Procurement plays an important role in all organisations, having far-reaching environmental, social and economic impacts. In the public sector alone procurement comprises approximately 12 percent of gross domestic product (GDP) and 29 percent of government expenditure in OECD (Organisation for Economic Cooperation and Development) countries.
Sustainable procurement presents an opportunity for organisations to develop systems that allow for the prioritisation of growth while balancing this against the needs of society, the economy and the environment. It also recognises that progression towards a sustainable world will involve the full participation of diverse stakeholders and consideration of diverse issues.
International Standard Organisation (ISO) 20400, Sustainable procurement – Guidance is the world’s first International Standard for sustainable procurement and aims to assist organisations in meeting their sustainability responsibilities by providing guidance as to the effective implementation of sustainable purchasing practices and policies.
What is sustainable procurement?
Under the ISO, sustainable procurement is defined as “procurement that has the most positive environmental, social and economic impacts possible across the entire life cycle and that strives to minimise adverse impacts”.
ISO 20400 also lists a range of principles to be upheld if an organisation is to embrace sustainable procurement, including accountability, transparency, ethical behaviour, respect for human rights and a focus on innovation and improvement.
In integrating these principles organisations must balance the following issues:
- The triple bottom line – development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland report, 1978); and
- Social responsibility – responsibility of an organisation for its impact on society and the environment through transparent and ethical behaviour that:
- contributes to sustainable development, including the health and welfare of society,
- considers the interests of stakeholders impacted by procurement practices,
- is compliant with the rule of law and international norms, and
- is integrated at all levels.
The interplay between sustainable procurement and social responsibility
Sustainable procurement is a central tenet of social responsibility and it is envisaged that ISO 20400 will complement ISO 26000:2010 – Guidance on social responsibility. This is because ISO 20400 directs organisations to minimise their environmental footprint, review their impact on human rights and act to positively contribute to society and the economy.
To this end, important practices explored in ISO 26000 such as due diligence, analysing the sphere of influence, setting priorities and avoiding complicity are all practices encouraged in ISO 20400.
What does the new standard provide?
The ISO is divided into four clauses which provide guidance applicable for different levels of management. Integration between these diverse industry players is critical to the ISO’s ability to achieve its sustainability objectives.
Clause 4 ‘Understanding the Fundamentals’ is a generalist clause which discusses what sustainable procurement involves and its strategic goals. It also outlines fundamental practices such as due diligence, risk management and priority setting.
Clause 5 ‘Integrating Sustainability into the Organisation’s Procurement Policy and Strategy’ provides guidance to top-tier management on bridging the gap between sustainable procurement strategy and organisational policy. This clause clarifies the importance of mandating sustainability objectives within the organisation at all levels and in particular, stresses the importance of accountability and sustainable supply chains.
Clause 6 ‘Organising the Procurement Function towards Sustainability’ is most applicable for people engaged in procurement management and outlines the techniques to be employed to enable successful implementation, namely enabling people, engaging stakeholders, setting priorities and measuring performance.
Clause 7 ‘Integrating Sustainability into the Procurement Process’ is directed towards individuals managing sourcing activities and contracts. It provides practical guidance regarding implementing sustainable procurement at each stage of the process including planning, supplier selection and contract management and review.
More than just a valuable guide?
Unlike other International Standards such as ISO 14001:2016 – Environment Management Systems, ISO 20400 is merely an advisory document and does not provide an objective certifiable standard. Consequently, ISO 20400 may echo the weaknesses of ISO 26000 in that it is insufficiently attractive to businesses who capitalise less on communicating compliance with a guidance standard than with a certification. It is also unclear how ISO 20400 will be recognised within available rating systems used to evaluate organisational sustainability standards.
Therefore, the acceptance of ISO 20400 within corporate circles will be critical in determining whether the International Standard will be of practical relevance or whether it will merely be a valuable guide for organisations seeking to improve their engagement with sustainability standards.
Authors Scott Alden and Georgia Appleby are from Holding Redlich. Alden is a partner at the company and works on large strategic projects and infrastructure projects, and advises clients in relation to commercial contracts, procurement and probity. He has specific expertise in government and commercial law, infrastructure projects, general contractual and legislative advice and the tendering process, and commercial contracts of all kinds and sizes and for all industries. He is teaching workshops in effective contract management (Sydney) and contract law fundamentals (Melbourne) later this year.
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