What does COP26 mean for Green Procurement practices across the world?

The Conference of the Parties (COP) to the United Nations Climate Change Conference / Treaties is currently taking place in the Scottish city of Glasgow, United Kingdom. The principle aims of the COP26 conference are to address climate change through a reduction in carbon emissions into the atmosphere. While there are a wide variety of strands to the conference, covering lots of different topics and areas, they all converge on setting dates by which countries can achieve what is called net zero emissions. Net zero emissions means a country is not emitting any additional carbon into the atmosphere. Production needs to be either offset fully through absorption or through captive technology that brings emissions inside a country’s natural absorptive capacity or does not emit any carbon at all.

All these changes will have a profound impact on how societies live especially in the medium and longer term. From a procurement point of view, there can sometimes be a lack of clarity around what this might mean in real terms for companies as they:

• Buy and sell from each other;
• Must attain new standards under trade rules; and/or
• Sell to governments around the world.

Below, we provide a summary of what end-to-end green procurement means, and what buyers can do to get ahead of and stay ahead of the curve. Suppliers can also steal a march on competitors by understanding the likely trends as green procurement principles apply to their sector.

Step 1: Develop a Green Procurement Strategy.

In incorporating a green procurement strategy, a company needs to place green buying and sourcing principles at its centre.

To do this, you need to examine how your company uses in terms of materials and services and then review what needs to change in the current procurement approach. Once buyers have reviewed what is currently being procured and what may need to change, they need to switch their focus to the overall strategic direction of the organisation over the next 2-3 years. Buyers need to ask what kinds of new requirements are likely to arise within the organisation over that time frame. These additional, anticipated requirements can then be layered on top of the current supply requirements to develop a medium to long term view of what the organisation is likely to buy from suppliers. This portfolio of current and future requirements can then be analysed and prioritised from a carbon intensity perspective once. 

A green procurement plan can be developed to lower the carbon footprint of the overall business category by category once the green procurement strategy is in place.

Step 2: Improve Procurement Processes and Capabilities.

It’s important to ensure that buyers in a company or organisation can manage a procurement process. Whether an organisation uses a centralised procurement team or is one that allows budget holders to manage procurement they need to be supported (sometimes with some expert guidance from a lightly resourced procurement team). This kind of support should include:

• Access to company policies and protocols relevant to procurement activities;
• Access to useful templates to structure Requests for Proposals (RFPs);
• Access to supporting software, like that provided by Sluamor, that provides a workflow and governance structure for procurement;
• Access to training, like that provided by Sluamor, that can be accessed as and when it is needed; and
• Access to sourcing communities, like that provided by Sluamor, and sourcing databases, like those provided by Sluamor, that make supplier identification more efficient than relying on internet searches.

A high impact procurement strategy cannot be successfully implemented without an ecosystem like the above being created first. Green procurement works best from strong governing structures.

Step 3: Define what is needed from Suppliers.

The next step is to either make sure that the definition of existing requirements remains fit for purpose for each category of goods, service and/or construction requirement that your organisation has in its pipeline. Naturally, shifting from traditional procurement to procurement that is centred on green performance criteria can have a significant impact on how requirements are defined from a quality and cost perspective.

Further to the above, new requirements need to be assessed from the beginning, to comply with your organisation’s green related objectives. Depending on how indepth your company goes within its strategy, this can include going very deep, right into your various supply chains, to identify where the carbon load is coming from. The objective of green procurement is to minimise carbon in its totality, not merely from the point of purchase to the point of use / processing / dispatch.

It’s important that what is being sought from suppliers is clearly defined and that you are confident that what you are seeking is available before you go out to the market.

Step 4: Select Green Suppliers.

When an organisation clearly defines what it needs and articulates this, the Request for Proposals (RFP) issued to the market will have well developed criteria against which the goods and services being procured can be assessed. For green procurement, this will mean that goods will need to have certain performance characteristics that are likely to be pass / fail in nature. For goods and service organisations, company-wide accreditation with systems like ISO 14001 (an environmentally focused quality management system) are likely to be increasingly common requirements to be considered as a potential supplier. Some organisations operate at the EMAS 14001 which has been developed by the European Commission and goes beyond the standards laid down in ISO 14001.

It will be important for your company to understand how sub-contracting works and the origin of goods / services, so that the management and staff can get a good grasp of how carbon intensive a supplier might be and what that could mean for your company's green procurement plan.

Naturally, for goods in particular, product testing is very important and should form part of any selection process. Simply relying on certificates of compliance is unlikely to be enough to buy with comfort.

Finally, it is also a good idea to have statements of bone fides to ensure that buyers have assurances of minimum standards throughout a supply chain. To give a practical example, it is unlikely that a vendor of mobile phones, tablets or computers can confirm that the product they are selling is completely compliant with the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides as charities have reported that carcinogenic chemicals are being used in production processes of these kinds of items with the informed prior consent of workers.

Step 5: Evaluating Proposals.

Many organisations develop award criteria in addition to the pass/fail criteria that they use to select potential suppliers. Award criteria can vary considerably especially for green procurement but they can include:

• The process of production being used;
• The product development roadmap and its implication for carbon load;
• Life cycle costing;
• Anticipated product duration;
• Service requirements; and/or
• Biodegradability / recyclability.

In some cases, eco-labels are sought (e.g. cleaning products) but it is always advisable to still test that products perform as they are intended.

Life cycle costing is a foundational and green methodology that replaces the traditional price / cost aspect of awards. Life cycle costing refers to:

• The purchase price and all associated costs (delivery, installation, insurance etc);
• Operating costs, energy, fuel and water use, spares & maintenance; and
• End of life costs where applicable including decommissioning / disposal.

In the future, life cycle costs will also increasingly include greenhouse gas emissions are part of the costing. Using full cycle costing can change sourcing dramatically as the cost takes account of savings in resource usage while rewarding durability and high recyclability.

The greenest form of procurement is based on reduced / efficient consumption. It is rarely compatible with abnormally low pricing. Where pricing from some suppliers remains very low, it is worth considering an open book pricing exercise.

It is also possible to allow suppliers time to attain improved performance. For instance, your company may want a supplier to obtain an environmental management system within 12 months of a contract award. Where this is done, your company may want to also consider multi-sourcing, so that there are alternatives tested and in place in the event that a supplier doesn’t obtain the required certification or the performance standard that your company's green procurement strategy needs.

Step 6: Manage Supplier Performance.

Supplier performance reviews are an important part on any green procurement strategy. Where a contract relates to areas that have high carbon intensity, regular analysis and review is important to be able to demonstrate that the desired results are being achieved. A key part to this is to ensure an organisation is aware of:

• The baseline entering any agreement;
• The mechanism by which the baseline will be measured in the future;
• The difference in output / impact expected during the contract cycle; and
• The performance level against the impact expected.

It should be noted that, for goods in particular, contract management post contract award has a clear link back to the quality of analysis and testing undertaken before a contract is awarded.

It is important to ensure your company has signed contracts in place, so that terms can be enforced if the goals set for the green procurement category are not being met by suppliers. As a general principle, companies should always, where possible, impose their own terms on suppliers.

Step 7: Select Prioritry Focus Areas for Green Procurement.

In terms of prioritising a company’s areas of focus for green procurement, the following areas would typically be initial areas for focus.

• Buildings and building management systems including:
  • Green procurement focused on sustainable design for new buildings.
  • Minimum energy performance standards (EPBD or above).
  • Building green procurement into award criteria for construction contracts to reward sustainability (e.g. using recycled materials / low carbon materials).
  • Focusing on high efficiency and/or renewable energy systems.
  • Air quality (key with COVID), natural light, sensors to manage working temperatures and high air quality (HEPA filtration standard cannot be retrofitted).
  • Water saving fittings in bathrooms, kitchens etc.
  • Physical and electronic systems to manage energy use, water use and waste.
  • Using contract clauses related to the building management systems and their fitness for purposes to deliver green procurement goals.
  • Getting the contractors involved in works to train the company on the use of sustainable building management processes and systems.
• Road transport vehicles (contribute 25% of carbon emissions) including:
  • Reviewing fleet size (number and/or physical size) and replacing the least efficient vehicles.
  • Sourcing vehicles with the lowest carbon impact.
  • Training staff in eco-driving, monitoring tyre pressure and using sustainable motor consumables (lubricants, adhesives etc), which is important for lean, green operations.
  • Using vehicles that have air conditioning systems with low GWP coolants (global warming potential).
  • Ensure that environmentally friendly tyres (with life cycle visibility) are being chosen.
  • Using life cycle costings that incorporate externalities beyond the actual purchase as part of the cost model.
• Energy using products including:
  
  • IT and imaging equipment: use high efficiency products, designed to be resource efficient (highly recyclable), setting minimum requirements for longevity while ensuring hazardous substances are minimised.
  • Lighting: ensure that all installations in new buildings have low power density while providing the illumination needed, buy lamps with high efficacy, use lighting controls to reduce consumption, and use dimmable ballasts where circumstances allow.
  • Ensure systems work as intended in an energy efficient way.
  • Make sure mercury content is kept low and that waste associated with installation is reusable and/or recyclable.
• Food and catering services including:
  • Specifying a minimum percentage of food that is organically and/or locally produced. Typically, these would be scored more highly.
  • Menus that focus on seasonality and reward local seasonality (i.e. from a Northern European perspective where we are based, this means no green beans from Peru or Kenya out of season).
  • Contract clauses that minimise food waste and packaging waste.
  • Clauses that reward staff with training in environmental systems and companies that operate environmental systems.

In closing, remember to use Sluamor when you need to find affordable, reliable suppliers. Just send us a message via our Contact page if you'd like to discuss, or you can forge ahead and subscribe to share your requirements.