Sustainable Procurement: Making sure you get what you want

David Baggs, CEO & Technical Director, ecospecifier global

Summary:

Sustainable Procurement is gaining broad support globally as the need for increased sustainability outcome become not just more obvious, but urgent. To achieve sustainability in purchasing once must know not just about what constitutes sustainability from a theoretical point of view, or just from a broad practical standpoint, but to ensure we get what we want from any given purchase, we need know deeply from a whole-of-life-cycle impact perspective with economic and social inputs. Only then is one ensured that the correct decision has been made. The question is, 'how can we achieve this simply within pragmatic organisational constraints?'

This Technical Note looks at this question from an organisational standpoint and looks at the implications of engaging organisation-wide processes in sustainability to deliver overall increases in productivity called 'Green Productivity' benefits, how to engage these processes and deliver simple easier procurement outcomes. The role of third party certification in reducing research time and effort and providing simpler solutions in sustainable procurement is also presented.

Introduction:

According to Batsholom and Reid¹ Effective use of tools requires a good process, which depends, in turn, on supportive mental models. To deliver sustainable procurement outcomes that actually deliver real environmental, social and economic improvement in real terms, we must first share mental models of what is sought to be achieved.  Then we need to have some 'sustainability compass' as a guidance tool and to employ detailed analysis processes such as life-cycle analysis to make sure we are getting as robust and holistic answer as we can get and decide what the important issues are and how important they are relatively. Then and only then, can we get down to the individual product comparison assessment level.

Green Procurement can however mean more than just modifying the specifications of the purchasing department, it can mean embedding the necessary mental models (understanding) and processes throughout the entire organisation then using measurement and benchmarking analysis (such key performance indicators in organisational and staff performance and at a product specification level, life cycle assessment- LCA and life cycle impact analysis - LCIA) and overall, this often requires engaging the whole organisation from the top down and generally overcoming obstacles and resistance along the way. At his level it is described as Green Productivity.

Indeed organisations like Interface the global carpet manufacturer that started their sustainability journey in eco-efficiency have, according to its Asia Pacific CEO Robert Coombs at a recent Green Building Council of Australia 'Green Leaders' presentation², realized their maximum benefits are gained when the whole organisation is engaged in green procurement, across all sectors. This is how and where 'Green Productivity' is found.

Green Productivity is derived from finding and driving the creation of synergy between sustainability initiatives engaged during green procurement processes. Whether it is using integrated design processes to design buildings or integrated policies and processes across major organisations to increase outputs, reduce costs and increase productivity, synergy delivers multiple benefits across multiple systems and allows the overall organisation, process, or system to be optimised - leading to larger overall savings by enabling and delivering different outcomes. Generating Synergy and hence Green Productivity involves a variety of processes that will now be considered.

 

Discussion:

Sustainability Compass: What is Sustainability?
The Natural Step Foundation originally from Sweden, have developed four system conditions for sustainability which when used to develop appropriate strategic questions can often be used spontaneously to provide general guidance on whether an organisational initiative, process or product purchase is heading towards sustainability or away.

1. Substances from within the earth must not systematically increase in the environment;
2. Substances produced by society must not systematically increase in the environment;
3. The physical basis for the productivity and diversity of nature must not be systematically deteriorated; and
4. Fair and efficient use or resources with respect to meeting human needs.[3]

What is a Sustainable Product?
We must also realize that the characteristics that make a product sustainable do not just relate to the materials that they are manufactured from but involve all aspects from a products' design and raw materials sourcing to the way it is used, deconstructed and re-used or disposed. It is also an emergent quality of one or more systems:

• 'supply' systems;
• 'construction' & 'manufacturing' systems;
• 'procurement' systems;
• 'demand' processes;
• 'disposal' systems;

such that the overall life-cycle impact is minimised over more than one life-cycle or
as the US Architect William McDonough and German Chemist Michael Braungart
have coined in their book by the same name, the 'Cradle-to-Cradle'⁴ cycle.

In general terms it relates to products that not only:

• are not harmful ecologically (cradle to grave);
• require minimal maintenance in use;
• don't cause human illness;
• minimise resource demand because they are:
• salvaged, or contain recycled materials;
• reusable or recyclable with minimal additional energy or processing
• Designed for Disassembly (DfD);

but are also:

• durable & low maintenance;
• minimise resource demand e.g. energy ,water, rare & non-renewable resources;
• use renewable resources;

and come with manufacturer:

• extended responsibility commitments; and
• corporate social responsibility reporting.

However, if we considered all these reductive aspects of sustainability to be the full extent of a sustainable product description, we will be missing any chance of real or actual sustainability. While we have only vague ideas of what will constitute a truly sustainable city of the future, we cannot even get there by only reducing the impacts of growing demands when the natural systems are in such decline as a result of human actions.

Biodiversity has plummeted by almost a third in the 35 years to 2005… land species have declined by 25 per cent, marine life by 28 per cent, and freshwater species by 29 per cent… the current extinction rate is now up to 10,000 times faster than what has historically been recorded as normal.

The Convention on Biological Diversity in Bonn, pledged a "significant" reduction in biodiversity loss by 2010…global inaction has already made such a goal totally unattainable^.5

Key examples of the failure to control biodiversity loss is presented in a 2005 Australian Government report⁶ that showed up to 80% of timber imported into Australia from some countries is illegally harvested and a 2004 American Forest Products and Plywood Association report⁷ that found worldwide illegal timber trade to be worth US$22.5 billion with a 16 country survey finding 20-80% of exports from every country in the study were illegal.

To ensure sustainability, the natural systems that have been so significantly degraded will need proactive support. This support has been broadly characterized by this author as 'Restorative Sustainability'⁸ and products and processes that support restorative sustainability can be identified by one or more of the following features or abilities:

• promote ecological restoration by:
• reducing past concentrations substances from within the earth;
• reducing past concentrations substances produced by society in the ecosphere;
• repairing and restoring  ecosystems and increasing the diversity of nature;
• are perpetual or self perpetuating;
• create net positive influences;
• provide multiple ecological benefits; and
• long lasting effects.

So to move towards a truly sustainable future all social and business organisations and individuals will of necessity or intent move toward organisational and behavioural patterns that support the whole gamut of sustainability characteristics and will need strong change management support as they confront the inevitable skeptic/s within and the various influences within organisations and individuals that relate to any change.

Barriers to Green Purchasing:
There are a wide variety of potential barriers that are likely to be experienced by individuals within organisations trying to create change towards sustainability. Some of these are as follows:

Organisational: Lack of /or poor:

• policy direction;
• commitment at senior levels;
• internal sustainability champion/s;
• understanding of issues;
• appropriate organisational structure; plus
• intrinsic  conservatism;
• automatic assumption of increased costs;
• identified sources of funding (if necessary);
• perception that green 'is not a business concern'.

Individual:

• 'butt protecting" - fear of failure ;
• culture of conservatism;
• lack of time (or will) to research alternatives;
• bias in specifications towards 'tried & true';
• over-focus on first cost not whole-cost;
• specifications preclude innovative solutions
• perception that 'second hand is second class'
• unwillingness to take responsibility for change;
• lack of information on alternatives;
• lack of creditable eco-assessment of products.

While these are all real concerns many are a result of a lack of understanding of the reality of the benefits of an integrated approach to sustainability resulting from the view that 'sustainability' is something that is added to the status quo rather than integrated into new processes from the beginning.

The Way Forward - Green Productivity
Green Purchasing is a purchasing strategy. Green Productivity (GP) is an organisation level strategy for enhancing productivity and environmental performance (including purchasing) simultaneously and integrates the adoption of innovative practices, processes, technologies and products as a key tool. Innovation is a primary driver of economic growth. Green Productivity greens the process of innovation to deliver not just cost effectiveness but savings. Profits can be generated via savings generated by:

• delivering greater raw and recovered materials resource efficiency;
• improved productivity in processes and people;
• increased quality in products and services;
• higher sales, as a result of changed market profile due to benefit derived from above initiatives etc

Beneficial, green competitive advantage translates into profitability because competitiveness in pricing, quality and, the integration of environmental and productivity improvements creates new business opportunities. Up until now, "Quality" has been the focus. Extending this concept to include environmental quality is not difficult, it is logical…and the market is demanding it. However, this represents still the first steps toward increased productivity. Companies that focus only on quality derive only a fraction of the benefits that can flow from taking several more key steps. Indeed many organisations have already extended their quality systems to consider environmental quality with an 'Environmental Management System' (EMS) but the majority of these tend still to be outward focused often purely on environmental harm reduction of manufacturing processes in the external environment. These companies typically will see further benefits but still not all the benefits that can be encompassed with overall organisational strategies that consider all aspects of sustainability within a company. Not just environmental and resource impacts locally, but globally, taking responsibility for the resource recovery of products used or produced, considering social and health impacts on staff (e.g indoor environment quality) and third parties particularly in relation to equity between developed and developing nations, transparency and openness of information in reporting of Corporate Social Responsibility initiatives, in short, Green Productivity.

A growing number of companies globally have engaged Green Productivity processes to find it has had major bottom line benefits and transformed the company. Companies such as Bovis Lend Lease, Electrolux, Ikea, etc have derived massive commercial benefits from the Sustainability work they have done that has engaged the whole organisation in the process and focused on internal stakeholders and well as environmental consequences.

However the first step Green Purchasing program and learn from there. There are now several major international and nationally-based programs underway with this focus to assist various sectors move in the direction of greening products and purchasing.

International Processes
International Task Force for Sustainable Products: The United Nations Environment Program (UNEP) Sustainable Consumption and Production branch within its Division of Technology Industry and Economics is hosting the International Task Force for Sustainable Products' that has resulted in a Marrakesh Task Force lead by the UK with 13 country members working in various sectors: lighting; home entertainment products including televisions, simple set-top boxes and multi-function set-top boxes; electric motors and compliance monitoring, as well as:

• raising awareness of product policy as a means of achieving international development and environmental objectives
• encouraging more innovation on product eco-design
• establishing and participating processes for improving product performance.⁹

Equator principles: More than eighty financial organisations around the world have adopted a set of principles called the Equator Principles that is already having major impacts at project levels around the world.

'The Equator Principles Financial Institutions (EPFIs) have adopted these Principles in order to ensure that the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices…

We will not provide loans to projects where the borrower will not or is unable to comply with our respective social and environmental policies and procedures that implement the Equator Principles.¹⁰

There are 10 principles that among other things requires a project to:

...maintain or establish a Social and Environmental Management System that addresses the management of these impacts, risks, and corrective actions required to comply with applicable host country social and environmental  laws and regulations, and requirements of the applicable Performance Standards and EHS Guidelines. ¹⁰

Also requiring transparency of information, full consultation with stakeholders and Independent  Monitoring and Reporting. The principles apply to all new project financings globally with total project capital costs of US$10 million or more, and across all industry sectors:

They are based on International Finance Corporation (IFC-World Bank Group) Performance Standards and Environmental Health and Safety  Policies as well as IFC Procurement Policy. IFC Procurement Policy calls up green building rating tools e.g. LEED® (and consequently systems such as Green Star™ would also apply) for its own Buildings as 'practice what you preach' demonstration so there is a potential direct link between green building rating scheme success and successful project funding. This is powerful leverage in the marketplace.

National Processes
The Australian Procurement and Construction Council (APCC) has introduced the world's first government procurement framework to incorporate all three elements of sustainability into one document. The framework is a set of national and trans-Tasman principles to guide Australian State, Territory and Federal governments and the New Zealand Government in implementing sustainable procurement.

Sustainable procurement means organisations will consider:

• strategies to avoid unnecessary consumption and manage demand;
• minimising environmental impacts of the goods and services over the whole of life
• suppliers' socially responsible practices relating to employees;
• •and value for money over the whole-of-life of the goods and services, rather than just initial cost.¹¹

The Market Leading the Way
There is ample evidence in the market that green and ethical investments are driving company share values and business offerings. The financial organisations behind the Equator Principles have done this for a reason. They know the ethical investment sector is one of if not the strongest growing financial sector. Table 1 below shows an example of a recent Cleantech Funds performance against the ASX demonstrating clearly that the market is supporting the capital value of the Cleantech stocks in this fund well in advance of the generic ASX pool of stocks and this is not an isolated example.

Table 1: ACT Cleantech Fund vs  ASX & others¹²

Further example of the growth in this sector is the massive 550% anualised growth in projects registered under the Green Building Council of Australia's Green Star™ green building rating scheme.¹³

Effective Organisations
It is importantto have effective plans and strategies in place at an organisational level to ensure Green Productivity delivers all the potential benefits it can. Some key actions towards green procurement are:

• ensure Senior Management 'buy-in'
• identify internal champions - appoint Sustainability Director or Officer
• develop, adopt & promote Corporate Sustainability Policy to drive Green    Productivity based on a 'continuous improvement model' e.g. ISO 9001, or 14001.
• consider all aspects of organisational activity
• governance
• operations
• social responsibility

Within the Corporate Sustainability Plan:

• develop a Green Purchasing Plan with category specific green tender specifications and assessment processes;
• that uses metrics the market will understand e.g. based existing: Minimum Energy Performance Standards (MEPS), Green Star, Life-cycle Assessment etc.
• Plan for & assess Green Purchasing outcomes across whole-of-organisation:
• integrate Green Procurement KPIs into relevant staff performance criteria and reviews;
• collect & publish Statistics - internally and externally;
• use corporate influence in market as a consumer to drive market change;
• analyse procurement processes and modify - products & materials, buildings, services (particularly specifications & contracts);
• use weighted assessment processes based on key environmental priorities - not just cost & fit-for-purpose issues, to choose between dislike products;
• use Life-cycle Assessment as an information source;

Innovate: A key pathway to achieving real synergy and savings in sustainability is innovation. This is can be a foreign concept for some builders and developers. However the importance of innovation is underscored by the following quote from Björn Stigson, President of the World Business Council for Sustainable Development in Geneva, Nov 2004¹⁴

Technology is a key part of the solutions for sustainable development… Innovation and technology are tools for achieving higher resource efficiency in society.

Manage risk: There is an only sometimes correct perception that innovation increases risk. Most organisations are quite risk averse, however some key questions that might assist in determining how real the risk is and whether it is worthwhile is:

• Is the risk real or perceived?
• In who's opinion?
• Are they expert in the appropriate field, if not who is?
• Is the risk worth the returns?
• How can any identified risk be externalised?

Use smart tools & collaborate: Learning from other peoples' experience and mistakes reduces time and costs.  Use online facilitation resources such as:

• Viridus: an forum for green business professionals that allows online sharing through forums, polls, blogs and facilitates direct connection through profiles, one-on-one and group collaboration.
  • see www.virid.us
• The Greenleap Network: An extensive email forum among green practitioners in Australia run by Philip Sutton of Green Innovations Inc. Membership to the Greenleap forum is free for first 12 months, then generally after that, a small fee is charged:
  • see www.green-innovations.asn.au/greenleap.htm
• see also www.green-innovations.asn.au for information on Green Innovations & resources on creation of an ecologically sustainable economy & sustainability-promoting firms:

Use third party verified information: Using or specifying products or criteria based on third party verified or certified information is a powerful, strategic tool to reduce overall research time in:

• understanding the issues and priorities;
• creating specifications; and
• weighting and tender assessment systems;
• ensuring the products you purchase will deliver the benefits you need to drive productivity;
• finding leading edge, innovative products;
• reducing risk in the purchasing process.

Examples of third party schemes include:

• Minimum Energy Performance Standards (MEPS): is a Federal Government star based mandatory differential rating system for:
  • Fridges and Freezers
  • Dishwashers
  • Dryers
  • Air Conditioners
  • Clothes Washers
  • see www.energyrating.gov.au
• Energy Star Australia: Energy Star is an international standard for energy efficient electronic equipment including computers, printers and photocopiers, and home electronics such as TVs, audio products and DVD players. It was created by the US Environmental Protection Agency in 1992 and has now been adopted by several countries around the world, including Australia. The Australian ENERGY STAR program is a joint initiative of the Australian Government, and State and Territory Governments overseen by the Australian Government Department of Sustainability, Environment, Water, Population and Communities. See http://www.energystar.gov.au
• Window Energy Rating Scheme (WERS): run by the Australian Window Association, is a 10 Star based voluntary differential rating system for analysis of heating and cooling benefits of windows and glazing, skylights and films for residential and commercial buildings.
  • see www.wers.net.au
• Renewable Energy Certificates (RECS): a numerically based mandatory differential rating system that assesses the efficiency of energy generating systems relevant to locality/conditions undertaken by the Federal Government's Office of the Renewable Energy Regulator. Products registered for RECS include:
  • solar hot water heaters
  • small generation systems e.g. photovoltaic, wind, hydro
  • see www.orer.gov.au
• "National Carbon Offset Standard: run by the Federal Government's Department of Climate Change ánd replacing the 'Greenhouse Friendly' scheme this Standard sets the requirements for verification of the embodied carbon offsets for products and companies to ensure that carbon neutrality claims made via offsets or abatement are genuine.
  • See http://www.carbonoffsetguide.com.au/resources/national_carbon_offset_standard_NCOS
• Water Efficiency Labelling Scheme (WELS): like MEPS is a Federal Government star based mandatory differential rating system for some categories of water consuming fixtures and fittings such as:
  • taps
  • shower heads
  • dishwashers
  • clothes washers
  • toilets, cisterns and urinals
  • see  www.waterrating.gov.au
• Forest Stewardship Council  (FSC): A global sustainable timber certification scheme with full chain of custody certification to ensure the timber being purchased with the logo is actually sourced from controlled sustainable forestry operations. Scheme certifies:
  • FSC 100% Certified sources;
  • FSC Mixed Sources (% mix nominated)
  • FSC Recycled sources
  • see www.fsc.org
• Australian Forestry Standard (AFS): An Australian Timber Industry initiated standard that is a member of the Global PEFC system also with full chain of custody certification. AFS (and other PEFC based timber certification schemes from overseas) are a way to ensure the timber is not illegally sourced, however certain aspects of their system are likely to lead to lower environmental outcomes than FSC.

However to deliver sustainability outside these quite narrow bands of products other third party systems that consider products more holistically using international Standards based around LCA are needed to reflect within scientific limitations the whole of life (WOL) impacts of products and buildings. Some systems that provide ratings based on these WOL impacts are:

• Cradle to Cradle: is a multi-attribute eco-label that assesses a product's safety to humans and the environment and design for future life cycles. The program provides guidelines to help businesses implement the Cradle to Cradle framework, which focuses on using safe materials that can be disassembled and recycled as technical nutrients or composted as biological nutrients. Unlike single-attribute eco-labels, MBDC's certification program takes a comprehensive approach to  evaluating the sustainability of a product and the practices employed in manufacturing the product. The materials and manufacturing practices of each product are assessed in five categories: Material Health, Material Reutilization, Renewable Energy Use, Water Stewardship, and Social Responsibility¹⁴.

• BRE Green Guide: Products are assessed using LCA methodology to generate Environmental Profiles for each product as well as various construction elements, e.g. a roof or an external wall. This allows specifiers to compare one type of element with another. Each construction element is then reported as an Ecopoint score over a 60-year period. These are the standard metrics as used to provide ratings in the Green Guide. Ecopoint scores are then used to generate A⁺, A, B⁺, B, C⁺ and C ratings.

• ecospecifier global GreenTag™: GreenTag™ is an umbrella Certification with dual certification outcomes. GreenTag™ has been designed to be adopted by Government and Corporate Codes and Green Purchasing Policy as well as Green Building Rating Tools and retail groups:

• GreenTag™ LCARate Certification is a fully detailed life cycle analysis based rating and system that is an ISO 14024 compliant Type 1 ecolabel based on a Standard that includes full ISO 14040 compliant life cycle analysis (requiring peer review of all LCI/LCA), and that produces ISO 14025 Type III Environmental Product Declarations (EPD) as part of the reporting process. The GreenTag™ standard covers all product sectors including development, construction, infrastructure, interiors, building maintenance and building operations products. The materials and manufacturing practices of each product are assessed and scored in six categories: Health & Ecotoxicity, Material/Building Synergy, Greenhouse Impact, Life Cycle Impact, Biodiversity, and Corporate Social Responsibility. A GreenTag™ Ecopoint is then used to rate the product against the impacts of a worst case business as usual product in common use in the same functional category.
• GreenTag™ GreenRate's Certification system rates and certifies products against the Green Building Council of Australia (GBCA) Green Star™ system materials calculator based credits for:
  - Flooring and underlays
  - Furniture - chairs, tables, storage and workstations
  - Joinery
  - Walls, partitions and ceilings
  Furthermore, the EPD reporting is expanded to include ecospecifier Technical Opinion as to the products relevance to all the other Green Star™ credits where third party certification is not possible.
  This green building rating tool (GBRT) pre-assessment service assesses products against the Technical Manual standards of the various Green Star™ rating tools as other building rating schemes such as NABERS and BASIX in Australia and elsewhere, schemes such as LEED®, BREEAM™ etc and then publishes the Certification Report/EPD on the relevant ecospecifier website to the country or region of the search.
  Where a product has relevance to one or more GBRT they are then connected to specific search functions for each individual Rating Tool and Credit to make finding products relevant to specific credits easy to find.

CONCLUSION
While green procurement is superficially about buying ecological, health and socially beneficial products in an economically efficient way, when organisations engage fully with green procurement strategies across all aspects of the business, plan and design systems in an integrated way and focus on ensuring quality outcomes, the Green Productivity can provide substantial benefits and often lead product development or businesses in quite unexpected directions.

For professionals looking to implement Corporate Sustainability plans research can be a significant and time consuming process. Using the experience and expertise of others is a sure-fire way to reduce research and implementation time and costs. Online forums, networks and tools such as Greenleap and ecospecifier websites together with third party verification systems such as MEPS, WELS, FSC, GreenTag™, BRE Green Book and Cradle to Cradle™ are simple and easy ways to shortcut green procurement and green productivity timescales and workloads while ensuring that the information being relied upon is accurate and genuine.

REFERENCES

1. Batsholom and Reid, in Malin, N. (2005), accessed  on 11/05/12 at http://www.buildinggreen.com/auth/article.cfm?fileName=141201a.xml
2. Pers. Comm. (25^th Aug. 2008)
3. Accessed 11/05/12 at http://www.naturalstep.org/com/What_is_sustainability/
4. McDonough, W.; Braungart, M. (2002), Cradle to Cradle: Remaking the Way We Make Things. North Point Press, New York
5. UNEP in assoc with WWF, Zoological Society of London and Global Footprint Network, (2008), The Living Planet Index, accessed 11/05/12 www.unep.org/GEO/geo3/english/221.htm
6. Jaakko Poyry Consulting, (2005), Overview of Illegal Logging, Australian Department of Agriculture Fisheries and Trade, Canberra.
7. Seneca Creek and Associates and Wood Resources International, (2004) "Illegal" logging and global wood markets: The competitive impacts on the U.S. wood products industry. Prepared for American Forest and Paper Association
8. Baggs, D. (2007) Sustainability in Context Seminar Series, Ecospecifier, Brisbane.
9. Accessed 11/05/12 at  http://www.equator-principles.com/principles.shtml
10. Australian Procurement and Construction Council, (2008), Australian and New Zealand Government Framework for Sustainable Procurement, APCC, Deakin, ACT.
11. ACT Cleantech accessed 11/05/12 at http://www.auscleantech.com.au/Pages/cleantech.html
12. Green Building Council of Australia, (2008,2009) e-letters March 2008, August 2009.
13. Accessed on 11/05/12 at http://www.wbcsd.org
14. Accessed on 11/05/12 at http://www.mbdc.com/detail.aspx?linkid=2&sublink=8