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Procurement is the process of finding, acquiring, buying goods, services or works from an external source, often via a tendering or competitive bidding process. The process is used to ensure the buyer receives goods, services or works the best possible price, when aspects such as quality, quantity, time, and location are compared.Procurement is considered sustainable when organizations broadens this framework by meeting their needs for goods, services, works, and utilities in a way that achieves value for money and promotes positive outcomes not only for the organization itself but for the economy, environment, and society. This framework is also known as the triple bottom line.
Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or works from an external source, often via a tendering or competitive bidding process.
Bidding is an offer to set a price by an individual or business for a product or service or a demand that something be done. Bidding is used to determine the cost or value of something.
The triple bottom line is an accounting framework with three parts: social, environmental and financial. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value. Business writer John Elkington claims to have coined the phrase in 1994.
Sustainable procurement is a spending and investment process typically associated with public policy, although it is equally applicable to the private sector. Organizations practicing sustainable procurement meet their needs for goods, services, utilities and works not on a private cost–benefit analysis, but with a view to maximizing net benefits for themselves and the wider world. In doing so they must incorporate extrinsic cost considerations into decisions alongside the conventional procurement criteria of price and quality, although in practice the sustainable impacts of a potential supplier's approach are often assessed as a form of quality consideration. These considerations are typically divided thus: environmental, economic and social. To procure in a sustainable way involves looking beyond short-term needs and considering the longer term impacts of each purchase. Sustainable procurement is used to ensure that purchasing reflects broader goals linked to resource efficiency, climate change, social responsibility and economic resilience, for example.
Public policy is the principled guide to action taken by the administrative executive branches of the state with regard to a class of issues, in a manner consistent with law and institutional customs. There has recently been a movement for greater use of evidence in guiding policy decisions. Proponents of evidence-based policy argue that high quality scientific evidence, rather than tradition, intuition, or political ideology, should guide policy decisions.
The private sector is the part of the economy, sometimes referred to as the citizen sector, which is owned by private individuals or groups, usually as a means of enterprise for profit, rather than being owned by the State.
Cost–benefit analysis (CBA), sometimes called benefit costs analysis (BCA), is a systematic approach to estimating the strengths and weaknesses of alternatives used to determine options which provide the best approach to achieving benefits while preserving savings. A CBA may be used to compare completed or potential courses of actions, or to estimate the value against the cost of a decision, project, or policy. It is commonly used in commercial transactions, business or policy decisions, and project investments.
Sustainable procurement involves a higher degree of collaboration and engagement between all parties in a supply chain. Many businesses have adopted a broad interpretation of sustainable procurement and have developed tools and techniques to support this engagement and collaboration.
Procurement – the letting of contracts for goods, works and services on the best possible terms – has historically been based on two criteria, price and quality, with a view to maximizing benefits for the procuring organization. Sustainable procurement broadens this framework to take account of third-party consequences of procurement decisions, forming a "triple baseline" of external concerns which the procuring organization must fulfill.
Environmental concerns are the dominant macro-level justification for sustainable procurement, born out of the growing 21st century consensus that humanity is placing excessive demands on available resources through unsustainable but well-established consumption patterns. Sustainable procurement aims to promote conservation, reuse and responsible management of these resources, using renewable or recycled materials where possible and reducing waste.
This is a sufficiently influential issue that environment-centric procurement (green procurement) is sometimes seen to stand alone from sustainable procurement. The most straightforward justification for green procurement is as a tool with which to address climate change, but it offers the broader capacity to mitigate over-exploitation of any and all scarce resources.
Climate changes occur when changes in Earth's climate system result in new weather patterns that remain in place for an extended period of time. This length of time can be as short as a few decades to as long as millions of years. The climate system receives nearly all of its energy from the sun, with a relatively tiny amount from earth's interior. The climate system also gives off energy to outer space. The balance of incoming and outgoing energy, and the passage of the energy through the climate system, determines Earth's energy budget. When the incoming energy is greater than the outgoing energy, earth's energy budget is positive and the climate system is warming. If more energy goes out, the energy budget is negative and earth experiences cooling.
Examples of green procurement range from the purchase of energy-saving light-bulbs to the commissioning of a new building from renewable sourced timber via organic food being served in a workplace canteen. The ultimate green procurement is the avoidance of the purchase altogether.
Organic food is food produced by methods that comply with the standards of organic farming. Standards vary worldwide, but organic farming features practices that cycle resources, promote ecological balance, and conserve biodiversity. Organizations regulating organic products may restrict the use of certain pesticides and fertilizers in the farming methods used to produce such products. Organic foods typically are not processed using irradiation, industrial solvents, or synthetic food additives.
In support of Sustainable Development the organization should develop and publish a 'Sustainable Development Procurement Guidelines and Procedures'. When it comes to purchasing products or services, referral to these guidelines would help make the organization become a leader in environmentally responsible purchasing.
Although various corporate giants have publicly acknowledged adopting sustainable procurement and reducing their carbon footprint, they have miserably failed to match their promises. The most widely discussed examples include Disney's initiative to introduce sustainable paper sourcing policy in 2012 and 3M promising to reduce its greenhouse gas emissions.
Sustainable procurement is also used to address issues of social policy, such as inclusiveness, equality, international labor standards and diversity targets, regeneration and integration.
Examples include addressing the needs – whether employment, care, welfare or other – of groups including ethnic minorities, children, the elderly, those with disabilities, adults lacking basic skills, and immigrant populations. Criteria for Socially Responsible Procurement can be applied to every stage of a supply-chain e.g. from mining to assembly and distribution.
Often differences in the purchase price between a non-sustainable and sustainable alternative are negligible. Yet even where the sustainable option costs more upfront, savings of energy, water and waste over the lifetime of the product or service can provide significant financial savings.On a macroeconomic level, it can be argued that there are economic benefits in the form of efficiency gains from incorporating whole-life costing into decision-making. [Note: in contrast to most arguments from sustainable procurement proponents, these can be purely private benefits accrued by the procuring organization.]
In addition, the creation of sustainable markets is essential for long-term growth while sustainable development requirements foster innovation. There are also potential global applications: sustainable procurement can favor fair trade or ethical practice, and allow extra investment to channeled towards developing countries.
On a micro economic level, sustainable procurement offers the chance for economic redistribution. Targets might include creation of jobs and wealth in regeneration areas, or assistance for small and/or ethnic minority-owned businesses.
For central governments, sustainable procurement is typically viewed as the application of sustainable development criteria to spending and investment decisions. Given high-profile socioeconomic and environmental concerns such as globalization and climate change, governments are increasingly concerned that our actions meet the needs of the present without compromising the needs of the future.
Public spending, which accounts for an average of 12% of GDP in OECD countries, and up to 30% in developing countries, wields enormous purchasing power.Shifting that spending towards more sustainable goods and services can help drive markets in the direction of innovation and sustainability, thereby enabling the transition to a green economy. Through Sustainable procurement practices, governments can lead by example and deliver key policy objectives. Sustainable procurement allows governments to mitigate key issues such as greenhouse gas emissions, improve resource efficiency, recycling, among others. The key international organizations already increasingly recon gnize public procurement as a means of changing the unsustainable patterns of consumption and production.
The United Nations, including its many affiliated agencies, recognize their own responsibilities in contributing to more sustainable patterns of development, maintaining a market behavior which is credible, inspirational and exemplary, and proving that UN agencies stand behind the principles they promote.Through the development of procurement criteria that support sustainability principles, requisitioners and procurers can send strong signals to the market in favor of goods and services that promote sustainability. The United Nations agency destined to develop and promote resource efficiency and more sustainable consumption and production processes, including the promotion of sustainable resource management in a life cycle perspective for goods and services in both developed and developing countries, The United Nations Environmental Programme, UNEP, drafted sustainable public procurement implementation guideline to aid in the consideration of society, economy, and the environment in procurement processes
The Marrakech Task Force on Sustainable Public Procurement (MTF or SPP) which was managed by Switzerland from 2006 to May 2011 established an approach for the effective implementation of sustainable procurement. This approach was named the MTF Approach to SPP. Since then, the United Nations Environmental Programme have worked together with the Swiss government to develop a project to implement sustainable procurement worldwide. The project named Capacity Building for Sustainable Public Procurement in Developing countries were piloted in 7 different countries, Chile, Colombia, Costa Rica, Lebanon, Mauritius, Tunisia, and Uruguay and since then, the list of countries adopting this newly designed approach to developing has increase adding even more advanced and industrialized nations to be used as case studies to measure the efficiency and benefits of the implementation of sustainable public procurement. In Brazil, the project involved recycled paper, in Costa Rica, the management services was redesigned, toner cartridges for laser printers was the main objective in France, in Hong Kong and China the nations aimed to improve traffic with LED traffic lights retrofit, organic food for school children in Italy, sustainable construction in England, consultancy and temporary staff services was renovated in Scotland, and in the United States, there was a push for the sustainable transportation of waste.
The eight case studies reveal a diversity of environmental impacts at various stages of the products’ life cycle. The purchase of remanufactured ink cartridges by the French Ministry of Education has led to a decrease in the amount of waste generated at the manufacturing stage. The construction or services case studies (Yorkshire and Humber Region, UK, and Oregon, USA) demonstrate significant impacts related to the reduction of CO2 emissions, of waste production, and of water consumption. The Ferrara study (Italy) and the recycled paper case (São Paulo, Brazil) show positive environmental.
Although the social component of sustainable development has often been considered as the most neglected one, the eight case studies show a strong commitment from public purchasers to tackle social issues. Employment and social inclusiveness issues are considered essential by the public entities who promote these priorities through their procurement processes. Some of the social impacts are directly targeted by tenders, such as the participation of companies employing disabled persons in the French case or the fight against illiteracy in Scotland. Other impacts are the results of the specific purchase, as in the State of São Paulo case (notebooks using recycled paper) which demonstrates a clear positive impact for waste pickers. The analysis of the case studies illustrates the diversity and strength of the recorded sustainable development impacts. Public purchasers can be clearly seen as key potential actors of society, able to impact a wide range of sustainable development fields.
The UK in 2005 pledged to be a performance-leader in sustainable procurement by 2009 and commissioned the business-led Sustainable Procurement Task Force to formulate appropriate strategy.Broad-based procurement strategies are prominent across the EU while it is an increasingly influential concern elsewhere, most notably Canada. The US federal government requires certain green procurement practices in its buildings and supports the wide and inclusive use of them. The General Services Administration, an independent establishment and government corporation, is responsible for promoting green procurement and provides federal agencies with selling and purchasing guidelines and suggestions. Green procurement is primarily done by federal contracting personnel and program managers – but it is not restricted to such professionals.
At market-level, sustainable procurement is typically instrumental: authorities seek to address policy through procurement.
Government departments and local bodies can use procurement to address certain chosen agendas in buying solutions that will contribute to community or environmental goals, or to diversity or equality targets.
To help local governments improve sustainability and reduce environmental impacts the California Sustainability Alliance, has developed a Green Procurement Toolkit.Green procurement can help local governments save money, create local green jobs and improve their environmental sustainability.
Under sustainable procurement criteria any procuring organization must therefore take a broad approach to sustainability, reflecting localized economic, environmental and social needs as well as cross-cutting sustainable development strategies such as Life Cycle Assessment.
ICLEI is a membership organization of local governments who recognizes the power of Sustainable Public Procurement to achieve environmental, social and economic benefits.It encourages Public Procurement of Innovation as a means for achieving sustainability. Among its various activities, it offers a Sustainable Procurement Resource Center and a Procurement Forum, which can be used by procurers or by anyone interested in these topics.
Procura+ is a network of European public authorities and regions that connect, exchange and act on sustainable and innovation procurement.
On December 8, 2006 the Greater London Authority became the first public-sector body to publish a sustainable procurement policy,promising to award a "distinct competitive advantage" to those companies which demonstrated a commitment to sustainable procurement concerns. The policy reflected the Mayor's enthusiasm for public procurement as a tool for fostering social inclusion, equality and environmental objectives.
The GLA also stated that their policy was "very much as a model for broader government procurement" but this expectation was not fulfilled in the UK Government's Sustainable Procurement Action Plan, published on March 5, 2007.The Action Plan, which incorporated answers to the Sustainable Procurement Task Force, was explicitly environment-oriented in approach (Ch 4.3) with wider social issues scarcely addressed.
This was perhaps surprising, as was press disinterest in the publication. Despite its acknowledged importance among senior politicians and business leaders, publication of the Action Plan received only one national newspaper report, and that was markedly flippant in tone.
Sustainable procurement outside of the United Nations is happening everywhere, in the international community, in states and local authorities, in the private sector and in the civil society. Sustainable procurement is as applicable to the private sector as the public sector, and certainly its proponents aspire to seeing its application across all areas of the economy due to a vast amount of material available on the internet for organizations and companies wishing to improve their sustainability performance.
Acquisition of goods and services may account for over 50% of the company's expenses, and may exceed 80% in sectors such as in retailing, electronic and automotive industries - with all this purchasing power, the private sector has a great ability to influence markets.Influencing procurement practice within a private-sector firm is not straightforward for governments, meaning that the companies themselves often have to be self-motivated to embrace sustainability. It becomes a social responsibility for both businesses and workers to promote sustainable procurement in the workplace.
The UK's Sustainable Procurement National Action Plan argues that it is "something the best of the private sector is already doing – whether through enlightened leadership or shareholder pressure".It also argues that government purchasing power (circa £150bn in the UK alone) can apply sustainable procurement principles to present a persuasive case to those in the private sector resisting sustainable procurement practice.
Fair trade and sustainable procurement demands the implementation of responsible practices in relation to workers, environment and society to be followed by suppliers as to promote a chain of sustainability between production and consumption.
B Corporation (certification) (B Corp) demands support for the triple bottom line. B Corp are incentivized to buy local, organic, and from other B Corporation (certification). This promotes a chain of sustainable businesses that amplifies its effectiveness.
While there is no strict definition on how organizations implement sustainable procurement, there are two approaches that can be combined:
This is where an organization examines a products movement along the supply chain and assesses the environmental credentials of themselves and of their suppliers. This path is commonly used when an organization wishes to understand the impact of a product or product range for strategic and marketing purposes. This approach can also provide a vivid picture of supplier processes.
An organization may analyze the CSR management systems of a supplier and whether its practices conform with law and with the CSR standards of "buying" organization. Thus, the organization measures the environmental and social risk a supplier may impose upon them. Implemented effectively, this method will show whether a supplier meets the environmental standards of the organization, along with whether suppliers are meeting the requirements of law. Some assessments improve the whole supply chain by providing incentives for other businesses to be more sustainable.
In order to assess the CSR Management systems companies can use a variety of tools :
The United Nations Environment Programme (UNEP) is a programme of the United Nations that coordinates the organization's environmental activities and assists developing countries in implementing environmentally sound policies and practices. It was founded by Maurice Strong, its first director, as a result of the United Nations Conference on the Human Environment in June 1972 and has overall responsibility for environmental problems among United Nations agencies; however, international talks on specialized issues, such as addressing climate change or combating desertification, are overseen by other UN organizations, like the Bonn-based Secretariat of the United Nations Framework Convention on Climate Change and the United Nations Convention to Combat Desertification. UNEP's activities cover a wide range of issues regarding the atmosphere, marine and terrestrial ecosystems, environmental governance and green economy. It has played a significant role in developing international environmental conventions, promoting environmental science and information and illustrating the way those can be implemented in conjunction with policy, working on the development and implementation of policy with national governments, regional institutions in conjunction with environmental non-governmental organizations (NGOs). UNEP has also been active in funding and implementing environment related development projects.
Over the years, as countries and regions around the world began to develop, it slowly became evident that industrialization and economic growth come hand in hand with environmental degradation. Eco-Efficiency has been proposed as one of the main tools to promote a transformation from unsustainable development to one of sustainable development. It is based on the concept of creating more goods and services while using fewer resources and creating less waste and pollution. “It is measured as the ratio between the (added) value of what has been produced and the (added) environment impacts of the product or service .” The term was coined by the World Business Council for Sustainable Development (WBCSD) in its 1992 publication “Changing Course,” and at the 1992 Earth Summit, eco-efficiency was endorsed as a new business concept and means for companies to implement Agenda 21 in the private sector. Ergo the term has become synonymous with a management philosophy geared towards sustainability, combining ecological and economic efficiency.
The green economy is defined as economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus. The 2011 UNEP Green Economy Report argues "that to be green, an economy must not only be efficient, but also fair. Fairness implies recognizing global and country level equity dimensions, particularly in assuring a just transition to an economy that is low-carbon, resource efficient, and socially inclusive."
E-procurement is the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the Internet as well as other information and networking systems, such as electronic data interchange and enterprise resource planning.
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH or GIZ in short is a German development agency headquartered in Bonn and Eschborn that provides services in the field of international development cooperation. GIZ mainly implements technical cooperation projects of the Federal Ministry for Economic Cooperation and Development (BMZ), its main commissioning party, although it also works with the private sector and other national and supranational government organizations on a public benefit basis. In its activities GIZ seeks to follow the paradigm of sustainable development, which aims at economic development through social inclusion and environmental protection. GIZ offers consulting and capacity building services in a wide range of areas, including management consulting, rural development, sustainable infrastructure, security and peace-building, social development, governance and democracy, environment and climate change, and economic development and employment.
Sustainability advertising is communications geared towards promoting social, economic and environmental benefits of products, services or actions through paid advertising in media in order to encourage responsible behavior of consumers.
Forward Commitment Procurement (FCP) is a procurement model that is designed to be used to deliver cost effective environmental products and services to the public sector and help to create the market conditions in which the environmental goods and services sector can thrive.
Conservation Finance is the practice of raising and managing capital to support land, water, and resource conservation. Conservation financing options vary by source from public, private, and nonprofit funders; by type from loans, to grants, to tax incentives, to market mechanisms; and by scale ranging from federal to state, national to local.
As a compliment to analyses of production and its processes, Sustainable Consumption (SC) is the study of resource and energy use. As the term sustainability would imply, those who study SC seek to apply the concept of “continuance”—the capacity to meet both present and future human generational needs. SC, then, would also include analyses of efficiency, infrastructure, and waste, as well as access to basic services, green and decent jobs and a better quality of life for all. It shares a number of common features with and is closely linked to the terms sustainable production and sustainable development. Sustainable consumption as part of sustainable development is a prerequisite in the worldwide struggle against sustainability challenges such as climate change, resource depletion, famines or environmental pollution.
Sustainability is the ability to exist constantly. In the 21st century, it refers generally to the capacity for the biosphere and human civilization to coexist. It is also defined as the process of people maintaining change in a homeostasis balanced environment, in which the exploitation of resources, the direction of investments, the orientation of technological development and institutional change are all in harmony and enhance both current and future potential to meet human needs and aspirations. For many in the field, sustainability is defined through the following interconnected domains or pillars: environment, economic and social, which according to Fritjof Capra is based on the principles of Systems Thinking. Sub-domains of sustainable development have been considered also: cultural, technological and political. According to the Our Common Future, Sustainable development is defined as development that "meets the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainable development may be the organizing principle of sustainability, yet others may view the two terms as paradoxical.
Environmental governance is a concept in political ecology and environmental policy that advocates sustainability as the supreme consideration for managing all human activities—political, social and economic. Governance includes government, business and civil society, and emphasizes whole system management. To capture this diverse range of elements, environmental governance often employs alternative systems of governance, for example watershed-based management.
The California Sustainability Alliance is an organization funded by the California IOUs to bring together key stakeholders needed to overcome the obstacles of sustainability. The Alliance was designed in 2008 to help meet the State’s aggressive climate, energy and other resource and environmental goals by increasing and accelerating sustainable measures and strategies. The Alliance specifically focuses on energy efficiency, climate action, “smart growth” principles, renewable energy development, water-use efficiency, waste management, and transportation management within California.
Sustainable event management is the process used to produce an event with particular concern for environmental, economic and social issues. Sustainability in event management incorporates socially and environmentally responsible decision making into the planning, organisation and implementation of, and participation in, an event. It involves including sustainable development principles and practices in all levels of event organisation, and aims to ensure that an event is hosted responsibly. It represents the total package of interventions at an event, and needs to be done in an integrated manner. Event greening should start at the inception of the project, and should involve all the key role players, such as clients, organisers, venues, sub-contractors and suppliers.
A sustainability organization is (1) an organized group of people that aims to advance sustainability and/or (2) those actions of organizing something sustainably. Unlike many business organizations, sustainability organizations are not limited to implementing sustainability strategies which provide them with economic and cultural benefits attained through environmental responsibility. For sustainability organizations, sustainability can also be an end in itself without further justifications.
Sustainable products are those products that provide environmental, social and economic benefits while protecting public health and environment over their whole life cycle, from the extraction of raw materials until the final disposal.
Environmental certification is a form of environmental regulation and development where a company can voluntarily choose to comply with predefined processes or objectives set forth by the certification service. Most certification services have a logo which can be applied to products certified under their standards. This is seen as a form of corporate social responsibility allowing companies to address their obligation to minimise the harmful impacts to the environment by voluntarily following a set of externally set and measured objectives.
An inclusive business model is a commercially viable model that benefits low-income communities by including them in a company's value chain on the demand side as clients and consumers, and/or on the supply side as producers, entrepreneurs or employees in a sustainable way. The concept was first formalized in an early United Nations report called Creating Value for All: Strategies for Doing Business with the Poor (2008) published by the Growing Inclusive Markets Initiative and guided by an Advisory Board consisting of leaders in the field such as the International Business Leaders Forum, the International Finance Corporation, key bilateral donors, the World Business Council for Sustainable Development, University of Michigan and Harvard Business School.
Resource efficiency is the maximising of the supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively, with minimum wasted (natural) resource expenses. It means using the Earth's limited resources in a sustainable manner while minimising environmental impact.
Sustainable Materials Management is a systemic approach to using and reusing materials more productively over their entire lifecycles. It represents a change in how a society thinks about the use of natural resources and environmental protection. By looking at a product's entire lifecycle new opportunities can be found to reduce environmental impacts, conserve resources, and reduce costs. U.S. and global consumption of materials increased rapidly during the last century. According to the Annex to the G7 Leaders’ June 8, 2015 Declaration, global raw material use rose during the 20th century at about twice the rate of population growth. For every 1 percent increase in gross domestic product, raw material use has risen by 0.4 percent. This increasing consumption has come at a cost to the environment, including habitat destruction, biodiversity loss, overly stressed fisheries and desertification. Materials management is also associated with an estimated 42 percent of total U.S. greenhouse gas emissions. Failure to find more productive and sustainable ways to extract, use and manage materials, and change the relationship between material consumption and growth, has grave implications for our economy and society.