Sustainable Procurement: Are public authorities doing enough?

The B2B community Agrion just published an interesting article, raising the question: Green Procurement: Are private companies greener than the authorities?

There is at least one area where I see a fundamental difference between Private and Public Green Procurement.

There are 2 dimensions to Sustainable procurement:

– Products (i.e. optimizing the environmental impact of products and services purchased)

– Suppliers (controlling and improving the CSR practices of Suppliers).

It could be summarized saying that Sustainable Procurement is about « what you buy » and « who you buy from ».

I believe that both the Public and Private sector are equally engaged on the 1st dimension. But I see a major difference in the fact that only the Private Sector is really engaged on the 2nd dimension.

Today most of the largest companies have set up structured processes to monitor and develop the Sustainability Practices of their suppliers (involving development of specific Code of Conducts, Self Assessment tools, Audits, and Sustainability Training programs for suppliers).

On the other hand I know very few Public Sector buyers who have set up similar programs to formally assess the sustainability practices of suppliers (not products) they select. In France, most of the time the reason given not to engage with such evaluations, are constraints of the « Code des Marchés Publics » (derived from EU Public Procurement Directive): integrating evaluation criteria’s not directly linked to the « RFQ Scope » could be considered as discriminatory, and in breach of the Public Procurement Code.

As an extreme example a Public Sector Buyer could issue a RFQ for Office Furniture, integrating advanced environmental requirements on materials used, while at the same time ignoring completely the local pollutions at the supplier factory, or potential child labor practices in the supply chain.

As a citizen I find it difficult to understand why the Private Sector would be the only one to carry the bag of improving the Sustainability practices of millions of small and medium enterprises. Driving Sustainability practices in global supply chains is one of our major challenges, and private sector companies can’t be the only one held responsible of the bad environmental, social or ethical practices of suppliers.

What is required to make sure that Public Procurement aims at « greening » suppliers as much as « greening » products? Evolutions in the Public Procurement Code are certainly needed, but I suspect that other changes are necessary as well. Instilling a culture of « Suppliers Relationship Management » in the Public Sector is also probably needed. What else? If you are a practitioner in the Public Procurement we would be very keen to get your views, in the comments section of this blog.

Renting products rather than buying them..an option for Sustainable Procurement?

The French Environmental Agency published an interesting study on “Functional Economy” (also called “Service Economy”) which means replacing “purchasing products” by “renting products”. According to this study, a “Functional Economy” would lead to reduction in raw materials and energy consumption and therefore major environmental benefits.

The rationale behind this theory (first published by walter R. Stahel in 1989) is that as a company moves from maximizing sales of material products to the delivery of customer satisfaction, its employees will have strong incentives to minimize materials and energy used in the systems that deliver the service to the customer.

Indeed a manufacturer who sells a product has incentives to sell more, and shorten the lifespan of the product. On the other hand a manufacturer who is paid on usage basis is incentivized to extend lifespan and decrease maintenance costs.

The most famous example is printing services, where companies such as Xerox are offering “pay per copy” fully managed printing services, where they are responsible for providing equipment, maintenance, supplies and responsible for equipment end of life. Less well known, but even more interesting, is the concept of “Chemical Leasing“, initiated by companies such as Dow Chemical. Interesting case studies have proven that for example Chemical Leasing in metal cleaning in the automotive industry was leading to a 72% reduction in solvent consumption.

The main drivers identified by ADEME are:

– a more professional maintenance able to improve the service level

– changes in functionnal specification of the products

– a more rational usage of the product, as end users become aware of the total cost of ownership

This theory could provide an interesting model for “Sustainable Procurement” managers who could innovate by pushing some of their suppliers to lease products rather than selling them.

New tool for Sustainable Packaging

The Sustainable Packaging Coallition announced the availability of a new tool, “Compass” allowing companies to benchmark the environmental impact of packaging.

From a sourcing / purchasing perspective, packagingis really the perfect commodity, where Sustainability/CSR can help companies reduce over-specifications, drive innovations and allign “environmental impact reduction” and “cost reduction”.

The most famous case study is maybe the Walmart 5% packaging reduction project, but we here many stories in all industries, from purchasing exectutives having been able to generate postive ROI projects on their Sustainable Packaging initiatives.

The Sustainable Packaging Coallition website, offers very interesting information, including this definition of Sustainable Packaging :

“Sustainable Packaging is :

A. Is beneficial, safe & healthy for individuals and communities throughout its life cycle;

B. Meets market criteria for performance and cost;

C. Is sourced, manufactured, transported, and recycled using renewable energy;

D. Maximizes the use of renewable or recycled source materials;

E. Is manufactured using clean production technologies and best practices;

F. Is made from materials healthy in all probable end-of-life scenarios;

G. Is physically designed to optimize materials and energy;

H. Is effectively recovered and utilized in biological and/or industrial cradle to cradle cycles”

Public Purchasing and Green Transport

The famous double-decker London imperial buses (The Routemasters) are going to be reintroduced on the streets of London after disappearing in 2005. The 2 projects selected among more than 700 other candidates are the ones from Aston Martin and Capoco. Theses two companies have won this difficult competition thanks to the environmental characteristics of their vehicles even if their prices are anticipated to be higher than more traditional buses.

Transport activities are a major source of pollution and green house gases (GHG). Road transport alone accounts for 84% of CO2 emissions attributable to transport as pointed out in the White Paper on European Transport Policy (click_here).

Public authorities can have a major leverage in encouraging green transport given the amount vehicles purchased across Europe. This is reason why the European Union has long been promoting green procurement in public purchasing. See link on the European Union guidelines on the green procurement of transport services and buses (click_here).

In that context, Boris Johnson, the new mayor of London, has then decided to go for green procurement when reintroducing the Routemasters. The 2 winning projects from Aston Martin and Capoco present vehicles that are said to be low polluters and low CO2 emitters. Solar panels are even integrated in the glass roof for the Aston Martin version, although the efficiency of solar panels in the English capital, known for its fog, still remained to be tested. More details in the following video from the BBC (click_here).

Green Sourcing for the Olympics

It is well known that the London Organizing Committee has made Sustainability a core policy of the 2012 Olympic Games, since an ambitious 2012 Sustainability Plan was published in November 2007. What is new, is the profound impact this initiative will have on the Sustainable Procurement initiative of 1000’s of companies.

The Organizing Committee has just issued today a very ambitious “Olympics Sourcing Code” ‘(access here) which will apply to all products and service providers.

Two things are really innovative about this code:

• First the code includes a very detailed list of restricted substances, going beyond regulations (and including for example the (in)famous phtalates and bisphenol)
• The second and most important thing for us, is that the Code is not only focused on suppliers environmental/socials practices but also on their responsible sourcing practices. All suppliers have to ensure:

“that products and services are sourced and produced under a set of internationally acceptable environmental, social and ethical guidelines and standards“

This initiative should therefore have a massive impact, on the 5000 direct suppliers, but also cascading to more than 25000 tier-2 suppliers.

New Job : Chief Procurement & Sustainability!

This week Siemens announced that they were appointing Barbara Kux as both Chief Procurement Officer and Chief Sustainability Officer. This is not only a great news for gender equality (Mrs Kux will be the first woman on Siemens Board in 160 years, and the 1st woman on a DAX 30 board), but a real proof of the strategic alignment between Purchasing and Sustainability.

More and more companies realize that the future of Sustainabilty lies in Supply Chains Management (last year the Sustainability Director of Schneider, Gilles Vermot-Desroches, even explained in a conference, that he anticipated that in a couple of years, both functions would be merged, as companies would change their focus from internal to exernal value chains).

Mrs Kux appointment is a perfect example of this. She was holding exactly the same 2 jobs at Phillips, which during her tenure, became both a leader in Sustainable Procurement, and grew its “green business” into a 5.3bn€ activity. I had the chance to attend her presentation at the latest Insead Leadership Summit last summer : you can find the video and summary here.

We wish Barbara Kux the same success at Siemens!

Lighter in CO2…Lighter in Euros

In the latest HEC Benchmark we conducted, “Sustainable Procurement” was the #2 priority of Procurement Executives…just behing “Cost Reduction”. At the time where a lot of purchasing organisations are under pressure to deliver additional cost savings to their organisation, there is a risk that some will postpone or push back on their Sustainability Programs.

The latest Renault commercial reminds us that “Green” and “Low Cost” are not contradictory..quite the opposite. “Lower in CO2…Lower in €” and a nice visual reminds us that Cars Leasing and Fleet Management is one of the spend categories where Travel Managers have been able to leverage the environmental factor to reduce costs. In France companies are now taxed on the CO2 emissions of company cars, providing an additional incentive to provide lower costs / lower horsepower vehicles to their executives. But in several countries procurement executives are telling us that the “guilt” associated to high emission cars is helping them to drive compliance to their lower cost Travel policies.

By the way, Renault is also one of the automakers in Europe who has one of the most ambitious Sustainable Procurement program, and we have learnt that despite the economic slow down, and procuctions cuts they were facing, they had no intention to stop or delay this program. A good example for many companies.

EcoVadis selected by Microsoft

The ISV Ecovadis is the first french ISV to join the recently created IDEES program for Eco-Activites (10 ISVs to be recruited this year). This was announced this morning by Bill Gates and Bertrand Delanoé, at the Paris City Hall.

We are glad to have been selected to joint this program, which will allow us to re-inforce our partnership with Microsoft on the technology aspect, as well as to develop or relationships with the Paris City administration, which we know is very committed to “Green Procurement”.

EcoVadis is a provider of Sustainable Supply Management Software, helping organisations integrate environmental and social criteria’s in the supply chain.

A new report published by the United Nations highlights the importance of sustainable supply management for CEO’s

Three groundbreaking studies by organizations such as the UN Global Compact, Mc Kinsey and Goldman Sachs presented today at the Global Compact Leaders Summit show that an increasing number of business leaders see corporate responsibility as a way to compete successfully and to build trust with stakeholders – and that sustainability front-runners in a range of industries can generate higher stock prices. At the same time, there are important “performance gaps” in implementation, as highlighted by a complementary survey of chief executives participating in the Global Compact: 59 per cent of CEOs said corporate responsibility should be embedded into global supply chains, but only 27 per cent think they are doing so. You can acess the report here.

EcoVadis is one of the winners of Tremplin Entreprise 2007 competition

EcoVadis has been selected in the “Internet & Services” category. Co-Organised by the French Senat and Essec Business School, Tremplin Entreprise is the leading event allowing selected French companies to meet the international venture capital industry. Since 1999, Tremplin Entreprise, is part of Paris Investors Week organised by AFIC, Paris Europlace & CDC Entreprise.

EcoVadis has been selected in the “Internet & Services” category. Co-Organised by the French Senat and Essec Business School, Tremplin Entreprise is the leading event allowing selected French companies to meet the international venture capital industry. Since 1999, Tremplin Entreprise, is part of Paris Investors Week organised by AFIC, Paris Europlace & CDC Entreprise. EcoVadis has been selected in the “Internet & Services” category. Co-Organised by the French Senat and Essec Business School, Tremplin Entreprise is the leading event allowing selected French companies to meet the international venture capital industry. Since 1999, Tremplin Entreprise, is part of Paris Investors Week organised by AFIC, Paris Europlace & CDC Entreprise.