3

Sourcing and Materials

Procurement is often thought of as simply the act of purchasing goods and services by processing a requisition, receiving an invoice, and then making a payment; however, many workshop participants emphasized that procurement should be thought of as a much broader process, from generating and soliciting requirements all the way to closing out a contract (Figure 3-1). Participants also noted that procurement tools to help foster sustainable purchasing could be integrated into all aspects of the process. Such integration could allow for better accounting of the actual costs of goods and services acquired through the procurement process. That process, however, is often considered as starting with the procurement professional. Nancy Gillis from GSA’s Federal Supply Chain Emissions Program Management Office explained that many steps in the procurement process occur prior to the actual purchasing phase, but typically it is only at the point of purchasing where the conversation about sustainability begins.

As Jonathan Rifkin from the District of Columbia’s Office of Contracting and procurement noted, procurement professionals ensure that hundreds of legal, regulatory, and policy requirements are implemented in an open and public way. Unless these professionals are given a clear idea of how to help meet sustainability goals when purchasing products, the process can essentially turn into a check-the-box exercise, making implementation of any sustainable strategy difficult to do in a meaningful way.

By the time a procurement professional first sees a solicitation, Mr. Rifkin noted, it is already too late in the process to affect any significant



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3 Sourcing and Materials P rocurement is often thought of as simply the act of purchasing goods and services by processing a requisition, receiving an invoice, and then making a payment; however, many workshop participants emphasized that procurement should be thought of as a much broader process, from generating and soliciting requirements all the way to clos- ing out a contract (Figure 3-1). Participants also noted that procurement tools to help foster sustainable purchasing could be integrated into all aspects of the process. Such integration could allow for better accounting of the actual costs of goods and services acquired through the procure- ment process. That process, however, is often considered as starting with the procurement professional. Nancy Gillis from GSA’s Federal Supply Chain Emissions Program Management Office explained that many steps in the procurement process occur prior to the actual purchasing phase, but typically it is only at the point of purchasing where the conversation about sustainability begins. As Jonathan Rifkin from the District of Columbia’s Office of Contract- ing and procurement noted, procurement professionals ensure that hun- dreds of legal, regulatory, and policy requirements are implemented in an open and public way. Unless these professionals are given a clear idea of how to help meet sustainability goals when purchasing products, the process can essentially turn into a check-the-box exercise, making imple- mentation of any sustainable strategy difficult to do in a meaningful way. By the time a procurement professional first sees a solicitation, Mr. Rifkin noted, it is already too late in the process to affect any significant 13

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14 SUSTAINABLE PROCUREMENT CONSIDERATIONS FIGURE 3-1 The procurement process at a federal agency. SOURCE: Nancy Gillis presentation, December 7, 2011. sustainability-related changes to products they purchase. It would be more influential to insert sustainable specifications earlier than the pur- chasing phase— for instance, when the statements of work for a particular procurement are being developed. New procurement tools could help, Mr. Rifkin said. A workshop participant also suggested that procurement professionals could be evaluated in part based on their performance in meeting certain sustainability criteria. Mr. Rifkin added that it would be possible to assess performance based on sustainability criteria only as long as clear specifications, priorities, and procedures are provided. Stephen Gordon from Old Dominion University echoed the theme that earlier stages in the procurement process are important and that sustainability considerations could be incorporated at any point along the supply chain and at any stage in the life of a product, including dis- posal. Life-cycle assessments (LCAs) aim to assess the environmental, economic, and social impacts of a product throughout its lifespan. Attrib- uting costs to different stages in the life cycle of a product is one use of LCAs, although even if a more sustainable product will save money over time, upfront costs can be a barrier to purchasing it. The cost of dispos- ing of products, especially those containing hazardous components, is seldom considered during purchase, Dr. Gordon noted. If procurement professionals incorporate this consideration, they may decide to purchase a product that is costlier up front, but which may ultimately result in sav- ings over the entire life cycle. Some participants discussed the possibility of financing upfront costs and then using cost savings to pay that amount back—an example of a revolving funding scenario that could help address high initial costs. Dr. Gordon also noted that it is important to account for sustainability historically by looking at a product’s past performance to quantify sav- ings and process improvements, referred to as the return on investment. Forecasting savings is important so that contracting officers are not penal- ized up front for purchases that may initially be more expensive but that will save on externalities in the future. There are qualitative case studies but few peer-reviewed scientific data on these forecasting methodologies, which would benefit from further analysis and quantification, Dr. Gordon said.

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15 SOURCING AND MATERIALS There is opportunity for more work on life-cycle assessments, as Dara O’Rourke from the University of California, Berkeley, pointed out. LCAs have primarily been used by academics and consultants and have been less useful for decision makers within procurement agencies or compa- nies, he said. However, some modern LCA tools and approaches offer better visibility into the entire supply chain. A challenge is bridging the gap between the academic black box and general use so that information from a product’s anticipated life cycle is used in LCA tools in a way that helps decision makers make more informed choices about a product, Dr. O’Rourke noted. Participants offered potential solutions to make informa- tion from LCAs and LCA tools more accessible, such as providing such tools at little or no cost to the public sector. Some participants also noted that the choice of technology platform and availability of data can affect how widely a tool is used. For instance, modern Web applications and associated mobile apps could help move technology and tools forward. In addition, a shift toward more accessible or “open” data could enable an ecosystem to develop around agreed- upon data structures and standards. Participants noted that conventional systems made up of proprietary data and code may not be the dominant model much longer. As one participant noted, such shifts are currently exemplified by USDA’s National Agriculture Library’s Federal Life-Cycle Assessment Digital Commons, which is coordinating the collection of LCA data and information on organization, management, dissemina- tion, and preservation in a way that makes data available to all users (Appendix E). SUPPLY CHAINS Edan Dionne from IBM Corporation described the company’s Supply Chain Social Responsibility Audit Program. Third-party auditors are used to audit suppliers against IBM’s Supply Chain Code of Conduct, which addresses labor, safety, environment, ethics, and social responsibility. Sup- pliers found to be noncompliant are required to implement improvement plans, she said; IBM will discontinue using suppliers that fail to improve after implementing such a plan. Ms. Dionne noted the responsibility IBM feels to develop its supply base by working to educate suppliers and ask- ing them to focus on environmental and social issues and impacts. It is especially helpful to work with first-tier suppliers, clarifying expectations by providing specific tasks for improvement, Ms. Dionne added. For example, IBM recently imposed a management system require- ment that allows suppliers to examine environmental and social impacts more holistically and requires them to implement programs to address noncompliance in these areas. Many suppliers want to do the right thing,

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16 SUSTAINABLE PROCUREMENT CONSIDERATIONS Ms. Dionne noted, but they need to have the organization, policies, and capability in place to sustain their performance over time. Patrick Mallet from ISEAL Alliance noted that a big challenge is inte- grating data and ensuring consistency, both in how data are understood and also in the language used to convey meaning. One tool that has been developed to address such challenges is the Nike Considered Index. Lorri Vogel from Nike Inc. stated that the company focuses on design- ers because, as the earliest group in the product-development process, designers have the largest impact downstream. As such, they need design tools and systems that allow them to make better choices. Peter Graf from SAP also noted that the connection between the design phase and recy- cling is key, and that in terms of procurement tools, there are overarching elements that apply regardless of the sector or type of products purchased (Figure 3-2). Nike’s Considered Index focuses on materials, waste, solvents, and innovation, said Ms. Vogel. She gave as an example a particular Nike shoe, which scored well on environmentally preferred materials and reduced weight but not as well on solvents. The key issue was bonding dissimilar materials, such as the plastic plates in the shoe. The design team came up with a new way to bond the plates to the midsole, improving the shoe’s score on solvents and also scoring well on innovation. FIGURE 3-2 The connection between the design phase and recycling is key; there is opportunity for information technology and software to take a model that is based on linear processes and make it cyclical. SOURCE: Peter Graf presentation, December 8, 2011.

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17 SOURCING AND MATERIALS The Nike Material Sustainability Index (MSI) is another tool used by Nike to organize information on the materials they use. Nike‘s Jim Goddard noted that the company tracks materials from their sources— whether the material was grown in a field or extracted from an oil well— to the product factory. This takes into account all of the early life-cycle stages of the material, which can account for up to an estimated 60 per- cent of the environmental impact of a product. The idea behind the MSI, Mr. Goddard said, is to ensure that useful information is available at the right time in the product design process, so that designers and develop- ers can make decisions about the best material while creating a product. Trade-offs are necessary when making decisions about what material to use, and that information needs to be integrated as a normal part of the design process. A ROLE FOR ECOLABELS Some participants noted that different types and amounts of informa- tion are needed at different points in the procurement process. For exam- ple, the procurement professional may not need to know all of the details about the sustainability of a particular supplier’s supply chain, as long as someone within the purchasing organization with a broader perspective incorporates that information. Ecolabels, standards, and certifications are tools that can convey some kinds of sustainability-related information. Ecolabels could also address the desire for a single, simple notation that represents an agreed-upon optimization of the environmental, social, and economic attributes of a product or service, some participants said. Being able to represent these products’ attributes in a simple, easily understood label could enhance the efficiency of the purchasing process. Certifications could be especially useful in areas where “green-washing 1” take place. Alicia Culver from the Responsible Purchasing Network emphasized that purchasers who are not trained in sustainability could easily fall for what looks like a sustainable product based on claims from a label. Claims such as “natural” or “earth friendly” are commonly used on consumer products, Ms. Culver noted. She also explained that claims on many retailer-created ecolabels are inconsistent, which increases con- fusion. Harmonization and agreement on the claims and criteria would help clarify matters. Anastasia O’Rourke from Big Room Inc. said that her company had tracked the growth of ecolabels back to 1954 when the first such label— a “safe” toy label in Germany—emerged. Since then, the number and 1 Practice of making an unsubstantiated or misleading claim about the environmental benefits of a product, service or technology.

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18 SUSTAINABLE PROCUREMENT CONSIDERATIONS complexity of ecolabels has increased significantly; labels can be multi- attribute or single-attribute based, life-cycle based, specific to a region, or global. Ms. Kinn Bennet from Environmentally Preferable Purchasing at EPA described ecolabels or standards as residing at the tip of a tri- angle, which would be all the information some people, such as procure- ment professionals, may need (see Figure 2-1). But information that goes beyond the label—such as information from LCAs and standards-setting and verification procedures—can also help, she said. Single-attribute and multiple-attribute certifications are currently being used, with single- attribute labels focusing on just one area, such as human health or envi- ronmental impact. Choosing one attribute often requires a trade-off with another attribute, Ms. Culver noted. Multi-attribute certifications can address several areas, such as life-cycle impacts, human and environ- mental toxicity, packaging, and performance. An ecolabel could serve as a visualization that might be enough for the purchaser, explained Dara O’Rourke. With current technology, however, a deeper dive into more data and information could be readily available, though not necessarily required each time a purchaser selects that product, he said. Josh Saunders from Greencurement commented that certifications exist for some products for which a lot of environmental or health information is available; however, for many other products such data do not exist, and so neither do the certifications. Not many ongoing efforts in the public or private sector are attempting to solve this problem, he added. Also, some consumer efforts are trying to increase transparency in the market, creating an opportunity to demand better data to inform purchasing decisions, Mr. Saunders said. Gathering more information, standardizing data, and increasing interoperability of systems are all potential components of this approach. Mr. Saunders also commented that one way to move forward would be to convince a number of large institutional, influential purchasers to gather better information that can be used by all to make more informed decisions. Dara O’Rourke noted that a broad framework is needed to encompass all of this information from products, standards, and labels; purchasers need information from suppliers, who need information from their suppliers, and so on down the supply chain. It is key that this infor- mation is meaningful, relevant, and accurate, he said. Other participants noted that such a framework should be developed in an iterative fashion; as data are collected and used, it would likely become clear some data are not useful and that different information is needed. Thus, it would be important to feed this information back into the process and to adapt it accordingly. As one participant expressed, we have to build systems that allow us to learn over time and ensure that the right information is sought out.

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19 SOURCING AND MATERIALS FIGURE 3-3 Terms and concepts in environmentally preferable purchasing (EPP) that feed into a framework for sustainable products. SOURCE: yalmaz Siddiqui presentation, December 8, 2011. yalmaz Siddiqui from Office Depot discussed an example of a frame- work for sustainable products he has worked on with the Green Products Roundtable, a voluntary stakeholder group working to reduce confusions over the “green” marketplace and improve the production and buying decisions of manufacturers, institutional purchasers, and consumers. 2 The framework attempts to incorporate many concepts surrounding the idea of a sustainable product, such as LCA outcomes, attribute-based concepts, standards, and single- and multi-attribute ecolabels. Work needs to be done on definitions so that everyone has the same understanding of the concepts being discussed, he added. Those concepts and definitions then need to be incorporated into procurement tools. The first step in the group’s approach to developing the framework was to identify the terms and concepts used in major environmentally preferable purchasing policies (EPPs). This involved identifying the attributes most looked for and the ecolabels most frequently used (Figure 3-3). The next step was to determine how to prioritize the different ways of reducing the impact of that product, where “impact” might refer to water use, greenhouse gas emissions, or some other environmental impact. Mr. Siddiqui summarized the main ideas in the framework—an LCA that identifies types of life-cycle impacts, such as abiotic depletion or 2 Keystone Center. 2012. The Green Products Roundtable. [online.] [Available at: http:// www.keystone.org/spp/environment/Green-Products-Roundtable] [Accessed April 24, 2012].

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20 SUSTAINABLE PROCUREMENT CONSIDERATIONS toxicity, and four broad “footprint” areas that focus on materials and waste, water use, energy use, and toxicity. The framework then connects attributes that purport to reduce certain types of life-cycle impacts. Mr. Siddiqui stressed that data will be needed in order to understand what sectors and product categories are driving the highest life-cycle impact types. The framework itself is a tool of sorts, he added, but it could also serve as a reference for developing standards. In addition, it could func- tion as a foundation for a procurement tool to help clarify which attri- butes, ecolabels, or behaviors reduce impacts in meaningful ways. The framework could also provide a way to distinguish between criteria used in making decisions.