mepm project report

Masters of Engineering Project Management

Advantages and limitations of Green Public Procurement: New

Zealand case study

Project Guide Himanshu Naik

Anne Staal Student Id-15875013

Abstract

Background problem: Historically “Green procurement” has been recognised as an

advertising phenomena due to lack of attention paid to environment. In the last decade as the

world faces problems associated with global warming, scientists started thinking about new

techniques which can reduce environmental impact. However, there are few literatures

available which explicitly discuss procurement practices and reducing environmental impact

by implementing green procurement. In this research, we are going to find how green

procurement can help the environment. It is seen that most of the public organisation procure

material from SMEs, which can be used to enhance procurement base. Also, in New Zealand

more than 95% of industries are SMEs (Collins, Lawrence, Roper, & Haar, 2010). So it is

highly important to evaluate their procurement practises and their efforts to address

environmental concerns.

Purpose: The main objective of this study is to examine the advantages and limitations of

green public procurement in public organisations.

Findings: From the literature and interview conducted with executive reveals that there are

certain factors which are vital for green public procurement such as organisational behaviour,

political will, financial resources and legislations which can be acted as hurdles for

implementation of green public procurement. Moreover, consumer behaviour is also an

important element in green procurement. Though public companies don’t look for profit but if

tax payers are not interested in environmental concerns it is highly unlikely that government

or political class will pay attention to green public procurement.

Key words: Green procurement, green purchasing, green supply chain management, corporate

social responsibility, sustainability.

Acknowledgements

This project would not have been possible without the help of my supervisor Mr. Anne Staal.

His through guidance motivated me to do things in right and expected direction. He not only

made me understand the depth of the topic but practical implications which will help me in real

life to solve problems.

I would also like to thank my parents, my younger brother and my entire friend circle who

trusted me in entire completion period. Special thanks to Auckland University of

Technology(AUT) for providing infrastructure such as library and other online resources.

Glossary of words

EU: European Union

GDP: Gross Domestic Product

GPP: Green Public Procurement

GPRP: Government Procurement Reform Program

MNC: Multi-National Company

PWC: Price Waterhouse Coopers

SBN: Sustainable business Network

SME: Small and Medium Industry

UN: United Nations

UNFCCC: United Nations Framework Convention on climate change

Contents 1.Introduction ......................................................................................................................................... 1

2. Objectives ............................................................................................................................................ 2

3. Research question: .............................................................................................................................. 3

3.1. What are the advantages and limitations of Green Public Procurement policies? ..................... 3

3.2. How Green procurement can be implemented in New Zealand with help of SMEs? ................. 3

4. Literature review ................................................................................................................................. 4

4.1 What is green procurement? ........................................................................................................ 4

4.2 What is relevance of green public procurement? ........................................................................ 5

4.3. How negative practices can be acted as hurdles for implementation of green procurement? .. 6

4.4. How policies can be acted as hurdles for implementation of green public procurement? ........ 7

4.5. What is real situation of New Zealand’s companies? .................................................................. 9

4.6. What are SMEs? ......................................................................................................................... 17

4.7. How green procurement can be fostered using SMEs?............................................................. 18

4.8. Summary of literature review: ................................................................................................... 19

5. Research methodology: ................................................................................................................ 20

5.1. Research strategy ....................................................................................................................... 20

5.2. Scientific approach ..................................................................................................................... 20

5.3. Summary .................................................................................................................................... 21

6. Findings analysis and discussions: ................................................................................................ 22

6.1. supplier selection criteria........................................................................................................... 22

6.2. Financial performance: .............................................................................................................. 24

6.3Clients perspective: ...................................................................................................................... 25

6.4. Legislative hurdles ...................................................................................................................... 26

6.5. Summary: ................................................................................................................................... 27

7. Conclusion ..................................................................................................................................... 29

8. Recommendations and limitations ................................................................................................... 30

8.1. Recommendations ..................................................................................................................... 30

8.1. Limitations.................................................................................................................................. 30

9. Reference ...................................................................................................................................... 31

10. Appendix 1 ................................................................................................................................ 34

Interview 1 ........................................................................................................................................ 34

Interview 2 ........................................................................................................................................ 36

Interview 3 ........................................................................................................................................ 38

1

1.Introduction

In today’s world, economy is going through dramatic changes because of cutting edge

technologies. Several aspects of businesses are changing because of innovation and change in

policy. After Rio earth summit, it is almost crystal clear that to maintain position in market one

has to compatible with “Green” technology. (Brenton, 1994; Panjabi, 1992) after year 2000

market flourished with words such as green innovation, eco-friendly, sustainable, bio-

degradable. Green procurement is essential part of operations and supply chain; in this analysis

we are going to see the exact research questions on this topic.

There is quick development in the division of environment. Environmental concerns of people

increased in this decade because of globalization and hardened rivalry among organizations.

As per PwC report there are certain variable includes which drives interest for green

development, for example, customer interest, government strategies, foundation of UNFCCC

and expanded familiarity with a dangerous atmospheric fear among the young people of world

(PricewaterhouseCoopers 2008). Also subsequent to tolerating Kyoto convention it's just about

compulsory for each nation to reduce its carbon outflow which is main impetus to catch

venture. To address these difficulties numerous controller and government associations direct

organizations to rehearse natural benevolent practices which in the long run helps for extreme

objective of economic development.(de Costa Rica, 2008) Though numerous organizational

administrators feel that ecological items are not essential because of the cost included. They

are finding a way to minimize or decrease ecological effect by embracing new innovations at

planning stage and putting resources into innovative work so they can diminish their

appearance in carbon footprint. (PricewaterhouseCoopers 2008). Altruism is one of the reason

yet practically shopper interest is main thrust behind green wave (PricewaterhouseCoopers

2008). Study led by PwC scholars revealed that although the clients are occupied with

purchasing green items, they would prefer not to pay more for expense connected with benefit.

Yet, while practicing environmental safety it ought to additionally be viewed as that how

request will maintain for specific item.

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2. Objectives

In this research we are going to find what are the advantages and limitations of Green Public

Procurement. It has been seen that public procurement is approximately 16% of Europe’s

GDP(Grandia, Steijn, & Kuipers, 2015). Thus focus of this study is on public organisation. It

is also seen that 96% of New Zealand companies are SMEs (Collins et al., 2010) which are

main suppliers to public organisation. To study green public procurement in context of New

Zealand due attention should be paid to SMEs and their contribution for GPP.

3

3. Research question:

3.1. What are the advantages and limitations of Green Public Procurement policies? Sub questions:

1. What is green procurement?

2. How negative practices can be acted as hurdles or limitations for

implementation of green public procurement?

3. How policies can be acted as limitations for implementation of green public

procurement?

4. What is real situation in New Zealand in context of procurement?

5. How situation can be improved with help of planning and taking corrective

measures?

3.2. How Green procurement can be implemented in New Zealand with help of SMEs? Sub questions:

1. What are the SMEs?

2. How green procurement can be encouraged using SMEs?

4

4. Literature review

4.1 What is green procurement? After 1990s there has been an increasing importance to the fact which recognises “green

procurement” as effective tool of reducing negative environmental impact which is related

to production of goods till end of life cycle of that product (Ho, Dickinson, & Chan, 2010).It

has been also seen that green procurement can be growth engine for stimulating

innovation,(New, Green, & Morton, 2002) but to achieve fruitful results from public

procurement there should be more efforts to be made (Günther & Scheibe, 2006).The word

green procurement is originally coined in “Rio earth summit” in the conference of United

Nations for “Environment and development”(Nikolaou & Loizou, 2015).The procurement

can be called as green when there is environmental criteria is considered(Nikolaou &

Loizou, 2015).Several scholar also considered “Green procurement” is growing because of

voluntary acceptance of states. In 2013 European commission came up with executive

report which explicitly points out importance of green public procurement (Nikolaou &

Loizou, 2015).Though green procurement encapsulates future opportunities for sustainable

environment it is quite unclear how green procurement can impact businesses in positive

manner (Testa, Grappio, Gusmerotti, Iraldo, & Frey). So there is a wide disagreement

among the scholars about green procurement (Arrowsmith, 2006). There can be more than

these articles which defines green procurement but for this research we are considering

optimum number of articles with all the possible perspective that can be included.

When public authorities or private entities apply environmental preferences while

purchasing or giving tenders or services it can be called as green procurement (Varnäs,

Balfors, & Faith-Ell, 2009) However the environmental criteria is not always considered

for decision making or while awarding the tenders rather it is considered for checking

contractors capability of managing environmental work in project (Varnäs et al., 2009).

Green public procurement is a process whereby contracting authorities aim to procure

services and products that meet environmental requirements (Uttam & Roos, 2015). There

can be different school of thoughts regarding the definition of green procurement but the

essence is that all the researchers are focusing on environmental factor while

implementation phase (Ninlawan, Seksan, Tossapol, & Pilada, 2010) In recent years, green

public procurement has extended to sustainable public procurement, which involves the

incorporation of both environmental and social considerations in the procurement of goods

and services (Varnäs et al., 2009). Green Public Procurement is also defined by the

European Commission as “a process whereby public authorities seek to procure goods,

services and works with a reduced environmental impact throughout their life cycle when

compared to goods services and works with the same primary function that would otherwise

be procured” (Uttam & Roos, 2015).Green public procurement includes so many social

factor thereby it can be called sustainable public procurement (Walker & Brammer, 2012).

In recent years many countries adopted roadmap for implementation of sustainable public

procurement. It has been also seen that to implement sustainable public procurement

expands new opportunities for green public procurement however in many countries

implementation of sustainable public procurement doesn’t go beyond inclusion of

environmental criteria.(Walker & Brammer, 2012).Green public procurement can also be

seen as an important potential instrument of innovation policy (Ho et al., 2010)

Implementation of green procurement can be useful for reducing carbon footprint.

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Also the inclusion of carbon footprint in Green Public Procurement can act as a strong

stimulus for eco-innovation.(Alvarez & Rubio, 2015). According to World Bank report in 2013

several companies are including environmental criteria because of the importance of green

factor associated in developed countries.(Alvarez & Rubio, 2015). In this section we have

analysed different definitions of green procurement. In conclusion we can see that green

procurement is process where environmental criteria are adopted to enhance efficiency or

social dividend in case of public organisation or profit margin of private entities.

4.2 What is relevance of green public procurement?

In previous question we have discussed the definition of green procurement now in this

question we shall discuss the relevance of green procurement.

In this research we will try to find out what is driving force behind green procurement,

how it is economically viable to adopt green procurement as instrument to reduce

environmental impact and carbon footprint(Abdallah, Diabat, & Simchi-Levi, 2010;

Abdallah, Farhat, Diabat, & Kennedy, 2012). Altruism is one of the reason yet practically

shopper interest is main thrust behind green wave.(PricewaterhouseCoopers, 2008).

Systematic diagnostic study led by PwC scholars that however the clients are occupied with

purchasing green items, they would prefer not to pay more for expense connected with

benefit. Yet, while practicing environmental safety it ought to additionally be viewed as

that how request will maintain for specific item. In PwC report interest figure is represented

as follows.

Today In future Percentage

increase

Business 48% 75% +56%

Government 57% 76% +33%

Consumer 54% 72% +33%

Source:(PricewaterhouseCoopers, 2008)

These figure indicates that how much demand is there for green factor based on systematic

study. Several international organizations and scholars also highlight that GPP is likely to

play a key role in the overall environmental policy since it may stimulate firms to adopt

voluntary environmental management practices to increase their share in public

procurement(Nikolaou & Loizou, 2015). European Union’s report suggested its member

states to implement green criteria while giving tenders(Nikolaou & Loizou, 2015).

Governments are trying to reduce the negative environmental impact of production and

consumption by leveraging their influence as major procurers of goods and services

(Grandia et al., 2015; Walker & Brammer, 2012).Public procurement of European union

accounts for 16% of gross domestic product, this figure is more higher in japan and Asian

countries .(Grandia et al., 2015).From this it can be evident that large amount of money is

being spent on procurement if we use as innovative tool then it can be easy to achieve target

of reducing environmental impact. Also we should also explain why we have chosen public

organisations over private entities because public organisations are mainly controlled by

government so all government policies are directly reflected in organisation’s policies.

Furthermore, public organisations are not always profit oriented wider social angle is

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always there so people will get social dividend and there can be transformation of socio

economic scenario.

4.3. How negative practices act as hurdles for implementation of green procurement? How to define “Greenwashing”?

Greenwashing is defined as the act in which company gives false or misleading

information to consumers to gain the profit. There are two types of greenwashing firm level

and product level. Firm level green washing is defined as giving false information about the

process for instance many companies advertise that they follows eco-friendly procurement

protect the environment though they are not doing it(california, 2011; Laufer, 2003; Parguel,

Benoît-Moreau, & Larceneux, 2011). On the other hand product level Greenwashing is

giving false information about the product or service which is environment friendly (Mitchell

& Ramey, 2011) We are going to see few examples to illustrate both levels of greenwashing.

Firm level greenwashing:

General Motors is one of the leading company in automobile manufacturing which

claims that it is working in environmental sector by implementing different manufacturing

and designing techniques but at the same time company fight for EPA regulations norms

which are defined for cleaner air. So by studying these facts we get to know that how

contradictory the claims of company whenever there is question of profit.

Product level Greenwashing:

LG electronics miss-certified the refrigerator with wrong energy consumption indicator than

actual. Energy Star is third party organisation which rates the electronics product. But

investigation it was found that eight out ten refrigerator consumes more energy than actual

rated star. So this is a clear example of product level misleading in which with using energy

efficient label product sold for higher profit margin.

To figure out what are the driving variable behind "Greenwashing"? We need to see this theme

from alternate point of view, for example, administrative, hierarchical and social. Since there

is circuitous impact of all these elements soon individual and customer conduct. By considering

these variables, we became acquainted with that there are three principles main impetus which

makes ready for firm level greenwashing. There are outer and inside elements which are

specifically in charge of greenwashing outside component incorporates motivating forces for

Green item, discount in Taxes and so forth. Though roundabout variable incorporates requests

from buyer and speculator. In spite of the fact that multifaceted nature in regulation is one of

the main impetus behind the Greenwashing for instance if for some item emanation farthest

point is set for specific nation which is need not be same for rest of the world so customary

result of created world can be sold in libelling so as to create nations it as a green. Likewise,

reformatory activity is not characterized for specific activity such a large number of MNCs are

exploiting careless regulations. So from this it can be comprehended that firm regulations are

important to abstain from greenwashing rate for that policymakers, government associations

and supervisors ought to similarly take an interest to conquer the occasions of greenwashing.

Government ought to proactively venture forward to make regulations about "Green" items and

administrations. Commonly absence of clarity fills the need of organizations’. Words like "All

Natural", "Bio-degradable", "Eco-accommodating" fill the need of organizations as there is no

reasonable and straight forward definitions for this.

Our third question is about management views and management decision that can change the

company’s policy. So in this analysis we will see how managerial views can act as hurdle in

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implementation of green procurement. It is always the management’s decision which can lead

a company to certain direction. Many author believe that most of the higher manager are stick

to organisational inertia which is they are not willing to take any risk because of losing revenue.

But in this competitive world this habit can be costlier than taking risk. In this research data is

collected for different management level authorities and their hobbits are checked and on the

basis of that analysis is done to find out how management decision can act as a hurdle. For this

experiment questioner or interaction with people is the best way to know their opinion. In this

report we are just discussing methodology and how we interact with people. In final report we

will submit the details of interviews conducted of people and analysis of data collected. This

will give us a unique opportunity to check whatever we have found out with literature is

matched with real world problem and how to find solution depending upon that.

4.4. How policies can be acted as hurdles for implementation of green public

procurement? This is most important question because it takes into consideration the pragmatic aspect of

implementation. In this analysis we will try to find out what the hurdles are and how to

overcome these. Green Public Procurement mainly under the severe financial conditions of the

current economic crisis, during which time public expenditures should gradually be cut due to

the flagship policy of the European Union for severe austerity measures(Li & Geiser, 2005;

Nikolaou & Loizou, 2015). That means limited budgetary allocations is the main hurdle for

implementation. Systematic study led by PWC suggests that buyers behaviour is also one of

the reason it further elaborates that buyers are preoccupied with purchasing green goods and

services but they refuse to pay extra coast associated with it (PricewaterhouseCoopers, 2008).

From this example it is quite evident that consumer behaviour can act as a hurdle for

implementation of green procurement. If consumer refuse to pay for green products, then it’s

not economically viable for organisation to implement green procurement. Government

policies should be conjunction with green public procurement. Suppose in coal based power

plant if company decided to go for advanced technology which emits less carbon dioxide than

previous then government should facilitate low tax on new technology or instruments. Most of

the time it has been seen that government advertises for going green at the same time imposes

higher tax on green products for higher revenue gain. We must also consider this paradox and

reason associated with it. Lack of trust can be acted as hurdle for instance if government want

to promote green policy then it should be first enacted in state owned organisation to set

example for private players in market. They suggest that a state-owned web platform promoting

both environmentally friendly products and displaying the best environmental performance of

firms could shape necessary market conditions in order to provide new opportunities to exploit

the green economy.(Nikolaou & Loizou, 2015).To find out solutions we have to consider

hurdles in such a way that we can reach towards roots of problem. Hurdle analysis involves

four major steps including demand management, market research, award and procurement

processing.(Günther & Scheibe, 2006). If we go further, then we can subdivide each process

to another.

Demand management: we can divide demand management into three further steps.

Demand emergence, demand research and analysis and fixing of demand are significant

factor that we should consider while doing hurdles analysis.

Market research: This is the most important because this involves lots of economics. In

today’s era due to immense competition analysis of market is always prerequisite.

Basically market research involves market observation, market prediction and

communication to procurer who are involved in procurement process.

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Award: At this stage tender is prepared and rules regarding the procurement process will

be formed. At this stage scrutiny of tenders is performed and based on requirement of

procurer award is given. At this stage environmental criteria can be checked or further

clause can be added according to procedure established by law.

Procurement processing: This step involves logistics of goods, accounting control and

inventory management. As we have discussed these are main steps that we have to take

into account for doing hurdle analysis.

There are different stakeholders which can influence public procurement process.

The State is an important factor, by implementing different rules, regulation and

directives state can influence the decision making process. The citizens can put

pressure on legislature to amend laws for green procurement positively or

negatively.

Hurdles analysis for local bodies proposes following hurdles for an

implementation of green public procurement.(Günther & Scheibe, 2006)

The main hurdles are no results of effort, no aim of local bodies for proposed goal,

no consensus among stakeholders, not informed about different possibilities,

uncertain legal position, very complex laws these are some factors. They also

proposed lack of knowledge, delay in decision making process, not informed about

alternative option, expensive production, lower functionality, user prejudice these

are main obstacle regarding implementation of green public procurement. To

summarise these are some hurdles that we have found in literature. According to

Gunther and Schreiber hurdles analysis can be expressed in following way

(Günther & Scheibe, 2006)

Hurdles analysis

Due to lack of efforts green procurement is not implemented

Employees are not trained to adopt green procurement as operation tool.

Green procurement is not one of aim of implementing agency.

The aim of Green procurement is not reflected through legislative

amendments and guidelines.

Procurement guidelines of agency are not supporting green procurement

though it aims for it.

There are ambiguities concerning legal framework of green procurement.

Established laws for green procurement are very rigid with respect to

implementation perspective.

Many times it has been seen that established laws prevents green procurement.

Employees are not informed about importance of green procurement and

services.

It is difficult to identify green products and services within procurement

market.

Many user have prejudices concerning green products and services.

Many times due to competition Green procurement is often obstructed by

administrative procedures.

Most of the times Follow up costs are not included in procurement decisions.

9

Green products have less functionality than conventional product.

Green products and services are much more expensive than conventional

product.

Many times green procurement causes extra work.

There are no sufficient alternatives available within green procurement

market.

Scope of green procurement is too small

Customers are often refuse to pay extra cost associated with green products.

Given Scope of green procurement is not used effectively.

Many organizations used “greenwashing” for effective marketing.

Lack of managerial vision is also obstacle to implementation to green

procurement.

Strategic decision can be made to obstruct green procurement.

Source:(Günther & Scheibe, 2006)

4.5. What is real situation of New Zealand’s companies? In last section we have seen hurdles for implementation of green public procurement. Now we

shall consider New Zealand case study. What is the current situation regarding environment

policies, what is market situation and how green procurement can be implemented?

Sustainability refers to incorporating social and environmental criteria in business which can

provide competitive edge and economic profit in market.(Collins et al., 2010). In case of New

Zealand there has been two stories one focuses on advantages during economic crises as green

technologies helps business to effective management of waste disposal and energy efficiency.

On the other hand, some school of thoughts suggests that at the time of economic hardship

purchasing power parity of consumers reduced so people would tend to buy more inexpensive

product than “Green” products which are relatively expensive than its counterpart. In 2009

there was survey conducted of managing directors to know then situation of sustainability

practices in New Zealand. There was economic recession going on at that time. It was found

that 30% stakeholder responded positively for that survey. It was seen that more than 736

companies participated in that 15 % companies responded in same manner as before.(Collins

et al., 2010) and because of this it was possible to maintain track record of company. In addition

to sustainability survey also identifies who is responsible for decision making and barriers and

drivers for that. It has been seen that before recession there was increasing trend regarding

sustainability which was stopped after global economic crises.(Collins et al., 2010). But

according to survey though sustainability was important factor there was no consensus about

definition of sustainability. Some companies were practicing environmental criteria and some

companies followed social causes. Moreover, it has been seen that majority of companies are

following social causes for sustainability than environmental concerns. The survey was

conducted and financed by charter institute of management account which is UK based

organisation. The Sustainable Business Network (SBN) was also non-financial partner and

New Zealand Business Council for Sustainable Development (NZBCSD) is new partner (non-

financial) which was interested in sustainable practices in New Zealand.

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Profile of organisation:

The latest survey was conducted in 2010.There was total 736 participant companies out of them

30% were responded positively. The survey was mailed to participant through hard copy or

online medium. 15% participant responded similarly to last surveys which were conducted in

2003 and 2006. It was seen that New Zealand’s profile is different than other developed

countries like UK and US Because 99% business consists of small and medium type of

industry. According to Ministry of Economic Development small industry can be defined as

which has less than 20 employees.

The industry sectors the survey respondents self-identified with was:

18% Finance, property and business services

12% Manufacturing

11% Retail, hotel, restaurants

7% Community, social and personal services

6% Transport

5% Construction

4% Agriculture, hunting, forestry & fishing

2% Electricity, gas and water

0% Mining and quarrying

34% Other

2010 survey indicates different environmental practices followed by firms to reduce impacts.

In following figure environmental practices of NZ organisations are given.

Environmental practices by NZ SMEs in 2010

Source:(Collins et al., 2010)

From the graph above, it has been seen that most of the companies follows recycling as prefer

way of reducing environmental impacts furthermore more than ninety-nine percentage of

company in New Zealand are SMEs so this graph can be valid impetus for our analysis.(Collins

11

et al., 2010). Some noteworthy facts about New Zealand’s SMEs are, only 17% have target for

water recycling and 16% participant stated that they did have targets for emission reduction.

The finance and account department which is responsible for allotting funds stated that they do

not have modern system to accommodate environmental related expenses. Sixty-four

percentage of companies also admitted that managing director is responsible for environmental

strategies that indicates that environmental practices are subject to economic viability there is

no fixed strategy to tackle environmental impacts.

There is one more observation which clarifies that environmental practices followed by firms

are proportional to revenue. Furthermore, it clarifies that firm’s practices are mainly to build

market image than its environmental cause. Also real practices can be verified at the time of

economic crises when there is low demand and stiff competition. In 2010 when survey was

conducted there were mixed results about performance of companies and it can be seen that

volume of company was deciding factor to check their environmental performance. Though

larger companies were consistent in environmental practises, smaller and medium industries

tended to avoid environmental practices. Survey results showed similar finding like there

were 3% large companies which couldn’t continue environmental practices whereas 4%

medium and 11 small companies relinquished environmental practices at the time of

economic crises (Collins et al., 2010)

Impact of economic crises on environmental practices of firm

This was litmus case for New Zealand companies because for public organisations or private

entities have to face measures taken by central bank in terms of monitory policies and it has

been seen that most of the public organisation and governments adopts austerity measures to

control economic balance. The 2010 survey suggested that results are mixed. From 2003 to

2010 there is increase in number of firms which campaign based on clean and green energy. In

2003 to 2010 there was increase of 13% which is marginally high when we compare on the

basis of New Zealand firms size because it’s easy for bigger companies to adopt changes than

smaller which has smaller resources. It was also seen that most of large company’s uptake in

environmental practices were high. Furthermore, it can be concluded that company’s

environmental practices depend on size of the firm.

Social practices by New Zealand firms

Source:(Collins et al., 2010)

From this graph it can be seen that most of the companies followed charity as a corporate social

responsibility practice. Furthermore, it can be added that New Zealand companies preferred

12

social practices over environmental practices. More than 60% of companies followed local

social practices (Collins et al., 2010). When we analyse the bar graph it can be further clarified

that after charity and local services most of the companies followed job training as tool to

compete in market. Very few companies follow social innovation and other small mediums as

a way of doing sustainable practise. From the analysis we can conclude that more New Zealand

companies are engaged in social practises than environmental practises.

How strategic approach of procurement can help to get better results?

Waikato regional council has come up with new procurement rules which can be ice breaker

for New Zealand public procurement organisations (counsil, 2016). It advocates how effective

planning can translate into risk minimisation. Three points that are mentions while considering

procurement these are

1) Procurement should be planned with respect to type, risk and value of procurement. That

means procurement practices of organisation should have multidimensional approach to

avoid risk.

2) Organisational image, which should be unbiased towards all the supplier so that it can

retain and benchmark criteria which are essential for effective implementation of green

procurement.

3) Organisation should select right supplier or it should set certain precedence while selecting

right supplier. Furthermore, selection of supplier is very important because every supplier

has its own image which can cascade positive or negative effects.

4) Suppliers selection is vital aspect. There are certain criteria mentions which can be applied

while supplier selections these are methodology, risk management, track record, reputation,

financial viability, reputation and commercial experience.

One more government report published in 2010 by Ministry of Business and Innovation of

New Zealand government stated that how reforms can make procurement more cost

effective and can save revenue (innovation, 2010). Furthermore, in that report key result

areas are defined like scope of procurement, capacity building, improved business

accountability and sustainability (innovation, 2010). Scope for procurement is explained in

following diagram:

13

From this diagram we can define scope of procurement and also give an idea about different

organisations where government can focus for better implementation of procurement norms

and better optimisation. This government model also advocates the advantages and

achievements by New Zealand governments after successful implementation of new

procurement policies.

Before

Now

There was no unified or model legislation

for assigning contract.

Regulatory measures are there to

meet critical requirement of

contract.

There was no channel available for

information sharing for tender process.

Special agencies are establishes to

convey information about tendering

processing and transparency.

There were no grievance redressal

mechanism in placed to address suppliers

concerns.

Now there are multiple agencies

which take into account suppliers

feedback and suppliers also

satisfied about it.

There was shortage of skill procurer Now it is very easy for skill

procurer to migrate to New

Zealand.

There was demand supply mismatch

because there was demand for

procurement training

There are plenty of courses

available for training and

certifications.

Source:(innovation, 2010)

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There is also one more government body which works to improve overall situation in

procurement norms is New Zealand Government Procurement Reform Programme (GPRP)

which is government body (government, 2010).

This GPRP explains chain of success concept which means that procurement is combination

of several logical steps and if at each stage efficiency is attained then it would be easy to deliver

success.

GPRP suggested some valuable insights regarding procurement process about traditional

procurement behaviour it further added how procurement was considered to be administrative

work rather than opportunity for innovations (government, 2010).

We will see how new approach of procurement has changed dynamics of procurement through

graphical representation.

Traditional approach of procurement:

Image source:(government, 2010)

The new approach for procurement takes into consideration core research methodology and

perhaps professional approach of ethical due process (government, 2010). It is also focused on

collaborative research approach than individual research.

New approach for procurement: With process mapping


15

At each stage key results area are defined to enhance productivity and life cycle assessment is

done to avoid losses at each stage of process. These steps ultimately This diagram explains

how strategic approach for procurement can be value addition lead to profit maximisation.

Source:(government, 2010)

Procurement lifecycle:

This study report basically divides procurement into three different sections which are

planning, sourcing and managing and these three subtopics are further divided into eight

different parts. We will see how we can implement these strategies to minimise the risk.

Furthermore, this is object oriented approach which takes into consideration specific areas to

be targeted. In this approach benchmark is already set to compare growth of projected output

Project initialisation: In this phase procurement plan is made and key results area are

decided. For successful implementation of project stakeholder engagement plan is made

with agreement of stakeholders for better interaction in project. At this stage of

procurement planning documentation is done and strategies for fund allocations are decided

for key requirements.

16

Stakeholder identification: In this stage stakeholders are identified for successful

implementation of project because stakeholders are main drivers of any project. In

following diagram stakeholder engagement plan is made for smooth functioning of project.

Furthermore, key stakeholders are determined and they are prioritised as per their influence

in the project. This project management approach is followed over conventional operational

management approach to gain more productive results.

Stakeholder engagement plan for procurement


In this plan different players in procurement are identified like suppliers, government bodies,

vendors and procurement managers for effective coordination and interaction.

Policies: This is a very important issue element as procurement procedure should be

transparent towards buyers and suppliers. Government should enable platform which can

enable procurers to do business in fair and transparent manner. There are some approaches

that government should follow while procurement of goods and services and these are

mentioned in following diagram:


17

From this table it can be illustrated that which approach to be followed according to situation

in market and stakeholders interest associated with it.

In this illustration we have learned strategic approach to procurement and consequence of

management approach to procurement.

4.6. What are SMEs? A small and medium company can be considered as company which employees 50-200

employees (Gunasekaran, Rai, & Griffin, 2011). The employee strength can be different

depending upon country (Psillaki & Daskalakis, 2009). SMEs play very important role because

it employees and due to small capital it encourages entrepreneurship which is driving force for

any business to run. New SMEs are seen as a significant component of the solution to countries

development issues (Olawale & Garwe, 2010). It is also notable fact that SMEs are not just

vital in developed economy they also played very important role in developing economy

(Singh, Narain, & Yadav, 2013). In New Zealand SMEs are playing very important role not

just in the context of industrial output but in term of employment. In New Zealand 96% of

industries are SMEs and they employ nearly 40% of workforce that indicates how they drives

the growth engine for job market in New Zealand (Voges & Pulakanam, 2011). It can be also

explains by researcher that due to limited access to institutionalise finance and resource

restriction growth of SMEs are limited if they get exposure of institutionalise support (Beck &

Demirguc-Kunt, 2006). In following diagram countries wise distribution of SMEs are

explained:

Source:(Beck & Demirguc-Kunt, 2006)

European commission formally come up with classification of SMEs on the basis of several

different factors such as employee strength, turnover and balance sheet performance on the

basis of that it has provided the definitions of SMEs in following diagram

18

Image source:(commission, 2016)

In this we have discussed what is the definition of SME, on which factor it can be classified

and what are the economic relevance of SMEs. In the next sub question now we shall focus on

green procurement using SME as medium of engine for growth.

4.7. How green procurement can be fostered using SMEs? Small businesses are more dynamic in nature which employees more people with competitive

capital investment. At the same time they are also responsible for pollution in UK that figure

is almost near to 70% of total industrial pollution (Walker & Preuss, 2008). But many times it

has been seen that these small firms manage their environmental performance due to lack of

resources. There are different ways which like we can see this problem through supply chain

point of view which means consumer can force their supplier to avoid certain type of material

or use of material which is environmentally certified. Due to use of certain environmentally

product cost can be escalated that is where actual problem lies.

Local government are key player in the field of procurement because most of their

supply is sourced from SMEs. Local Agenda 21 provides information that if we can

force local government for pro-environment legislation for their supply we can attain

goal of green procurement at certain extent.

Another way of implementation is voluntary strategic green procurement than via

Corporate Social Activities rather than legislative enforcement (Walker & Preuss,

2008)

Most of the public procurers sourced their products from SMEs. Moreover, public

companies should provide ample amount information so that small companies will get

due benefit of that for their regulations and implementation.

There are drivers which actually enable SMEs to implement green procurement.

Image source:(Lee, 2008)

19

From the above diagram it is evident that there are three main drivers which can enable SMEs

to implement green procurement which are environmental championing, monitoring (specially

buyer’s trends), and public and regulatory pressure which are the main drivers behind the

implementation

There are mainly five drivers for green procurement in SMEs that are following

Process: The SMEs can focus on operational factor for green implementation like

energy savings, alternative energy sources, source based emission reduction and mass

based control which can be acted as drivers for green procurement in context of process.

Organisation: The organisation should have environment management system which

can give training to its employees and other suppliers regarding environmental policies

and changes adopted by organisation for implementation of green procurement.

Supply chain: In this section consumer perspective takes into consideration

alternatively demand side management is achieved in context of environmental friendly

procurement.

Relationship perspective: In this environmental communication plan are considered for

external stakeholder engagement.

4.8. Summary of literature review In this literature review we have referred to a range of articles to find out relations between

different green procurement practices of public authorities and their environmental impacts.

We have also discussed what are the hurdles for implementation of green public procurement.

We have found that legislative hurdles, financial constraints act as barrier in literature. We will

verify our claim of literature with interview findings.

20

5. Research methodology In this research study, procurement practices of public organisations are studied and analysed

to find out environmental impact and how it can be reduced by green public procurement.

In this valuable study I have got opportunity to study different aspects of green public

procurement, what are hurdles for implementation of green public procurement. Though there

are several pieces of research paper which talks about public procurement , still there is further

scope for development (Green, Morton, & New, 1996). Research has been done in the field of

green procurement but there are some gaps in terms of environmental impact of green

procurement, its viability in financial domain and other issues associated with green

procurement. Green public procurement has to be in line with business and for this lot more

research is required to address different clauses and technicalities (Varnäs et al., 2009)

In one of the research question we have seen what are the hurdles for implementation of green

public procurement and causes associated with it. In interview also we confirmed that factor

such as organisational behaviour, limited budgetary allocations, legislative hurdles are main

causes are the main hurdles are the main hurdles for implementation. Similarly, we found

disagreement between literature findings and data collection such as involvement of green

criteria in procurement process and implications of that. From this it can be inferred that

literature finding and practical findings are not same always because each literature has

different contexts such as economic situation, geographical terrain and other factor which can

influence the results.

5.1. Research strategy There are mainly two types of research methods that are widely followed (Creswell & Clark,

2007; Patton, 1990). These two methods are qualitative and quantitative. Qualitative method

which takes into account literature, and information which is widely available. Qualitative

method does not deal with just number but it takes into account opinions, line of thoughts and

wider perspective of particular object that is why we have adopted for this study. Unlike

qualitative method in quantitative method data is collected and processed to check already

established principle or hypothesis where there is little scope for wider perspective.

However qualitative method gives us flexibility to accommodate different thought, opinions

and principle which are beyond our expected thought process (Bowen, 2009).

5.2. Scientific approach (Bell & Bryman, 2007) mentioned that sometimes it is difficult to opt one method or theory

from one literature. Because it is almost difficult to find the literature which has same line of

thought which is required for our concurrent research. To overcome this difficulty in most

research inductive approach is used in which literature is used to propose new literature along

with qualitative data.

In this research study inductive approach is followed. Which means existing literature is used

along with qualitative data to propose new hypothesis. We have extensively used different

articles on green public procurement and sustainability to find out environmental impact of

procurement. To verify our facts, we have conducted interviews with procurement officials.

And on the basis of information which they have provide hypothesis is verified. Detail

discussion of this interviews is done in results section of this this research study.

21

5.3. Summary Based on literature and interview findings research pros and cons of green public procurements

are proposed. Though there are can be some errors and drawbacks but maximum attempts are

taken in the direction of making research pragmatic and dynamic in nature.

22

6. Findings analysis and discussions: Three companies participated in survey process. In following table profiles of respondents is

given

company A B C

Type Electronics/manufacturing manufacturing Public

organisation

Respondents

profile

Procurement officer Procurement

officer

Supply chain

officer

To find the advantages and limitations of green public procurement interviews are conducted.

To get structured response from respondent interview questions are divided in four different

sections. These sections are tender criteria, financial performance, consumer’s perspective and

measure of financial performance. These questions can be subdivided further but to keep it

simplified, classification is done in four sections only. In first section selection criteria is

discussed.

6.1. supplier selection criteria

Interview A

1) Do you involve green selection criteria in your supplier selection process?

Yes

2) Do you evaluate supplier’s history before assigning contract?

Yes

3) Does involving green criteria while assigning contracts economically beneficial?

May be

4) Do you believe that green supplier can build positive image of your organisation?

Yes

5) Do you believe that green public procurement has future in upcoming years in the

context of your organisation?

Yes

23

Interview B


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:



Yes: No: May be:

Interview C


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:



t

24

Yes: No: May be:

Inference and discussion:

From answers it can be clear that there is consensus among the respondents about involving

green criteria and evaluating supplier’s history before assigning contract. This can clearly

imply advantage of Green public procurement. Because of this supplier will tend to make

greener product which are environmental friendly and secondly only those companies will get

contract which are practising environmentally friendly policy which increases competition and

possibility of innovative products. Similarly, if focus is given to corporate image and future of

green procurement then it can be found that there is no consensus of respondents which

indicates limitation of green public procurement. This reduces possibility of implementation of

green public procurement because of lack of confidence of respondents about future of it in

volatile market situation.

6.2. Financial performance: Interview A

1) Do you think it is possible to link financial criteria with “Green criteria”?

May be

2) Do you believe that financial performance can be improved with help of “Green” public

procurement?

Yes

3) Do you implement any other methods other than financial performance to measure

green public procurement?

Yes

Interview B


Yes: No: May be:


procurement?

Yes: No: May be:



Yes: No: May be:

Interview C


Yes: No: May be:


procurement?

25

Yes: No: May be:



Yes: No: May be:

Inference and discussions:

It is often seen that financial performance of company is always verified by financial variables

such as stock price, market capital, revenue growth etc. critical evaluation of answers can

suggest that there is no consensus of respondents about linkage of financial performance of

company to green procurement which imply limitation of green public procurement in context

of financial performance. Unless managers and executives do not believe in financial merits of

green procurement it is hardly to be implemented.

6.3Clients perspective: Interview A

1) Are clients willing to pay extra cost associated with “green” criteria?

Yes

2) Do you have plans in your organisation to improve environmental literacy? (like

training program)

May be

3) Do you believe that consumer driving force can impact your green procurement

implementation?

Yes

Interview B


Yes: No: May be:


training program)

Yes: No: May be


implementation?

Yes: No: May be

Interview C


Yes: No: May be


training program)

Yes: No: May be

26


implementation?

Yes: No: May be


Though there is no agreement of respondents about employee training program and premium

coast associated with green procurement, companies mutually agree that consumer demand can

be driving force for implementation of green procurement. It has been that many consumers

wanted premium products but they are not willing to pay cost associated with it. It can be also

inferred that if public companies emphasised on green public procurement then it can be

possible to implement green procurement in entire supply chain due interconnection of

different suppliers in supply chain which is vital advantage of green public procurement. In

New Zealand more than 95% companies are SMEs (Collins et al., 2010) which are suppling to

public companies can implement green procurement if public companies stick to its demand

for green products which eventually helps the environment.

6.4. Legislative hurdles Interview A

1) Do you face any legal constraints while implementing green procurement?

No

2) Do you get subsidy for procurement of green products?

No

3) Is your supplier involved in “Greenwashing”?

(Note: Greenwashing involved false environment practices.)

No

4) Does your company have alternative strategy to tackle “Greenwashing” tactics of rival

companies or suppliers?

May be

Interview B


Yes: No: May be


Yes: No: May be



Yes: No: May be

27



Yes: No: May be

Interview C


Yes: No: May be


Yes: No: May be



Yes: No: May be



Yes: No: May be


On the point of legal issues while implementation there is ambiguity among the respondents.

One possibility is that, there are different environmental laws for different industries so for

different industries corresponding hurdles can be different. From the answers is also evident

that companies are least interested in training program as companies do not see any direct

benefit attached to this.

6.5. Summary In this section crux of interview questions is discussed in context of original research questions.

First research question is about limitations and advantages of green procurement. Critical

analysis of interview questions suggests that there are few advantages of green procurement as

follows

Green Procurement increases completion among the suppliers which is helpful to

reduce environmental footprint.

GPP also helps to build positive image of public organisation which helps to build

creditability of public organisation.

GPP allows public organisation to attain resource efficiency by using alternative

material

In legal aspects of interview questions, respondents mentioned about legal hurdles and financial

constraints which indirectly gives idea of limitations of GPP. In context of research question

there are more limitations which are expressed by respondents as follows

Green procurement increases the price of product which cause public organisations to

spend more on procurement.

Green procurement can also cause inflation of basic commodities if core sector public

companies opted for green procurement which can reduce affordability of product.

Respondents showed lack of confidence when asked about future of procurement.

28

Responded pointed out legal and legislative obstacle which are limitations of Green

Public Procurement.

Second research question is specifically about SMEs. Respondents mentioned that most of their

customers are public bodies which further demonstrates that in New Zealand to implement

Green Public Procurement focus must be given to SMEs.

29

7. Conclusion

Hence it can be concluded that Green Public Procurement has inherent advantages and

disadvantages. To implement Green public procurement entire supply chain should be focused

on. Public companies procure goods from different small companies that is why entire supply

chain should be targeted to get maximum positive output from green public procurement. From

analysis it can be stated that implementation of Green procurement is dependent on several

different factors such as financial resources, legal constraints and governments support.

Literature finding and respondents information is summarised for each sub-research questions

for simplicity in following explanations;

It tells that green procurement is an activity which takes into account environmental

perspective in procurement.

Due to mass procurement in public organisation targeted procurement approach can

reduce environmental footprint.

Environmental practices adopted by New Zealand companies are proportional to their

revenue strength (Collins et al., 2010)

More than 95% companies in New Zealand’s are SMEs which should be emphasised

to get better green procurement results.

30

8. Recommendations and limitations

8.1. Recommendations From the answers of interview questions and literature findings there are some

recommendation proposed which are mentioned as follows:

For any public organisation selection of supplier’s history is crucial step which can be

useful for public organization in long run in two aspects of building positive image and

keeping sustainability in operation.

To implement Green Public Procurement public organisations have to take initiative in

terms of giving subsidy, suppliers training to overcome the doubt of future of Green

Public Procurement among the small suppliers.

Government should simplify environmental law in context of implementation and can

implement concept of environmental audit which should take into account all aspects

related to environment other than financial indicator.

Public organisations should campaign about green procurement by which it can attract

mass attention which can become driving force of Green Public Procurement from

demand side.

Government should give subsidy in monetary form or in tax to help organisations to

balance their expenditure.

8.1. Limitations

There are some inherent limitations of this studies which are mentioned as follows

Respondents selected for this survey are from different geographical locations of New

Zealand which can affect result of studies because each council and local bodies have

different norms of public procurement.

Results obtained from three respondents cannot be generalised for SMEs due to their

different types.

It is assumed that information provided by respondents is true and based on their own

experience.

Literature used for this study is limited which cannot accommodate every information

about green public procurement.

31

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34

10. Appendix 1

Interview 1 Questioner for Engineering Research Project

Note: The data obtained from this interview will be kept anonymous and only used for academic

purposes.

Questions:

Supplier selection


Yes


Yes


May be


Yes

8) Do you believe that green public procurement has future in upcoming years in the context of your organisation?

Yes

Financial performance


May be

10) Do you believe that financial performance can be improved with help of “Green” public procurement?

Yes

11) Do you implement any other methods other than financial performance to measure green public procurement?

Yes

Clients and Employee perspective

12) Are clients willing to pay extra cost associated with “green” criteria? Yes

13) Do you have plans in your organisation to improve environmental literacy? (like training program)

35

May be

14) Do you believe that consumer driving force can impact your green procurement implementation?

Yes

Legislation and legal obligations

15) Do you face any legal constraints while implementing green procurement? No

16) Do you get subsidy for procurement of green products? No

17) Is your supplier involved in “Greenwashing”? (Note: Greenwashing involved false environment practices.)

No

18) Does your company have alternative strategy to tackle “Greenwashing” tactics of rival companies or suppliers?

May be

Date: 09/06/2016

36

Interview 2

Questioner for Engineering Research Project


purposes.

Questions:

Supplier selection


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:



Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


27) Are clients willing to pay extra cost associated with “green” criteria? Yes: No: May be


t

37

Yes: No: May be


Yes: No: May be


30) Do you face any legal constraints while implementing green procurement? Yes: No: May be

31) Do you get subsidy for procurement of green products? Yes: No: May be


Yes: No: May be


Yes: No: May be

Any feedback and suggestions

Date:

38

Interview 3 Questioner for Engineering Research Project


purposes.

Questions:

Supplier selection


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


Yes: No: May be:



Yes: No: May be:


Yes: No: May be:


Yes: No: May be:


42) Are clients willing to pay extra cost associated with “green” criteria? Yes: No: May be


Yes: No: May be

39


Yes: No: May be


45) Do you face any legal constraints while implementing green procurement? Yes: No: May be

46) Do you get subsidy for procurement of green products? Yes: No: May be


Yes: No: May be


Yes: No: May be

Any feedback and suggestions

Date:

mepm project report

Documents