1. A risk based approach to sustainable procurement
EAUC – EAF Programme

2. A risk based approach Background Train the trainer
Three year project
Reducing negative environmental and social impacts through purchasing
Steering group, partners from Further Education and Higher Education
Training
Train the trainer
Policy and strategy development
Risk based approach to procurement
Supplier engagement
Social issues in procurement

3. A risk based approach Objectives
Develop a shared understanding of what a risk based approach to sustainable procurement looks like
Review good practice of risk based approaches
Practice the implementation of a risk based approach
Be introduced to the latest guidance available
Develop an action plan to take back to your institution

4. A risk based approach Agenda 12.00 Lunch
Introductions and objectives
What is a risk based approach?
Why take a risk based approach?
Break
Implementing a risk based approach
Case Study Review
Action Planning
Close

5. A risk based approach Format and style of workshops Interactive
Informal
Varied
Proactive

6. What is a risk based approach?

7. Basic risk management Identification Analysis Evaluation
Control/management

8. Risk identification and analysis
Identify potential threats that could stop you achieving your business objectives by completing the following sentence: there is a risk of ….. which would result in ……
Impact (low, medium, high)
cost
time
quality
Likelihood (low, medium, high)

9. Risk evaluation L/H = M M/H = H H/H = H L/M = L M/M = M H/M = H
L/L = L
M/L = L
H/L = M
High
Impact
Impact
Low
Low
High
Likelihood

10. Risk evaluation Manage Stop Ignore High Impact Impact Low Low High
Likelihood

11. Why is the environment a risk? (1)
Risk to the environment from the organisation (and its supply-chain)
Pollution Potential
Climate Change
- Resource Depletion
- Emissions
- Waste
Reputation
Fines/ prosecutions
Rising costs

12. Why is the environment a risk? (2)
Risk to the organisation from
the environment
- Reputation
- Legal compliance
- Supplier failure
- Supply failure – resources!
- Environmental taxation
- Heath impacts, e.g. air quality and respiratory disorders
- Quality of working environment
Impacts on cost, time and quality
Business risks

13. Sources of environmental purchasing risks
Risks can arise from three different areas of supplier performance:
Supplier performance in their own sites/operations
Supplier performance while on your site
Supplier-provided components/products/services which flow through into your operations products/services
Slide courtesy of Environment Agency (adapted)

14. Why take a risk based approach to sustainable procurement?

15. Why take a risk based approach?

16. Why take a risk based approach?
Every product or service we buy has an environmental and social impact
You buy thousands of products
You have limited resources
You have limited time
You are being asked to demonstrate how the work you do supports your institution

17. Why take a risk based approach?
We need a way to prioritise our activity
Risk as a concept resonates with institutions and senior management
Ensures we are not wasting our efforts – we are looking to implement sustainable development which is about reducing impact
Tried and tested approach

18. Why take a risk based approach?
Helps focus activity on main impacts
Involves stakeholders internal customers – helps get buy in for implementation
Demonstrates that high risks do not only come from high value purchases

19. What guidance exists?

20. What guidance exists? The approach we are going to use is adapted from
Sustainability and Local Government Procurement – IDeA (November 2003)
An approach used by Belfast City Council
The Environment Agency

21. Implementing a risk based approach to sustainable procurement
Exercise

22. Implementing a risk based approach
In groups identify what environmental issues are of particular concern – try to choose 3.

23. Implementing a risk based approach
In groups identify 20 products / services you routinely buy as an organisation

24. Implementing a risk based approach
In groups identify 20 products / services you routinely buy as an organisation
Consider the environmental impacts / risks associated with the products or service

25. Implementing a risk based approach
In groups identify 20 products / services you routinely buy as an organisation
Consider the environmental impacts / risks associated with the products or service
Using the matrix provided identify whether you perceive the product to be a high, medium or low environmental risk and high, medium or low profile risk

26. Implementing a risk based approach
Environmental
Risk
Profile
Procurement
High
Med
Low
Item 1 *
Item 2
Item 3

27. Implementing a risk based approach
High
Environmental Risk
Low
Profile Risk
Low
High

28. Implementing a risk based approach
High
Priority 2
Priority 1
Priority 4
Priority 3
Environmental Risk
Low
Profile Risk
Low
High

29. Control and management
Priority 4
Reduce consumption
Increase awareness and encourage via questionnaire and referral to policy

30. Control and management
Priority 3
Reduce consumption
Green specifications only on the basis of cost benefit
Increase awareness and encourage via questionnaire and referral to policy
Minimal green supplier appraisal

31. Control and management
Priority 2
Reduce consumption
Green options sought
Cost / benefit evaluated
Green supplier selection
Green design
Green specifications
Whole Life Costing
Ensure issues included in consultancy design briefs

32. Control and management
Priority 1
Reduce consumption
Green options sought
Cost / benefit evaluated
Green supplier selection
Green design
Green specifications
Whole Life Costing
Ensure issues included in consultancy design briefs
Gain commitment to future action

33. Summary of the process
Review / Identify environmental and social priorities for your institution
Identify a group of individuals within your institution from different backgrounds and experiences
Compile a list of all the products and services you purchase (as comprehensive as possible)
Spend as long as it takes prioritising using the matrix (1 – 2 days)

34. Summary of the process
This means you have undertaken an environmental risk analysis of all the products and services you purchase!!
Identify the suppliers related to those products or services
Prioritise management response
Communicate it to staff and suppliers

35. The Environment Agency
Case study review
The Environment Agency

36. The Environment Agency
Identification of Business Need and Assess against Waste Hierarchy
Business Risk
Assessment
Sustainability Risk
Assessment
Influence with Supplier
Summarise risks, Supplier Influence
& Map using Boston Matrix
LOW RISK
Identify main issues and integrate into the contract
HIGH RISK
More detailed risk assessment, rank, allocate and manage

37. The Environment Agency
High level environmental risk assessment
Does the purchase or service provider have the potential for high energy consumption?
Is the product made of – or does the service provider use – unsustainable materials
Could the item or service provider cause a pollution incident in the performance of Agency work?

38. The Environment Agency
High level environmental risk assessment
Are excessive emissions (to land, air or water) caused during the manufacture of goods used directly or by the service providers?
Is there an environmental public relations risk to the Agency in purchasing the product or service?

39. The Environment Agency
Agency’s influence with the supply base
The agency then looks at the potential influence it will have with high risk product or service provider
Is the Agency a key client?
Does the Agency represent more than 0.5% of turnover?
Is the Agency an easy customer to work with?
Does the Agency pay on time?
Is the Agency efficient in its business dealings with us?

40. The Environment Agency
Detailed risk assessment (answers yes to three questions or more
Management action
Determine the method of risk management
Allocate responsibility
Agree a date for resolution
Address though supplier selection, specification, evaluation, and negotiation
Can’t manage it because of lack of influence

41. Case study review
United Utilities

42. United Utilities CSR Policy Environmental Policy
Sustainable Procurement policy
BITC Index

43. United Utilities
2003 saw a review of the supplier prioritisation approach, which prioritised commodity groups rather than individual suppliers
Each commodity group was assigned a potential environmental impact ranking, based on an impacts matrix approach developed internally

44. United Utilities
The resulting commodity prioritised list formed the basis of our engagement programme with our suppliers
The engagement workshop programme also included specific workshops for United Utilities' procurement buyers and internal customers - United Utilities' employees who set contracts and/or procure goods and services as part of their job

45. United Utilities
While the focus so far has been very much on environmental areas, there have been elements of social sustainability that have started to become incorporated

46. United Utilities
Examined all of the products they purchased and looked at high spend areas
Produced a prioritised list of suppliers of high risk commodities
Undertook as series of supplier engagement workshops

47. United Utilities Reducing energy consumption
Reduce the release of greenhouse gases
Reduce the use of non-renewable materials
Reduce the risk of pollution
Reduce waste production
Comply with environmental regulations
Reduce the impact of transport

48. Summary It is a fairly simple approach but will help focus your effort
Risk based approach may appeal to senior managers
Gets buy in and is inclusive

49. A risk based approach Objectives
Develop a shared understanding of what a risk based approach to sustainable procurement looks like
Review good practice of risk based approaches
Practice the implementation of a risk based approach
Be introduced to the latest guidance available
Develop an action plan to take back to your institution

50. jbrannigan@esdconsulting.co.uk www.eauc.org.uk
Many thanks