UK: CleanTech - How Green Is Your Procurement Strategy?

Last Updated: 3 December 2008
Article by Ian Stevens, Tom Scourfield and Paul Sheridan

Earlier this year we undertook a survey of suppliers and procurers of Information Technology and Communications (ITC) goods and services to determine how their businesses are affected by "green" procurement strategies.

The survey results revealed that while businesses are becoming increasingly sensitive to the need to adopt environmentally aware procurement strategies, only a limited number are actually taking significant practical steps to drive supplier performance – but many expect their procurement behaviour in this regard to change.

To read about the results of the survey please see below:



Full Article

Earlier this year we undertook a survey of suppliers and procurers of Information Technology and Communications (ITC) goods and services to determine how their businesses are affected by "green" procurement strategies.

The survey results revealed that while businesses are becoming increasingly sensitive to the need to adopt environmentally aware procurement strategies, only a limited number are actually taking significant practical steps to drive supplier performance – but many expect their procurement behaviour in this regard to change.

Policy drivers

Policy makers and industry bodies are increasingly taking a more active role in seeking to drive behavioural changes in procurement. This has led to publications such as the sustainability reporting guidelines produced by GRI, Intellect's "High Tech: Low carbon" report and the recently published EU Code of Conduct on Data Centres.

Unsurprisingly therefore regulatory change featured significantly amongst the factors respondents considered to currently be the greatest drivers toward the uptake of environment friendly procurement policies, along with consumer or customer demand, fiscal and/or economic instruments, corporate social responsibility and brand protection or enhancement. As to the future, while these criteria continued to feature strongly, employee recruitment and retention, shareholder/funder pressure and the prospects of future litigation were the areas whose influence respondents expected to grow most over the next five years, while corporate social responsibility is expected to play a less important role.

Please click here to view what respondents considered to be the greatest drivers towards the update of environment conscious technology procurement policies.

Procurement strategies

While nearly 50% of respondents confirmed that their organisations ask suppliers to provide details of their energy, sustainability and environment policies and credentials, only 18% of respondents said that their organisation asks its suppliers if they have signed voluntary agreements setting energy efficiency standards or energy consumptions targets. Similarly, few organisations ask their suppliers if they are members of ITC industry environment and sustainability bodies. Of those that did ask, details of membership of Energy Star (18%) and the Energy Saving Trust (10%) were most requested.

The policies and credentials most frequently requested relate to energy use and conservation; waste production, minimisation, reuse, recycling or recovery; and use of sustainable raw materials. Water use and conservation, transport and packaging were all expected to play a greater role in five years' time. Other notable areas of interest included ISO 14001 accreditation or other environment management systems accreditation, policies dealing with RoHS and WEEE and transparency of lifecycle costs, upgrade paths and the prospects for usable life extension.

Please click here to view details of environment related policies and credentials ITC goods and services supplier respondents have been asked to provide details of.

The survey revealed that relatively few organisations (31% of respondents) have participated in ITC procurements where fees, incentives, service levels or key performance indicators were tied to reducing environmental impact. However, about half of the respondents who stated their organisations had not been so involved expected that this would change in the next five years – indicating a clear expectation that "green" performance will play an increasingly important role in procurement in the years to come.

In addition to targets relating to the policies and credentials listed as being most frequently requested above, achievement of ISO 14001 accreditation, securing electricity supplies from renewable sources and completion of life cycle analysis were among the targets set by buyers.

The lack of clearly defined, reliable and authoritative benchmarks and baselines is clearly inhibiting the increase of green procurement and contracting practice. 64% of respondents stated that there are insufficient standards and comparables for measuring the environmental impact that ITC goods and services have. Over 84% of respondents were supportive of the introduction of BS/ISO certification in this area, and 66% were in favour of regulatory enforcement of environment policies.

Corporate behaviour

While 64% of respondents said their organisations did not contribute to carbon offsetting schemes, 50% expected them to be involved in the future.

Encouragingly 57% of respondents said their organisations had tangible or fixed targets for reducing their environmental impact. However only 22% said their organisation actually specifically measured the energy consumption of its ITC systems (including data centres). With so little information available to organisations as to their current ITC energy consumption it is not surprising that energy efficiency targets and performance level requirements are not widely prevalent in ITCgoods and services procurement.

Less than 47% of respondents said their organisations operate power management/energy efficiency software or devices to minimise the energy consumption of their ITC systems.

Closing the information gap

It seems clear that organisations, whether for ethical reasons, commercial ones (such as saving energy costs) or both are increasingly focussing on their procurement strategies and contracts from an environment and sustainability perspective.

However, a number of factors are restricting progress in this area. It is surprisingly common for those responsible for facilities management and energy usage not to be involved in purchasing ITC systems. As a result, energy efficiency frequently plays a less prominent role than would otherwise be desirable in ITC purchasing decisions. A more joined up approach in this regard would inevitably assist in driving demand for improved energy efficiency.

Accurate energy consumption, waste, water, transport and packaging use data and transparency of life cycle information are fundamental to driving sustainability and energy efficiency improvement. The lack of information many organisations have on the manufacturing and current performance and use of their own ITC systems makes it hard to benchmark improvement, or to identify areas where, and from what baseline, improvement can be measured.

For many organisations simply using the hibernation and standby functionality on their existing systems and shutting down PCs at night would result in significant energy use savings. The challenge after these "easy wins" is to target continued reduction in the environmental impact of their ITC systems.

The lack of comprehensive industry standards and comparators and consistent or mandatory eco-labelling also makes it difficult for businesses lacking comprehensive data on their own systems to set meaningful contractual baselines, or to monitor and benchmark supplier performance. Part of the problem with technology evolving so rapidly is that baselines may already be redundant by the time they have been agreed. Accordingly it is often at least as, if not more, important to establish comprehensive guidelines on what should be measured, in what circumstances, and how the results should be communicated.

In the absence of complete end to end data on the energy and environment cost of producing, supporting and decommissioning ITC components it is also difficult to set corporate policies for equipment refresh that are justifiable on the basis that replacing (and hopefully recycling) an existing system will have less impact than keeping it due to the energy efficiency gains in replacing it.

It remains to be seen whether the current economic environment will have an impact on organisations' drive to improve the "green" performance of their supply chains. The respondents to our survey were clearly of the view that further regulation is required to drive better procurement behaviour and competition in the energy efficiency and sustainability of ITC goods and services.

Many stakeholders believe that the establishment and enforcement of appropriate industry standards, comparators and reporting guidelines is essential. The imposition of auditable life cycle environmental impact and energy efficiency disclosure requirements on ITC suppliers, although having cost implications, would enable consumers and businesses alike to be more discerning when seeking out energy efficient products and contracting for performance improvements. It would also assist ITC suppliers to benchmark life cycle improvements in their own products.

Thank you to all our survey respondents – the lucky winner of the iPod Touch has now received his prize!

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 02/12/2008.

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