Environmental Supply Chain Forum Environmental Procurement in practice

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Environmental Supply Chain ForumEnvironmental
Procurement in practice

• Chris Browne

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Environmental Issues in Procurement

• Background
• Practical tools and techniques
• Risk assessment
• Prioritisation
• Integration into buying decisions
• Supply base management
• Approach
• Vendor rating
• Lessons learned Conclusion

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Procurement Risk Assessment Map
Identification of business need
Information gathering
Strategic Risk Assessment
Environmental Risk Assessment
Assessment of Agency Influence with Supplier
Development of management actions to manage and
reduce all risks
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Key elements of Approach
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Risk Mapping and Prioritisation
STRATEGIC SECURITY
STRATEGIC CRITICAL
Risk
TACTICAL ACQUISITION
TACTICAL PROFIT
Value 1M
Courtesy of PMMS Consulting Group
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Environmental Risk Mapping
This analysis informs the next stage of risk
assessment
Brainstorm key environmental impacts under each
heading
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Environmental Risk Mapping

• Answer high level risk questions
• Does the item have potential for high energy use?
• Is it made of unsustainable materials?
• Is there the potential of a pollution incident in
  performance of our work?
• Is excessive pollution caused during manufacture?
• Is there an environmental PR risk to the
  organisation?

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Risk Management

• Undertake a generic risk assessment on all
  contracts/ commodities (2 days)
• Target high risk/ value commodities for further
  research (Top 10)
• From this determine organisational approach to
  specific commodities areas ie construction
• Integrate environmental risk assessment into
  Buyers contract planning (10 min to 3 hrs)
• Target contracts for a generic risk assessment

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Approach to high risk contracts

• Determine key environmental issues and prioritise
  using a vulnerability approach
• Likelihood of risk happening
• Impact on the business if it happened
• Duration of problem and PR impact
• Score each risk based on H/ M/ L (3, 2, 1)
• Rank risks to prioritise effort

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Determining approach

• Who is best placed to manage the risk?
• client, supplier, suppliers supplier
• How is the risk dealt with?
• removal of need (dont buy it)
• specification
• supplier selection
• tender analysis
• post award management

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Assess the suppliers view
DEVELOPMENT
CORE
Market Growth/ Attractiveness
NUISANCE
EXPLOITABLE
Relative Value of Business/ Market Share
Courtesy of PMMS Consulting Group
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Attractiveness of Account

• Are we easy to work with?
• Are we an intelligent client?
• Are we efficient in our business dealings?
• Do we pay on time?
• Are we open to change?

• Are we a key client in the suppliers portfolio?
• Do we represent more than 0.5 of the suppliers
  turnover?
• Is the supplier operating in a saturated market?
• Are low switching costs present with this market?

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Approach to the market

• If there is a high degree of influence with the
  market
• request environmental performance of both the
  suppliers business/ the product
• If there is moderate influence
• target requirements into a few key areas and
  explore development opportunities
• If there is low influence
• encourage the supplier to develop through
  differentiation and wider marketing

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Supply Base Management

• A review of 500 suppliers

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Areas of Environmental Review

• Policy
• Assigned responsibilities
• Assessing impacts
• Setting Improvement targets
• Producing public information on environmental
  performance
• Environmental Management Systems

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Methodology

• The top 500 suppliers of the Agency were targeted
  representing 297M
• Data was gathered via a questionnaire with
  substantiated evidence and via telephone
• Suppliers were scored on 6 questions and rated
  out of 4
• Suppliers were categorised as
• Laggard/ Unaware ( 0 - 9)
• Settler/ Moving Forward (10 - 19)
• Pioneer/ Crusader (20 - 24)

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Questions

• Has your organisation set any targets for
  reducing environmental impacts?
• Does your organisation produce any publicly
  available information on environmental
  performance?
• Does your organisation have a system in place for
  managing environmental performance?

• Does your organisation have an environmental
  policy?
• Does your organisation have anyone responsible
  for its environmental performance and management?
• Has your organisation undertaken any assessment
  of the environmental impacts of operations?

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What does a Pioneer look like?

• Formal policy, signed by top management, that
  commits company to continuous improvement
• Environmental management integrated into company
  structure with clear delegated responsibility
  from board director
• Comprehensive assessment of organisational
  impacts with quantification

• Objectives and targets set with actions
  identified and on-going reviews of progress as
  part of a process of continuous improvement
• Comprehensive information published which reviews
  environmental performance against targets and
  objectives with external verification
• EMS fully integrated into all sites of the
  company, accredited to ISO 14001

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Statistical Results

• Pioneers/ Crusaders - 5
• Settlers/ Moving forward - 30
• Laggards/ Unaware - 65
• The majority of suppliers have undertaken no
  assessment of their environmental impacts
• 3 have achieved ISO 14001 with 24 planning to
  by the end of 2001
• The Environment Agency rated as a Pioneer with a
  score of 23

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Average Score by Market Sector

• Electronics non IT 7.2
• Transport Plant 7.2
• Protective clothing 6.5
• Lab Equipment 6.4
• Engineering Cons. 5.5
• Information Tech. 5.5
• Tools 5.5
• Business services 5.1
• Management Cons. 3.3

• Utilities 15.8
• Communications 11.7
• Oil/ fuel 11
• Telemetry 9.9
• Horticulture 9.7
• Engineering materials 9.3
• Construction 8.6
• Pollution material 8.4
• Waste services 7.7
• Office Equip/ Services 7.6

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Results by risk sector
STRATEGIC SECURITY Represents 8 M, 83 Co. 63 of
companies unaware Average Score 8.1 50 companies
planning 14001
STRATEGIC CRITICAL Represents 170M, 140 Co. 53
of companies unaware Average Score 9.1 33
companies planning 14001
Risk
TACTICAL ACQUISITION Represents 7 M, 119 Co. 68
of companies unaware Average score 6.3 21
companies planning 14001
TACTICAL PROFIT Represents 112M. 158 Co. 63 of
companies unaware Average score 7.1 20 companies
planning 14001
Value
Courtesy of PMMS Consulting Group
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Development Approach

• Pioneers, encouraged to lead by example
• Achieve ISO 14001 for all sites
• Product stewardship
• Sustainability
• Reporting
• Supplier Management

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Development Approach

• Settlers, encouraged to up and running
• Maintain momentum
• Assess impacts and set improvement targets
• Achieve ISO 14001
• Increase/ implement internal training

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Development approach

• Laggards, encouraged to find your feet/
  accident waiting to happen
• Assign real responsibilities
• Understand compliance issues
• Assess environmental impacts
• Set improvement targets

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Environmental ProcurementLessons from Experience
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Lessons Learned

• Keep it simple to begin with
• Evolutionary process - enhance as you learn
• Keep it at a practical level
• Start with some quick wins
• Demonstrate a structured approach
• Use the strength of teamwork
• Train and support staff

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Conclusion

• Consider the wider benefits such as marketing
  advantage, product differentiation etc
• Prioritise effort
• Dont expect to solve all the worlds problems
• Its not an exact science
• Use your suppliers expertise
• Market the benefits
• Result Reduced environmental impact

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