Sustainable procurement: much more than ticking boxes
At the turn of the millennium, sustainability was a relatively
Blog post written by Shaun McCarthy OBE, Chairman at Supply Chain Sustainability School
Date: 23rd March 2021 | Time to read: 7 mins
The drivers for environmental sustainability are becoming stronger. Institutional investors are taking a strong view on issues such as climate change. Larry Fink of Blackrock pulls no punches in his open letter to CEOs. In it he says, “I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives.” Investors perspective on Environmental and Social Governance (ESG) will impact share prices and borrowing costs.
According to some top supply chain trends to watch out for this year, organisations that adopt sustainable processes will achieve public recognition and better economic returns in the long run. An international study conducted by Unilever, involving more than 20,000 adults from 5 different countries, found that 1/3 of those interviewed prefers sustainable brands and that 21% of those would prefer to buy products that clearly indicate this on their labels, and this is a growing trend.
Customers are also driving the agenda much harder, particularly those in the public sector. The UK governments procurement policy notice PPN 06/20 obliges central government purchasers and government agencies from 1st January 2021 to apply a minimum of 10% weighting factor to “Social value” in tender evaluations. The note makes a clear definition of their expectations. With many government bodies already applying greater than 10%, this can be making a difference between winning and losing a tender. Spain is the EU country with the highest number of environmental infringements. In 2017 the nation accumulated 30 open cases, four more than the year before, representing almost 10 % of all the EU cases. Spain ranks first in the list of most fined countries for breaking the EU policy, and this fact should lead to further thoughts. Cases include all areas, from poor water management to omission of assessments in urban projects, habitats protection or air pollution, among others. For this reason, a new update of the Basic Document of Energy Saving in Buildings DB -HE of the Spanish Technical Building Code (CTE) has been implemented to comply with current and future EU regulations. On the other hand, The Nordic region is known for its excellence in sustainability, Norway is widely recognised as the most sustainable country in the world, but they continue to raise the bar. Just a few months ago, the Norwegian parliament approved a proposal to achieve climate neutrality by 2030, two decades earlier than planned. The European Union, for example, aims to be climate neutral by 2050.
In response we are seeing powerful policies coming from main contractors such as Balfour Beatty in the UK, in Sweden, Skanska’s “journey to deep green” has been seen as a leader for many years. Spanish giant Ferrovial is a sector leader in the Dow Jones Sustainability Index.
Collaboration is the new competition. We are seeing businesses coming together to achieve greater levels of sustainability. In February 2021 we see eleven contractors delivering Highway’s England’s £multi-billion Regional Development Programme coming together with a collective approach to supplier development, sustainability goals and key performance indicators.
There is good news and bad news. In a survey of over 1,000 smaller businesses by the Supply Chain Sustainability School in the UK in 2020, indicated that 74% have a better understanding of sustainability, 51% have increased their community engagement and 45% are winning new business through being more sustainable. However, only 37% say they have reduced their carbon emissions and 32% say they have reduced their air quality emissions. There is clearly more to do.
Embracing sustainable procurement means higher profitability and lower exposure to risk. There is great value in implementing supplier prequalification questionnaires with comprehensive insights and detailed analysis that allow companies to identify any potential risk and work with suppliers that can meet their sustainability standards. At Achilles we have been leveraging data from over 175,000 suppliers globally for more than 30 years now. With Achilles Insights, our data analytics tool, you can easily identify leading and lagging suppliers and ensure the suppliers you work with comply with your sustainability standards and criteria. Insights help you understand the overall profiles of suppliers against certain criteria such as corporate social responsibility (CSR). Ensuring all parties involved understand the importance of sustainability is also important and this is delivered via a supportive environment from the Supply Chain School. Last but not least, we may also want to consider implementing a systematic approach, such as that prescribed by ISO 20400.
Sustainable construction is not a fad, there is a burning platform. The construction sector worldwide has notoriously deep and wide supply chains that are hard to reach requiring the systematic application of tools and techniques to achieve consistent results.