing• Economies of scale reduce

prices & raise standards• Tools, training & awareness

Genuine:• Fragmented procurement

• Poor governance• Duplication of contracting

effort• Suppliers divide and

conquer• Under-resourced supply

teams

• Lack of SP leadership

• Promote collaborative procurement & spend hierarchy• Reduces duplication

• Introduces best practice category management

• Frees up local resource

• Reflect in new CPA framework

Questions, Answers and Further Information

Stuart WilliamsProcurement LeadForum for the Futures.williams@forumforthefuture.org.uk

tel: 07779 600 692