a risk based approach to sustainable procurement eauc – eaf programme
TRANSCRIPT
A risk based approach to sustainable procurement
EAUC – EAF Programme
A risk based approach
Background Three year project Reducing negative environmental and social impacts
through purchasing Steering group, partners from Further Education and
Higher Education Training
Train the trainer Policy and strategy development Risk based approach to procurement Supplier engagement Social issues in procurement
A risk based approach
Objectives Develop a shared understanding of what a risk based
approach to sustainable procurement looks like Review good practice of risk based approaches Practice the implementation of a risk based approach Be introduced to the latest guidance available Develop an action plan to take back to your institution
A risk based approach
Agenda
12.00 Lunch
12.30 Introductions and objectives
12.45 What is a risk based approach?
13.15 Why take a risk based approach?
14.00 Break
14.15 Implementing a risk based approach
15.45 Case Study Review
16.15 Action Planning
16.30 Close
A risk based approach
Format and style of workshops Interactive Informal Varied Proactive
What is a risk based approach?
Basic risk management
Identification Analysis Evaluation Control/management
Risk identification and analysis
Identify potential threats that could stop you achieving your business objectives by completing the following sentence: there is a risk of ….. which would result in ……
Impact (low, medium, high) cost time quality
Likelihood (low, medium, high)
Risk evaluation
L/H = M M/H = H H/H = H
L/M = L M/M = M H/M = H
L/L = L M/L = L H/L = MImpact
Likelihood
Low
High
HighLow
Impact
Risk evaluation
Manage Stop Stop
Ignore Manage Stop
Ignore Ignore Manage
Impact
Likelihood
Low
High
HighLow
Impact
Risk to the environment from the organisation (and its supply-chain)
- Pollution Potential- Climate Change - Resource Depletion- Emissions- Waste
Why is the environment a risk? (1)
Reputation
Fines/ prosecutions
Rising costs
Risk to the organisation from the environment
- Reputation - Legal compliance- Supplier failure- Supply failure –
resources!- Environmental taxation- Heath impacts, e.g. air
quality and respiratory disorders
- Quality of working environment
Impacts on cost, time and quality
Business risks
Why is the environment a risk? (2)
Sources of environmental purchasing risks
Risks can arise from three different areas of supplier performance:
1. Supplier performance in their own sites/operations
2. Supplier performance while on your site
3. Supplier-provided components/products/services which flow through into your operations products/services
Slide courtesy of Environment Agency (adapted)
Why take a risk based approach to sustainable procurement?
Why take a risk based approach?
Why take a risk based approach? Every product or service we buy has an
environmental and social impact You buy thousands of products You have limited resources You have limited time You are being asked to demonstrate how the
work you do supports your institution
Why take a risk based approach? We need a way to prioritise our activity Risk as a concept resonates with institutions
and senior management Ensures we are not wasting our efforts – we
are looking to implement sustainable development which is about reducing impact
Tried and tested approach
Why take a risk based approach? Helps focus activity on main impacts Involves stakeholders internal customers –
helps get buy in for implementation Demonstrates that high risks do not only
come from high value purchases
What guidance exists?
What guidance exists?
The approach we are going to use is adapted from Sustainability and Local Government
Procurement – IDeA (November 2003) An approach used by Belfast City Council The Environment Agency
Implementing a risk based approach to sustainable procurement
Exercise
Implementing a risk based approach In groups identify what environmental issues
are of particular concern – try to choose 3.
Implementing a risk based approach In groups identify 20 products / services you
routinely buy as an organisation
Implementing a risk based approach In groups identify 20 products / services you
routinely buy as an organisation Consider the environmental impacts / risks
associated with the products or service
Implementing a risk based approach In groups identify 20 products / services you
routinely buy as an organisation Consider the environmental impacts / risks
associated with the products or service Using the matrix provided identify whether
you perceive the product to be a high, medium or low environmental risk and high, medium or low profile risk
Implementing a risk based approach
Environmental
Risk
Profile
Risk
Procurement High Med Low High Med Low
Item 1 * *Item 2 * *Item 3 * *
Implementing a risk based approach
Low
Low
High
High
En
viro
nm
enta
l R
isk
Profile Risk
Implementing a risk based approach
Priority 2 Priority 1
Priority 4 Priority 3
Low
Low
High
High
En
viro
nm
enta
l R
isk
Profile Risk
Control and management
Priority 4 Reduce consumption Increase awareness and encourage via questionnaire
and referral to policy
Control and management
Priority 3 Reduce consumption Green specifications only on the basis of cost benefit Increase awareness and encourage via questionnaire
and referral to policy Minimal green supplier appraisal
Control and management
Priority 2 Reduce consumption Green options sought Cost / benefit evaluated Green supplier selection Green design Green specifications Whole Life Costing Ensure issues included in consultancy design briefs
Control and management
Priority 1 Reduce consumption Green options sought Cost / benefit evaluated Green supplier selection Green design Green specifications Whole Life Costing Ensure issues included in consultancy design briefs Gain commitment to future action
Summary of the process
Review / Identify environmental and social priorities for your institution
Identify a group of individuals within your institution from different backgrounds and experiences
Compile a list of all the products and services you purchase (as comprehensive as possible)
Spend as long as it takes prioritising using the matrix (1 – 2 days)
Summary of the process
This means you have undertaken an environmental risk analysis of all the products and services you purchase!!
Identify the suppliers related to those products or services
Prioritise management response Communicate it to staff and suppliers
Case study review
The Environment Agency
Identification of Business Need and Assess against Waste Hierarchy
Identification of Business Need and Assess against Waste Hierarchy
Business RiskAssessment
Business RiskAssessment
Sustainability RiskAssessment
Sustainability RiskAssessment
Influence with Supplier
Influence with Supplier
LOW RISKIdentify main issues and
integrate into the contract
LOW RISKIdentify main issues and
integrate into the contract
Summarise risks, Supplier Influence& Map using Boston Matrix
Summarise risks, Supplier Influence& Map using Boston Matrix
HIGH RISKMore detailed risk
assessment, rank, allocate and manage
HIGH RISKMore detailed risk
assessment, rank, allocate and manage
The Environment Agency
The Environment Agency
High level environmental risk assessment Does the purchase or service provider have the
potential for high energy consumption? Is the product made of – or does the service
provider use – unsustainable materials Could the item or service provider cause a
pollution incident in the performance of Agency work?
The Environment Agency
High level environmental risk assessment Are excessive emissions (to land, air or water)
caused during the manufacture of goods used directly or by the service providers?
Is there an environmental public relations risk to the Agency in purchasing the product or service?
The Environment Agency
Agency’s influence with the supply base The agency then looks at the potential influence it
will have with high risk product or service provider Is the Agency a key client? Does the Agency represent more than 0.5% of turnover? Is the Agency an easy customer to work with? Does the Agency pay on time? Is the Agency efficient in its business dealings with us?
The Environment Agency
Detailed risk assessment (answers yes to three questions or more
Management action Determine the method of risk management Allocate responsibility Agree a date for resolution Address though supplier selection, specification,
evaluation, and negotiation Can’t manage it because of lack of influence
Case study review
United Utilities
United Utilities
CSR Policy Environmental Policy Sustainable Procurement policy BITC Index
United Utilities
2003 saw a review of the supplier prioritisation approach, which prioritised commodity groups rather than individual suppliers
Each commodity group was assigned a potential environmental impact ranking, based on an impacts matrix approach developed internally
United Utilities
The resulting commodity prioritised list formed the basis of our engagement programme with our suppliers
The engagement workshop programme also included specific workshops for United Utilities' procurement buyers and internal customers - United Utilities' employees who set contracts and/or procure goods and services as part of their job
United Utilities
While the focus so far has been very much on environmental areas, there have been elements of social sustainability that have started to become incorporated
United Utilities
Examined all of the products they purchased and looked at high spend areas
Produced a prioritised list of suppliers of high risk commodities
Undertook as series of supplier engagement workshops
United Utilities
Reducing energy consumption Reduce the release of greenhouse gases Reduce the use of non-renewable materials Reduce the risk of pollution Reduce waste production Comply with environmental regulations Reduce the impact of transport
Summary
It is a fairly simple approach but will help focus your effort
Risk based approach may appeal to senior managers
Gets buy in and is inclusive
A risk based approach
Objectives Develop a shared understanding of what a risk based
approach to sustainable procurement looks like Review good practice of risk based approaches Practice the implementation of a risk based approach Be introduced to the latest guidance available Develop an action plan to take back to your institution
