Sustainable Procurement. A Thematic Review on Sustainable Procurement in Higher Education

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1 Sustainable Procurement A Thematic Review on Sustainable Procurement in Higher Education

2 Sustainable Procurement A Thematic Review on Sustainable Procurement in Higher Education

3 Editors Jorien Helmink MA, DHO Drs. Mareie de Jong, DHO Ing. Frits Dröge MSc (English) Authors Drs. Walter van der Es, Haagse Hogeschool Karin van IJsselmuide, NEVI Inkoop Academie Prof.dr. Dirk-Jan Kamann, University of Groningen Drs. Reitse Keizer, Significant Prof.dr.ing. Jacques Reijniers MBA, Nyenrode Business University and managing director Het NIC B.V. Drs. Marco Smit, CREM Ir. Sietske Smulders Dane, Fontys Hogeschool Engineering Ir. Patrick Tazelaar, Significant Prof. dr. Bart Vos, Tilburg University Mr. Ditmar Waterman, PIANOo Drs. Renate Wesselink, Wageningen University Review committee Dr. Geoffrey Hagelaar, Wageningen University Ir. Ric Hettinga, VROM Ir. Annelies Soede MBA, Municipality of Amsterdam Dr.ir. Arie Sonneveld, DSM Prof. dr. Jan Telgen, University of Twente Prof. dr. Bart Vos, Tilburg University Design Waarlé Grafische Vormgeving, Amsterdam Printer Drukkerij Callenbach Paper: Reviva Offset recycled Community of Practice We would like to thank all the members our Community of Practice Sustainable Procurement in educational programmes in higher education in the Netherlands for their contributions. Enthusiasm for the topic characterized our discussions in 2007 and 2008 and was the basis for this review, which made that many of us decide to actively participate as an author as well. A really joint effort! December 2008 Thematic Review Sustainable Development Dutch Network for Sustainable Higher Education (DHO) This edition was produced with financial support from the Netherlands Ministry of Housing, Spatial Planning and the Environment Order: DHO / / download: From buying towards sustainable procurement

4 Preface What exactly is sustainable procurement? How to practice it? How to organise it within my company or organisation? These questions are answered very clearly in this booklet on sustainable procurement. Real life examples are also given by companies and organisations who have practiced sustainable procurement. This booklet tries to assist all teaching professionals and education managers in Higher Education who want to incorporate sustainable procurement in their education programmes. There is a great need for such assistance. And that is precisely the reason why I have given financial support for this publication. The increasing demand for knowledge in the field of sustainable procurement is very understandable. The market for sustainable goods is booming. Consumers increasingly ask for sustainable products. And companies obviously want to meet that demand. Otherwise they will loose their customers. Companies also want to contribute to a more sustainable world. The need to better balance people, planet and profit is felt worldwide. Worldwide we increasingly understand that we only have one world to spend. Global warming, the exploding demand for energy, the threat to biodiversity; these are all subjects that are in the centre of our minds and rightly so. It is extremely important that education pays attention to sustainable development and sustainable procurement in particular. After all education trains the future (procurement) managers and decision-makers. They can make the difference between sustainable and disastrous. They can contribute in finding a new balance between people, planet and profit. And they are better aware of the need for sustainable development and the possibilities of corporate sustainability and sustainable procurement. Of course this can only be done if the teaching professionals have the proper tools to lead the way. With this booklet at hand all educators can serve their students with custom made knowledge to fit their needs in the field of sustainable procurement. So, dear reader, please be informed and indeed be inspired by this publication and strike your students with this sustainable spark! Jacqueline Cramer Minister of the Environment and Spatial Planning

5 Contents Introduction 6 1 From buying towards sustainable procurement Introduction: stakeholders increasingly want Green Current sustainable procurement practices Towards sustainable procurement: a long way to go How far upstream and downstream: network responsibility Trends and new developments Conclusions 2 2 Sustainable procurement: the procurement process Introduction The link between the basic procurement process and sustainability Possibilities under European Union sustainable public procurement Sustainable procurement in practice: procurement tools 3 Embedding sustainable procurement in organisations Introduction Today s practice: a struggle process Create a sense of urgency Different stakeholders need to cooperate Developing a change vision and strategy Communication during the process Empowering the participants Produce short-term wins Create a new culture 4 4 Professionalising towards sustainable procurement: it is all about choices! Introduction Coming to competencies Professionalisation of procurement Professionalization of buyers Competencies that underpin sustainability Professionalisation towards sustainability choices to be made 55

6 5 Research challenges Introduction: what do we need? Models and Indicators Embedding sustainable procurement in organisations In conclusion 62 Appendix A: Competentiegericht onderwijs en duurzaam inkopen 64 Appendix B: Virtuele duurzame inkoop voor het hoger onderwijs 71 Appendix C: Interviews met 7 sustainable procurement professionals 80 5

7 Introduction Sustainable Procurement is a fast-growing field of interest. It is stimulated by the Dutch government and targets have been set to incorporate Sustainable Procurement in its own business operations. Commercial organisations are becoming increasingly aware of its importance, partly due to a growing demand from customers, who ask for sustainable products and partly because, in wider perspective, corporate social responsibility (CSR) is becoming mainstream. This review aims to give an overview of the field of Sustainable Procurement: What exactly is Sustainable Procurement, what scientific research is needed and how can it be applied to practical situations? The review aims to inspire both teaching professionals and education managers in higher education, who wish to implement the theme of sustainable development into their education programmes (like i.e. commercial economics, management studies, international business studies, small business and retail management, facility management, MBA s) in general and in procurement courses in particular. (Parts of) the text can also be used as study material for students. The review is written by several different authors who are conducting research or provide consultancy in the field of sustainable procurement. Most illustrations and examples are derived from the Dutch and European situation, but the implications obviously go beyond this region. The first chapter is an introduction to the subject of sustainable procurement. It describes in depth the scope and significance of the subject and explains and defines related terms in their context. In the second chapter, the implication of sustainability on specific aspects of the procurement process is clarified. Topics are: sustainability in the basic procurement process, legal aspects, sustainability criteria and labels and a practical application in the form of procurement tools. Chapter 3 deals with the question of how sustainable procurement can become embedded in organisations. To provide an answer, Change Management theory is applied to the subject of sustainable procurement. Most (Dutch) universities use competences as a basis for curriculum development. Chapter 4 describes the competences that are important to the professional in the field of sustainable procurement. These competences are based on extensive research. The fifth and final chapter offers suggestions for the direction and content of scientific research into sustainable procurement: what should be the focus of (future) research and which models and indicators could be used? 6

8 Three appendices have been added to this review to provide teachers with some practical tools to develop their education programmes and to inspire them. The first appendix is about the application of specific competences in education programmes. The second provides ideas about educational tools and materials, such as digital aids. The third appendix contains 7 real life cases, in the form of interviews with purchasing professionals in different Dutch organisations. The appendices are written in Dutch. An English translation of the appendices can be found on the entire review can also be downloaded from this site. To learn more about sustainable development in general, the reader can find a document Denkraam voor Duurzame ontwikkeling, on the same website. Jorien Helmink and Mareie de Jong Projectmanagers DHO December

9 1From buying towards sustainable procurement Dirk-Jan Kamann and Marco Smit 1.1 Introduction: stakeholders increasingly want Green It started with the 1972 Meadows report, warning us about depletion of resources: a state of global equilibrium could be designed so that the basic material needs of each person on earth are satisfied and each person has an equal opportunity to realize his individual human potential. The report states, that such a state of equilibrium from a System Dynamics point of view would require trading certain human freedoms, such as producing unlimited numbers of children or consuming uncontrolled amounts of resources, for other freedoms, such as relief from pollution and crowding and the threat of collapse of the world system. It would be possible that new freedoms might also arise universal and unlimited education, leisure for creativity and inventiveness, and, most important of all, the freedom from hunger and poverty enjoyed by such a small fraction of the world s people today. In those days, a lot of people still thought, well, it may not happen. But, after the 1987 Brundtland report, defining sustainable development as meeting of our current needs without compromising the ability of future generations to meet their needs, after all the warnings by Greenpeace and other environmentalists, the effects of global warming and increased prices of raw materials almost daily in the news, people simply could not deny the need for a more sustainable economy any longer. People became aware of the Triple P, discussed by the Brundtland report: the need to show respect to the Planet and the People that inhabit that planet in a healthy economy (Profit). Or, the way we describe the P of profit: the need to stimulate companies to be innovative and cooperative in allocating and using resources when serving our demand. This increased awareness resulted in an increased public pressure on both companies and the public sector to show responsibility in this respect. The public sector presently has taken the lead on this issue here, by regulation but even more, by stating that public bodies should increasingly, and within a certain time period, only use sustainable products and services when fulfilling its public tasks. This way, the From buying towards 8 sustainable procurement

10 private sector or at least a significant part of it would be forced to adopt the same attitudes and practices. It meant quite a change from old practices for both public and private procurement officers. For, in the past, purchasing usually meant buying things at the lowest possible price. The bottom line was the most important thing for any organisation: staying within the budget or getting it as cheap as possible, maximising profit. People focused on the lowest price. Negotiating skills, leading to nice discounts, were considered the most important competences of purchasers or buyers, as they were referred to. Terms like Total Cost of Ownership or Total Life Cycle Costs were and still are in too many organisations and companies unknown or not practised in spite of top managers rhetorics. Things have changed. These days, purchasing or procurement, to use a slightly broader term originating from the US literature is defined as the way suppliers are selected and managed in order to enable the organisation to fulfill the customer needs best (Kamann, 1999). In the case of public bodies or organisations working in the semi-public or health sector, the definition uses the term stakeholder : public procurement has to assist in enabling its organisation to serve the stakeholders interests (Mitchell et.al., 1997; Kamann, 2007). One of these interests is the demand for sustainable goods and services we described above. Whether we buy T-shirts, shoes, computers, passports, public transport, security or health care, people increasingly demand green goods and services. We should note, that while we might distinguish between green and sustainable, the general public just uses the term green. This public demand meant that increasingly, both private and pubic bodies increase the share of goods and services that are sustainable. With private companies, this usually is a rather small share of all inputs. For public bodies, however, ambitious targets are set: 100% of all of their inputs in some years. While we may sometimes have doubts about the stringency of the norms applied, it does give a clear signal that governmental bodies take their responsibility, as demanded by the public (Thomson & Jackson, 2007; Walker, et.al. 2008). Private companies usually turn green, because it is required by law, by a large and dominant client e.g. a public body or to avoid the risk of exposure in case it becomes clear they do not behave according to what the general public sees as expected moral behaviour (Holt & Kochelberger, 2003). Active public bodies, who demand sustainable products and services from their (private) suppliers, push sustainable procurement into the private sector. And it means an entire supply chain may turn green because of the public demand-pull. Governments stimulate green innovations by guaranteeing a market for those products, taking away the risk. Reducing taxes for those products or even giving earmarked subsidies and grants, further stimulates the private sector to invest in more sustainable products and services. In the process of becoming greener, public bodies look for criteria to discriminate between green and non-green products and services, for labels guaranteeing that the supplier and its products are o.k. Governments also are aware that it is not just a matter of techniques or technology. Rather a change in thinking is required, a revised mental map: ranking priorities and formulating the nature of demand in the light of the Triple-P. This applies to consumers (end users) and producers (industrial users) alike. It is especially important to those involved in the purchasing function: those who actually specify goods and services used in meeting demand, either private or public. Because of 9

11 this, questions arise how to manage this change process, how to fit it in within the existing European legal system, how to develop and apply criteria, and which skills to develop among those involved. This review describes the present state in this process of increased awareness in the Netherlands. It also gives examples, challenges in research and policies. It deals with the legal European background of the public procurement process, and describes the required or desirable competences of people involved in the procurement function. It also provides the teacher with content to use in lectures, like interviews with people in practice and case studies. A list of useful literature is attached, but readers should be aware that this list has to be updated frequently with recent contributions to this issue. 1.2 Current sustainable procurement practices After the World Summit on Sustainable Development in Johannesburg in 2002, the Dutch government started an action programme for sustainable development. Sustainable procurement, being part of sustainable corporate management, was an important issue. After the new 2004 European procurement regulations allowed social and environmental criteria to be included in European tender processes, the Ministry of VROM decided that sustainable procurement should receive more attention in their sustainable corporate management policies. Indeed, governmental organisations spend about 40 billion euro each year, for products ranging from pencils and cars to roads and buildings. With this purchasing power, Dutch public bodies can influence the market and encourage producers to offer more sustainable products. In 2005 the Dutch Parliament agreed on a clear policy objective. By the year 2010, all central governmental procurement and investments have to be sustainable, i.e. sustainability should be one of the most influential criteria during each procurement process. Local authorities, provinces and water boards agreed on a target of 50%, but the local authorities have already raised ambition to 75% in 2010 and to 100% in The objective for sustainable procurement has not been laid down in a law. Instead, the Dutch government is persuading governmental organisations to sign a participation statement and to confirm their intention to include sustainable procurement aspects in their total procurement process. To date, about 125 organisations have signed. Besides the Dutch government other European governments have also started to promote sustainable procurement in their own organisation. European governments spend around billion on public procurement each year, which is approximately 16 percent of the total Gross Domestic Product (GDP) of the European Union. For example, the Belgian federal government has written various ministerial circulars on the use of social, ethical and environmental criteria for public procurement. A guide for sustainable procurement was created, which rates a large number of products based on both environmental and social criteria and creates minimum standards for these products. In Denmark, all central governmental institutions are obliged to develop their own sustainable procurement policy and an implementation plan under the Danish Environ- From buying towards 10 sustainable procurement

12 mental Protection Act. The first focus is on the public purchase of legal and sustainable timber. According to a 2006 policy, all public institutions should buy legal and sustainable timber for wood and paper products, i.e. timber that has been grown and processed according to standards of the Forest Stewardship Council (FSC), which incorporates both environmental and social standards, will be classified sustainable. 1.3 Towards sustainable procurement: a long way to go Green or sustainable procurement as a term or concept has been used and explained in a rapidly growing body of literature (cf. Klostermann & Tukker, 1998). Most of that literature focuses on the willingness of firms to implement green procurement (Lamming et. al. 1996; Holt & Kockelbergh, 2003), the ways how to increase the `green contents of goods and services (OECD, 2000) or the colour of certain activities and products: green or not-so-green (EUEB, 2003). The first question when discussing sustainable or green procurement obviously is: what is it, actually. Then, to clarify what is and what isn t: how do we measure it; how do we discriminate between green and not-so-green or even enemy-of-green. And, what do we include in our measurement and what not. Finally, how do we stimulate green innovations to improve the situation? What is Green : the Triple P for Planet, People, Profit While many people use he term green or sustainable, there is no clear consensus on an operational definition of sustainability (e.g. UN, 1996). Sustainable development is a dynamic process, not a static condition that can be clearly described. This hampers clear targets and operational standards, but also implies moving targets as a dynamic process of making requirements more stringent over time. Furthermore, the concept also relates to norms and values, and these are part of different cultural traditions, showing a spatial differentiation. We will continue with a discussion of the three Triple P elements, since they are the most used anchors to relate sustainable procurement to operational indicators (Kamann, 2003, 2004). 'Planet' coincides with the classical interpretation of sustainable : a way of production and consumption satisfying needs that respects biodiversity and the ecological system by using replenishable materials and renewable forms of energy. The term needs should be seen in its functional sense: primary needs (food, shelter, security, safety, procreation) and the higher levels of needs according to Maslow s hierarchy (education, development, recreation, self realisation, esteem, status). A problem here is to translate the hierarchy into operational values. How to compare a hot dish with a course in pottery? Given the abundant literature on this aspect of the Triple P (Archibaldi & Nijkamp, 1989; Klostermann & Tukker, 1998; Tromp, 1995), we focus on the other two Ps, People and Profit. 'People' refers to the talents of people, their share in happiness, to human rights, child labour, democratic rules, living conditions and the environment as experienced by humans. In this case, green or `sustainable gets the connotation of that way of satisfying needs, where mankind receives a net positive result in terms of happiness or less stress and other negative effects compared to other ways. Some of the factors we mentioned can easily be checked; others are more difficult to check, operationalise and/or measure. Some show large international differences. They show a clear overlap with ethical 11

13 issues e.g. child labour, minimum wages in Third World countries, legal rights, work conditions and so on. Profit is perhaps the most difficult dimension to agree with the classical interpretation of sustainability. The Brundtland Committee considered a healthy and robust economic system a prerequisite for any society to exist, and, in doing so, the economic system acts as incubator for real sustainability. The problem is that healthy and `robust are hard to operationalise in objective terms. Just taking the GNP has obvious and widely criticised shortcomings. What we will learn from that report is that economic interests do not always coincide with social and ecological interests; in fact, they rather are opposites. For this reason, we divide profit into two levels: (1) the micro level of the individual (holistic) actor, and (2) the meso level of a set of actors: a cooperative set of actors, a network, a system. Profit in the strict sense, at the level of the individual, holistic firm or organisation, refers to return on investments, growth, continuity. In the eyes of the general public these are the usual arguments used by entrepreneurs and organisations to defend and legitimate certain behaviour; at least to create an understanding for these unanimously shared sacred goals. In doing so, the organisation is considered to have its own identity, detached from society and the people who actually make up the organisation. It is then seen as the logical aggregate of the individual wishes, desires and goals of the participants of the organisation. However, especially in organisations with a high degree of specialisation and/or bureaucracy, participants of the organisation tend to be alienated from that Grand Total. Profit and continuity become flags, used to cover a set of diverging individual goals. It is proposed to eliminate the profit concept in its strict sense from the sustainability discussion. Undoubtedly, this will generate resistance, since thinking in terms of profit is a typical result of our western production technology. Anthropologists will state that such a production technology requires ideas and concepts as part of the super-structure to legitimate the particular technology. However, our aim is not to emphasise the existing technology, but rather strive for a mode of production that leaves more room for the other two factors: people and planet. A different mode of production implies different ways of thinking. Part of that way of thinking implies that profit in the strict sense is not part of the triad of P s, but stands opposite the other two elements. Profit in the broader sense: synergy. In order to discuss the mechanisms that give rise to synergy (Capineri & Kamann, 1998) which can be seen as a non-zero sum game outcome we have to start with the organisation: inside organisations, coordination costs arise as a result of internal division and specialisation of labour and processes. For the sake of simplicity, we let these coordination costs also contain such costs as the effects of increased alienation (including loss of loyalty and control) that result from labour specialisation. In cases of outsourced activities, these activities are performed outside the systems boundary of the organisation. In theory, every participant can focus on his particular distinctive capabilities. For instance, enabling scale effects required to make up for large asset specific investments. As a consequence, the internal costs of coordination are reduced which is good when non-core activities are concerned. However, the external costs of coordination increase. Total costs are then the costs of From buying towards 12 sustainable procurement

14 all activities, materials plus all the costs of internal and external coordination. If, and only if, by shifting the systems boundary, the total ex-post net revenue is higher than ex-ante revenue, we can say we have a case of synergy. How this synergetic surplus is distributed over the participants, is usually determined by their respective negotiation power and information asymmetry. Here we also touch on two aspects of a network or system: the performance of the individual firm depends on (1) the quality of its network partners; (2) the nature of a relation with any other actor which has an impact on the total of all relationships between actors in the network and vice versa. In summary: profit in a strict sense is unsuitable, misleading and even counterproductive for Planet and People, as it has more to do with a primitive drive, like greed and libido, which stands in sharp contrast with the idea(l) of the three P s. Profit in the broad sense is defined at meso level as synergy. Green : a relative term Green, or sustainable, will be used as a quality level of the three aspects planet, people and profit, which one wants to reach and maintain for a long period. On the one hand it aims to reduce and minimise the use of non-renewable energy and raw materials through miniaturisation and recycling, and to encourage the use of renewable energy and materials on the other hand. Furthermore, fundamental rights should be respected and economic progress delivered. Use refers to the total life cycle of a product and/or service: from early exploration and exploitation of all raw materials required for any product used in that life cycle, up to the recycling stage or storage of disposed waste of all materials involved in the development, production, use, dismantling and recycling stages of the product and its components. In practice green / sustainable is used in a relative sense: green relative to other, less green alternative products. The Dutch Environment Certificate Milieukeur is granted on the basis of techniques and materials, available and applied at the moment of granting: the greenest available product receives the certificate. The EU Eco-label is awarded only to those products with the lowest environmental impact in a product range. Food products with any type of Ecocertificate still may and will contain inputs and still may use techniques that, as such, should or would not qualify for such a certificate. In other words: a product is green when, considering its total life cycle, it is greener than comparable products. The idea behind these certificates is that progress in techniques and specialisation among producers of proper inputs will lead to more stringent criteria applied over time. It also fits in with our earlier remark, that sustainable development is a dynamic process rather than a static one. Figure 1a illustrates the degree of negative environmental impact of three products A, B and C over time. Changes in the environmental impact of a product may occur as a result of three different processes (Fig 1b): (1) continuous improvement (A) (a) under competitive pressures; by (b) learning curve- and scale effects; (c) independent developments, targeted or not; (2) discrete changes by transformation (B); (3) discontinuous changes by transcendence (C 1,2 ). Sometimes, a product or process is continuously improved, sometimes with discrete jumps in performance, transforming the product and/or production process every time for instance as a result of benchmark activities. It may be the result of the application of different paradigms: materials, knowledge and applications and/or use. 13

15 Figure 1.1a Figure 1.1b Environmental impact Types of change of 3 products over time Source: Kamann, 2003 The underlying philosophy with all Eco-certificates is that improved techniques and knowledge will lead to less harm to the environment over time. In theory, however, the opposite effect may occur: perverse behaviour, when for all suppliers the environmental impact increases. Still, one product is less harmful compared to the others and will be entitled to receive the certificate (figure 2). Figure 1.2 Perverse behaviour with eco-labels Source: Kamann, 2003 Hence: green certificates are awards for applying the best practice available at a given time, trying this way to stimulate green innovations. However, they are misleading by giving the impression that all is well with this product, which may give producers and From buying towards 14 sustainable procurement

16 consumers a false sense of being environmentally conscious, while in objective terms this is not the case. Green or sustainable innovations: how do they really come about? The sliding scales of awards should stimulate innovations leading to a steady improvement in sustainability. The term innovation, however, is perhaps one of the most ambiguously defined and described terms (cf. Schumpeter, 1934; Mowery & Rosenberg, 1979; Dosi, 1982; Kamann & Nijkamp, 1991). Often, these definitions have an analytical beauty but are hard to operationalise. Many authors, seem to refer to a rupture in a pattern of behaviour (Camagni, 1991); a shift in routines (Nelson & Winter, 1977; Kamann, 1986). Entrepreneurs like all people like to fall back on routines: behaviour and recipes one is familiar with and which in the past have proven to work. This leads to a certain degree of inertia, hindering change in behaviour, even when the old practices become obsolete. Of course, the key issue is first of all: how does one know a practice is obsolete? Practices are usually part of comprehensive paradigms, taught at schools, universities and trainings. The choice of materials, techniques, approaches, theories, models, matrices, applications and recipes: they are frozen into a solid state in the minds of those who were conditioned to apply them. Proper knowledge was rewarded with awards and promotion, deviations with dismissal or ridicule. If, and only if the tried and proven knowledge obviously did not work any more, then, new ideas would be welcomed, even when this often turned out to be too late. Usually, these new ideas come from system aliens that come in after takeovers and mergers, or by consultants. Because of this, a green innovation is defined as a change in behaviour (routines), leading to a more sustainable treatment of a product during its lifecycle (Kamann, 2003). This contains all three dimensions of product, process and application. Having described what it is, the next question is: Where to start, where to focus? What creates the maximum gain in greenness? New products, techniques and applications: new ways to satisfy needs We know that about 70-90% of the costs of a product are determined at its development and design stage (Robinson et. al., 1967). Using this as analogy, we hypothesise that at least 70% of the environmental impact is determined (1) at the time we allow for the existence, development or stimulation of certain needs; (2) when we decide how to satisfy those needs. When considering the fulfilment of needs, we should step back and look at their functional dimensions and at how these could and should be met from a triple P perspective. This could well lead to paradigm switches in the ways of satisfying needs, which is likely to contribute much more effectively to reaching green objectives. As an example, we may look at the decision to buy a vehicle. In fact, what we deal with is the function mobility ; transportation needs. First, we should wonder, whether we can reorganise work and travel in such a way, that transportation is avoided, and/or reduced. Then, the means of transportation should be discussed. Does it have to be a motorcar? Finally, if apparently we cannot avoid the use of such a vehicle, we may wonder: Can we change the type of vehicle? A Dutch study in transportation revealed a sharp increase in road-capacity, decrease in travel time, parking space and emissions, if a new type of vehicle would be introduced, which would take up less width on the road (exhibit 1). 15

17 Functionality and reframing problems: long term out-of-the-box thinking What we just wrote, in fact means that we should train people to learn to think in terms of functional needs. We believe that optimizing existing technologies and reducing energy use etc is of course a good thing. But, the largest reductions in environmental impact, the best contributions come from reframing problems, thinking in functional needs and a long term out-of-the-box thinking. This should lead the way towards solutions in satisfying needs in a significantly better way than we presently do. Exhibit 1.1 the Space Efficient Vehicle Source: NRC Handelsblad, Saturday October wheels 3 persons petrol use: 1:24 width: 1.40 m length: 3.7o m weight: 700 kg 1.4 How far upstream and downstream: network responsibility A problem in determining whether a product deserves any type of Eco-certificate is the question how far upstream and downstream we should go. Upstream may look straightforward, as long as we stick to the restricted mental map of a single supply chain. The question is, however, how deeply and how completely can we check suppliers on their green nature and their products. We know from experience, that an average Small and Medium sized Enterprise has 450 first tier suppliers, while on average a large company or public body has about or more suppliers. That means first of all that just to check all these suppliers, already is quite a job. However, each of these first tier suppliers again has between 500 and suppliers, making up the second tier. The third tier, again, consists of between 500 and suppliers for each of the suppliers in the second tier. That means that just a few steps upstream implies auditing between From buying towards 16 sustainable procurement

18 250 million and 8 billion suppliers, to do it completely and well. That clearly is impossible. It also means that companies who state that they audit and control the complete supply chain or system, network, as it actually should be named clearly have an overly optimistic view of their competences and influence. As one fashion producer stated: We can go as far as our agent in China. What happens after that [upstream], is completely lost to the eye. Recent scandals involving poisoned milk powder originating from China and ending up in products of respectable companies like Friesland Dairy Foods and Cadbury s show this is a serious problem, often underestimated by companies. Hence, the incompleteness in coverage of audits is a rule rather than an exception. So: the first problem already is that it is virtually impossible to check all suppliers upstream. Then, another problem: downstream. In figure 3, two identical clean products are produced by A and B in the upstream part. However, A has customers industries and end-users that mistreat the environment. B is fortunate enough to have users that comply with all rules. As such, taking into account the total life cycle, B gets the award, A does not. Even more difficult is the second case, where a single producer A has two categories of (end)users: a very bad group and a very good group. What to do? In general: to what extent can we hold producers responsible for what people do with their products? For weapons producers in most civilized countries this seems obvious, but what about McDonalds (litter in the streets), breweries (alcoholism), pubs (vandalism) and so on? It just means that we have to think about how to meet downstream network responsibility. Presently, low energy light bulbs are promoted. However, if an effective recycling of the used bulbs does not exist, then hazardous metals end up on waste dumps, and the total environmental impact is rather negative. Can Philips be made responsible for an efficient and effective recycling of its products? Is there any warning or text on the package, effectively ensuring proper recycling? Does just a single crossed-out garbage can, together with a number of other symbols suffice? Figure 1.3 Upstream and downstream relations A A B Source: Kamann,

19 Exhibit 1.2 Who is responsible? Source: picture taken by D.J.F. Kamann in Fiesole, Italy, 15 October 2005 As we stated before, given the large number of upstream suppliers, it seems an almost impossible task to audit everyone. Here, specialised agencies are stepping in to help out: what are the risky areas, what to audit. Of course, simply asking each first tier supplier to sign that everything is kosher up to that supplier as some companies do is too easy and does not take away the buyer s responsibility. Still, the next example shows it is possible in spite of all the issues raised above to improve the green content of inputs. As a paradox, and also to illustrate the dilemma that could well be used as discussion item in classes: the same bank as in exhibit 3, builds a brand new head office in Utrecht, claiming it to be the most sustainable office building in the Netherlands with a score of >300 on the Greencalc scale developed by the Dutch Institute for Building Biology and Ecology (NIBE; At this moment that is indeed high. New studies into so-called Sustainable Technology Development (DTO, in Dutch) Buildings, receive ratings far above In the Rabo-building, around 98% of the materials are re-used from the demolished old buildings. Very good, but still m 3 of concrete, together with m 3 tons of steel for reinforced concrete are being used. Concrete about the worst building material, with the highest environmental impact score and the worst score in terms of health impact on inhabitants of the building just for the foundation of the underground parking, m 3 was used (www.rabobankgroep.nl). But, it still can be the most sustainable office at this moment, which tells you something about the other offices. From buying towards 18 sustainable procurement

20 Exhibit 1.3 Sustainable Procurement at the Rabobank The Rabobank Group purchases goods and services with a value of around 1.8 billion euro annually in the Netherlands alone. The Rabobank Nederland purchases total approximately 900 million euro. This amount is substantial and exceeds the cost of permanent staff and, therefore, affects the risk profile and the financial performance of the Rabobank Group significantly. The amount can be broken down into the following main categories: - recruitment of staff with specific expertise (35%); - ICT hardware and software (25%); - facility equipment and services (20%); - primary banking services (12%); and - communications and marketing (8%). Most suppliers of the Rabobank Group operate internationally and some have their head offices abroad. The Rabobank purchases more than 60 categories of goods and services. After a CSR-scan, it became clear that with their purchasing policy, the Rabobank could influence certain CSR-aspects of 37 of the categories. The Rabobank has taken steps to do so. Many of the articles are purchased centrally and, therefore, a sustainable procurement policy is relatively easy to implement. The Rabobank s central purchasing unit is called RCI, which is to be involved with all purchasing transactions exceeding 50,000 euro. RCI should make well-informed purchases on the basis of the quality, continuity, reliability, risks, CSR-aspects and costs of goods and services. Some results of socially responsible purchasing have been achieved: - energy savings through the procurement of energy-efficient equipment; - the procurement of sustainable wind energy (green electricity) fully meeting the energy needs of Rabobank Nederland; - the annual increase in the share of organic dishes offered by our canteens; - the switch to organic coffee with the Eko and Max Havelaar ecomarks. With CSR is being incorporated into the standard purchasing process, i.e. in the supplier selection, certification and monitoring processes, this approach has lead to some results in the procurement of office paper. First, Rabobank has taken several paper-saving measures like less space-demanding layout of documents, standard double-sided printing and copying, and digitised bank statements. The main CSR issue of paper is the illegal logging for the pulp, from which paper is made. To deal with this the Rabobank first developed a so-called Eco Yardstick, in collaboration with suppliers. The Eco Yardstick combines issues like energy consumption, bleaching, the use of whiteners and forest management into a single score. Together with the Dutch Forest Stewardship Council (FSC) - an organisation in which all stakeholders in forest management are united - an FSC-certified paper was launched that was tailored to Rabobank s needs. Rabobank switched to FSCcertified paper in October Source: Rabobank, CSR at the Core,

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