Embedding Sustainability into the Procurement Process Forum for the Future

1. Embedding Sustainability into the Procurement ProcessForum for the Future Stuart Williams

2. Why sustainability matters: living within environmental limits Clean air & water, Stable climate Viable forests & fisheries, Biodiversity Population increase from 6 to 9 bn Consumption per head increases 4 - 6x Source: The Natural Step

3. Beyond the environment: the triple bottom line Living within environmental limits: Ensure natural resources to support life remain unimpaired BIODIVERSITY & RESOURCES CLIMATE EMPLOYMENT Ensuring a strong, healthy & just society: Meet diverse needs of all; promote wellbeing, inclusion & equal opportunity LABOUR RIGHTS WATER SHORTAGES WASTE Achieving a sustainable economy: Strong, stable, efficient & fair GROWTH & REGENERATION POLLUTION HEALTH

4. What is Sustainable Procurement? UK Public Sector Spend £150 bn 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

5. Some general principles MORE • Energy & resource • efficiency • Renewable energy • Recycled & reusable • items • Local supply • Sustainably managed • resources • Fossil fuel usage • Water consumption • Transport • Excess packaging • Disposable items • Hazardous materials • Sweatshop labour LESS

6. 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) Why buy sustainably?1. Whole life cost savings Use collaborative procurement to raise standards and leverage prices

7. 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?2. Reduces risk and protects reputation

8. 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?3. Government expectations

9. 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 Why buy sustainably?4. Central Government targets Councils should aim to meet or exceed these targets

10. 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 Why buy sustainably?5. Delivering long term Value for Money Sustainable procurement = Good procurement

11. Think upstream Tender Process Reduce demand Specify sustainability Favour sustainability Improve suppliers Shortlist responsible suppliers Specifications Evaluation Supplier development Demand review Prequalification Influence Time Indesign and procurement, the ability to influence cost and performance declines with time

12. Consider the whole life cycle Recycling & Reuse Raw materials extraction & processing Manufacturing Transportation Usage Disposal Minerals, timber, oil, water, electricity, fossil fuels, pesticides, labour, £ Heavy metals, greenhouse gases, agrochemicals, dioxins, landfill waste, traffic congestion & accidents, £

13. Use the SP Tool to help plan your tenders Contracts Database Prioritisation Matrix Sustainable Procurement Tool Prioritised Categories Demand Review Action Planning Whole Life Costing Procurement Plan Source Plan Source Plan The outputs from the SP Tool should direct the tender process

14. Prioritise the best opportunities High ⊚ Waste contracts ⊚ Building contracts 3 Top Priorities Long term objectives ⊚ Transport ⊚ Medical consumables ⊚ IT equipment ⊚ Printing & stationery Impact 2 ⊚ Medical implants 1 Quickwins Low 1 2 3 Hard Easy Ease of Implementation

15. Reduce or eliminate demand Purchase avoidance reduces health and environmental impacts and saves money

16. Identify impacts, opportunities and procurement interventions

17. 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 Supplier Pre-qualification: limited opportunities

18. 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 Use specifications to design-in sustainability

19. 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 Evaluation:Beware the last minute, half-hearted approach

20. 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 Contract award and monitoring:Are you getting what you paid for? Ts&Cs should support your specifications and be defined from the start of the Tender Process

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

22. 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

23. Barriers Perceived: Too expensive / poor VFM Against EU procurement directives The challenge for the public sector 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

24. Questions, Answers and Further Information Stuart Williams Procurement Lead Forum for the Future s.williams@forumforthefuture.org.uk tel: 07779 600 692