Sustainable Procurement: A Big Picture Perspective

Public procurement’s role began to evolve decades ago when leaders realized the importance of managing the supply of goods and services, not only in an efficient and cost-effective manner, but in ways that met constituent expectations. From what once was a highly transactional function relegated to the back office, procurement has become a sought-after strategic partner within public sector organizations. Leaders and policy makers understand the impact that taxpayer-generated funds can have in improving the lives of individuals and communities through social, environmental, and economic initiatives. It is no coincidence that this is occurring at a time when constituents are demanding that the resources they provide be utilized to further the values they hold. This strategic role for public procurement is commonly known as sustainable procurement.

What is Sustainable Procurement?

Sustainability usually refers to the ability of current and future generations to thrive. Thus, sustainable procurement is the process by which an organization can meet the demand for the goods and services it needs to fulfill its mission in ways that promote the social, environmental, and economic well-being of itself and of those impacted by its decisions, now and in the future.

While sustainable procurement has a strong environmental focus, it is not the same as green procurement. Green procurement focuses primarily on the environmental impact of organizational decisions and is a good first step on the way to sustainability. However, for a truly sustainable organization, we must look at the big picture.

Let’s consider sustainability using the three-legged stool metaphor common in management discussions, which argues that the success of any organization (the stool) requires its foundation (the legs of the stool) to be strong. The stool is only as strong as its weakest leg. If any one of legs collapses so does the stool. Green procurement is indeed one leg of the sustainability stool and helps assure the well-being of natural resources, critical to all organizations at some level and to everyone on this planet. However, green procurement alone does not make an organization sustainable. Sustainability requires other considerations. For example, the well-being of an organization’s social resources (employees, customers and communities that support the organization) are also critical for its success. Without thriving employees and customers, and the communities that support them, an organization cannot thrive in the long run. The same goes for financial considerations. The future of an organization that does not tend to its finances is likely doomed. For the organizational stool to be strong, all of its legs – social, environmental, and financial – must also be strong. If any of the three areas falters, the organization cannot thrive.

The belief that for an organization to thrive so must its social, environmental and economic resources is often referred to as the Triple Bottom Line or the 3Ps of sustainability – People (social factors), Planet (environmental factors), and Profits (financial factors). As Figure 1 depicts, sustainable procurement’s focus is to ensure that decisions regarding the acquisition of goods and services are holistic; in other words, that the big picture is considered when establishing the goals and policies that will govern procurement decisions.

                                                                Figure 1. The Sustainability Zone in Procurement Decisions.

Social considerations. Social considerations in sustainable procurement include the programs that support the well-being of individuals and communities, especially ones impacted by organizational decisions. This usually includes employees of the organization, residents of the local area and contractors, although some organizations have a much broader perspective that goes beyond local considerations. Sustainable procurement initiatives to foster social well-being may include: supplier diversity programs; wage and benefit requirements for employees of contractors; utilization of the local workforce; human rights considerations; educational and childcare programs; fair trade initiatives; and other programs aimed at maintaining or improving the condition of individuals and their communities, locally and beyond. The Davis Bacon act, which mandates certain minimum wage requirements for workers on federally funded construction projects, is an example of social considerations in sustainable procurement.  Another example is supplier diversity which seeks to increase the utilization of small and disadvantaged businesses in public sector awards.

Environmental considerations. Environmental considerations focus on the impact that the acquisition of goods and services may have on environmental resources. Impact considerations often include the entire lifecycle of the items being purchased, referred to as cradle-to-grave considerations. These may include considerations regarding raw materials, manufacturing processes, packaging, shipping, energy consumption, maintenance, recycling and disposal. The Resource Conservation and Recovery Act is an example of a cradle-to-grave policy that seeks to control the creation, movement, and disposal of hazardous materials. Mandating that wood used on a project is certified by the Forest Stewardship Council (FSC), which ensures that wood products are sourced responsibly, is another initiative that would be an environmental consideration. If you think this sounds like green procurement, you are correct. The environmental, or “green,” considerations of sustainable procurement help an organization understand and mitigate its impact on the environment.

Financial considerations. Almost every procurement professional has a story to tell about the perils of “low bid” decisions. Fortunately, many organizations have moved away from the insistence that lowest cost be the only driver in its procurement decisions. Today, many organizations utilize much more comprehensive and accurate methodologies for calculating the true cost of a purchase that go far beyond low bid decisions. Sustainable procurement incorporates these more comprehensive methodologies for calculating true costs, including best value procurement and total cost of ownership analyses that help organizations better understand the financial implications of a purchase.

Sustainable procurement may also include other big picture considerations such as the impact of economic development programs on its financial well-being. This is because in the public sector, revenue typically does not come from the sale of goods and services, as in the private sector, but typically from taxpayers. If local economic conditions are not thriving, revenue may suffer. In such cases, organizations may consider opportunities for sustainable procurement programs to promote local economic development, through programs such as small or disadvantaged business development, promoting the local work force, and responsible wage requirements, that improve economic conditions locally and, ultimately, result in higher tax revenue yields.

These are only a few examples of sustainable procurement initiatives. There are many others that in one way or another focus on the big picture impact of procurement decisions regarding social, environmental, or economic resources.

Taking the First Steps on the Road to Sustainability.

When looking to incorporate sustainability measures in your procurement decisions, remember that every organization has its own set of unique goals, opportunities, and challenges. Sustainable procurement is a journey that helps an organization build a road map to a more sustainable future, not a destination to be arrived at overnight. Sustainable procurement is a strategic process, and it requires careful planning to promote buy-in, relevant initiatives, and success. Incorporating sustainability factors in your organization’s procurement plan establishes the procurement function in a more strategic role and helps define value and benchmark performance, and it addresses organizational and community priorities. As you begin the journey towards sustainability, consider the following recommendations and best practices.

1. Think Big Picture. This is the first step because you can immediately begin to view procurement decisions with a broader perspective.
2. Get Buy-In. Because it has the potential to impact all areas of the organization and the community, sustainable procurement requires buy-in and a commitment from organizational leaders and policy makers.
3. Go Slow. Again, sustainable procurement is a journey, not a destination, and requires continuous cycles of planning, action, and assessment.
4. Measure and Celebrate. Benchmarking and measuring agreed upon goals are important, as is communicating and celebrating achievements.
5. Low Hanging Fruit. Easy wins will help build support for the program. Conduct a spend analysis and consider low hanging fruit that may yield quick positive achievements for your organization.
6. Engage the Industry. No one knows the supply chain better than your suppliers. Engage them in a discussion on what is possible – now and in the future.
7. Ask for Help. There is no need to go at it alone - resources are available. Consider reaching out to other agencies and subject-matter experts. Sustainable procurement is a growing field, and the list of available resources grows daily.

Conclusion

Sustainable procurement requires us to expand our view of the bottom line of any purchase to include a more strategic perspective. If we can do this, the big picture and the true impact of our procurement decisions will come into focus and help the organization, the people and communities we serve, and the natural resources that we rely upon to thrive.

Alex Denis is a Consultant in the NIGP Consulting Program. NIGP Consulting provides expert procurement consulting services and solutions to help transform public procurement into a value-added, strategic service provider in government. Powered by Periscope Holdings, Inc, NIGP Consulting is available to help entities analyze and improve your sustainable procurement structure and approach. For further information on the NIGP Consulting Program, please visit the NIGP website or contact the President of NIGP Code and Consulting, Marcheta Gillespie, at mgillespie@periscope.com or mgillespie@nigp.com