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SOURCE ISO/PC 277 Secretariat

« Sustainable Procurement » ISO/PC 277

Date:

2015-02-06 Doc. Number:

N 053

Assistant:

Anna MIKHAYLENKO

AFNOR

Direct line: + 33 (0)1 41 62 84 25

[email protected]

Your contact:

Laurence DOUVILLE

AFNOR

Direct line : + 33 (0)1 41 62 86 06

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Leonardo MARTINS

ABNT

Direct line : + (21) 3974 2362

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© ISO 2015 – All rights reserved

ISO TC 277 Date: 2015-02-4

ISO/CD 20400.3

ISO TC 277

Secretariat: AFNOR

Sustainable procurement — — Guidance

Warning

This document is not an ISO International Standard. It is distributed for review and comment. It is subject to change without notice and may not be referred to as an International Standard.

Recipients of this draft are invited to submit, with their comments, notification of any relevant patent rights of which they are aware and to provide supporting documentation.

ISO/CD 20400.3

© ISO 2002 – All rights reserved iii

Copyright notice 1

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Reproduction for sales purposes may be subject to royalty payments or a licensing agreement. 12

Violators may be prosecuted. 13

ISO/CD 20400.3

iv © ISO 2002 – All rights reserved

Contents Page 14

Foreword .......................................... .................................................................................................................. vi 15

Introduction ...................................... ................................................................................................................ vii 16

1 Scope ........................................... ...........................................................................................................1 17

2 Normative references ............................ ................................................................................................1 18

3 Terms and definitions ........................... ................................................................................................1 19

4 Fundamentals .................................... .....................................................................................................5 20 4.1 Introduction to fundamentals .................. .............................................................................................5 21 4.2 What is sustainable procurement? .............. ........................................................................................5 22 4.2.1 General ..................................... ...............................................................................................................5 23 4.2.2 Principles of sustainability ................ ...................................................................................................5 24 4.3 Why procure sustainably? ...................... ..............................................................................................6 25 4.4 Integrating sustainability in the organization’ s procurement policy .............................. .................7 26 4.4.1 Alignment of the organizational sustainabilit y policy and the procurement approach ............. ....7 27 4.4.2 Other important considerations for sustainabl e procurement ..................................... ....................9 28 4.4.3 Summary (procurement) steps and materiality p rocess ............................................ .................... 10 29

5 Organizing the procurement function towards susta inability ......................................... .............. 10 30 5.1 General ....................................... .......................................................................................................... 10 31 5.2 Setting priorities ............................ ..................................................................................................... 10 32 5.2.1 General ..................................... ............................................................................................................ 10 33 5.2.2 Mapping the supply chain .................... .............................................................................................. 11 34 5.2.3 Understand organizational goals in relation t o sustainable procurement ......................... .......... 12 35 5.2.4 Understand sustainability issues for each sta keholder .......................................... ....................... 12 36 5.2.5 Mapping purchase categories to sustainability issues ........................................... ....................... 12 37 5.2.6 Mapping critical suppliers’ sustainability is sues .............................................. .............................. 13 38 5.2.7 Mapping the sustainability issues to procurem ent processes ..................................... ................. 15 39 5.2.8 Consolidate and prioritize risks and opportun ities ............................................. ............................ 16 40 5.3 Enabling people ............................... ................................................................................................... 17 41 5.3.1 General ..................................... ............................................................................................................ 17 42 5.3.2 Organizational culture ...................... .................................................................................................. 17 43 5.3.3 Performance management ...................... ........................................................................................... 17 44 5.3.4 Developing competence ....................... ............................................................................................. 17 45 5.4 Governing procurement ......................... ............................................................................................ 18 46 5.4.1 General ..................................... ............................................................................................................ 18 47 5.4.2 Governance groups ........................... ................................................................................................. 18 48 5.4.3 Accountability .............................. ....................................................................................................... 18 49 5.4.4 Procedures and systems ...................... ............................................................................................. 18 50 5.4.5 Guides ...................................... ............................................................................................................ 18 51 5.4.6 Assurance ................................... ......................................................................................................... 18 52 5.4.7 Economic analysis............................ .................................................................................................. 19 53 5.4.8 Search for best practices ................... ................................................................................................ 19 54 5.5 Stakeholder identification and engagement ..... ............................................................................... 19 55 5.5.1 General ..................................... ............................................................................................................ 19 56 5.5.2 Identifying key stakeholders ................ ............................................................................................. 19 57 5.5.3 Engaging Internal stakeholders .............. .......................................................................................... 20 58 5.5.4 Engaging the supply chain ................... ............................................................................................. 21 59 5.5.5 Engaging peers and other external stakeholder s ........................................................................... 21 60 5.6 Measuring and improving performance ........... ................................................................................ 22 61 5.6.1 General ..................................... ............................................................................................................ 22 62 5.6.2 Metrics and Indicators ...................... .................................................................................................. 22 63

ISO/CD 20400.3

© ISO 2002 – All rights reserved v

5.6.3 Outcome indicators .......................... ................................................................................................... 23 64 5.6.4 Macro-economic indicators ................... ............................................................................................. 23 65 5.6.5 Reporting ................................... ........................................................................................................... 23 66 5.6.6 Benchmarking ................................ ...................................................................................................... 23 67

6 Integrating sustainability into the procurement p rocess ............................................ .................... 23 68 6.1 General ....................................... .......................................................................................................... 23 69 6.2 Planning ...................................... ......................................................................................................... 25 70 6.2.1 General ..................................... ............................................................................................................ 25 71 6.2.2 Assess sustainability risks and opportunities ................................................................................. 26 72 6.2.3 Analyze business needs ...................... ............................................................................................... 26 73 6.2.4 Analyze the market .......................... .................................................................................................... 27 74 6.2.5 Complete procurement strategy ............... ......................................................................................... 27 75 6.3 Requirements .................................. ..................................................................................................... 28 76 6.3.1 General ..................................... ............................................................................................................ 28 77 6.3.2 Types of requirements ....................... ................................................................................................. 29 78 6.3.3 Mandatory and optional requirements ......... ..................................................................................... 29 79 6.3.4 Verification of sustainability claims ....... ........................................................................................... 29 80 6.4 Sustainability aspects of supplier selection .. .................................................................................. 30 81 6.4.1 General ..................................... ............................................................................................................ 30 82 6.4.2 Prequalification ............................ ........................................................................................................ 31 83 6.4.3 Tender ...................................... ............................................................................................................. 32 84 6.4.4 Selection of the supplier, negotiation and aw ard ............................................... ............................. 33 85 6.5 Contract management............................ ............................................................................................. 34 86 6.5.1 Ensuring the quality of the supplier relation ship .............................................. .............................. 34 87 6.5.2 Implementing the contract ................... .............................................................................................. 35 88 6.5.3 Contract management plan .................... ............................................................................................ 35 89 6.5.4 Manage performance and relationship ......... .................................................................................... 35 90 6.5.5 Supplier/customer joint initiatives ......... ............................................................................................ 36 91 6.5.6 Supplier failure ............................ ........................................................................................................ 36 92 6.5.7 Disposal and end-of-life management ......... ..................................................................................... 36 93 6.6 Contract review and lessons learnt ............ ....................................................................................... 37 94

Annex A (informative) Help box ......................................... .............................................................................. 38 95 A.1 Risks and opportunities........................ .............................................................................................. 43 96

Annex B (informative) ISO 26000 tool box ............................... ....................................................................... 46 97

Annex C (informative) Global cost and value creation method ............ ....................................................... 47 98

Bibliography ...................................... ................................................................................................................ 48 99 100

ISO/CD 20400.3

vi © ISO 2002 – All rights reserved

Foreword 101

ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies 102 (ISO member bodies). The work of preparing International Standards is normally carried out through ISO 103 technical committees. Each member body interested in a subject for which a technical committee has been 104 established has the right to be represented on that committee. International organizations, governmental and 105 non-governmental, in liaison with ISO, also take part in the work. ISO collaborates closely with the 106 International Electrotechnical Commission (IEC) on all matters of electrotechnical standardization. 107

International Standards are drafted in accordance with the rules given in the ISO/IEC Directives, Part 2. 108

The main task of technical committees is to prepare International Standards. Draft International Standards 109 adopted by the technical committees are circulated to the member bodies for voting. Publication as an 110 International Standard requires approval by at least 75 % of the member bodies casting a vote. 111

Attention is drawn to the possibility that some of the elements of this document may be the subject of patent 112 rights. ISO shall not be held responsible for identifying any or all such patent rights. 113

ISO 20400 was prepared by Technical Committee ISO/TC 277, Sustainable procurement. 114

ISO/CD 20400.3

© ISO 2002 – All rights reserved vii

Introduction 115

ISO 26000:2010 - Guidance on social responsibility, is now available to organizations providing recognized 116 guidelines on sustainability 1 . The procurement function has an important role to play in implementing 117 sustainability within the governance framework of all kinds of organizations. This can also potentially offer an 118 opportunity for procurement to strengthen its strategic role, both internally and externally, and fundamentally 119 change the management of supplier relations and evaluation of global and sustainable performance. 120

Many barriers to development of sustainable procurement initiatives still exist at strategic as well as at 121 operational levels of organizations. Globalization and open markets motivate and even drive organizations to 122 share the same concerns at international level. Therefore there is a need for a common terminology and 123 framework of approaches and methods for good practices in sustainable procurement. 124

Inability to adequately manage sustainability concerns such as the growing demands on the world's resources, 125 current and forthcoming energy market conditions, environmental impacts and their consequences, child labor, 126 non-liveable income and a lack of social dialogue may cause adverse reactions which could be detrimental to 127 the organization's reputation. This standard includes the various dimensions of sustainability and their 128 interactions, involving all relevant stakeholders, especially suppliers, who play a key role in delivering 129 sustainable procurement solutions. 130

This document aims to: 131

promote and value sustainable procurement; 132

improve communication between suppliers and all stakeholders; 133

promote mutually beneficial relationships; 134

integrate in the procurement function the different dimensions of sustainability i.e. economic, social and 135 environmental aspects; 136

be global and applicable to any organization either public or private; 137

facilitate the understanding of the concept of "sustainable procurement", and make it accessible through a 138 practical and operational approach; and 139

respect the national and international regulations on public procurement. 140

NOTE Small and medium-sized organizations are organizations whose number of employees or size of financial 141 activities fall below certain limits. The size thresholds vary from country to country. 142

As a general principle, when taking steps to encourage sustainable procurement, public procurement officials 143 should always consider the legislative, policy and ethical framework that regulate their procurement activities. 144 Therefore, for public procurement activities, the guidance offered in this standard should always be read and 145 applied in conjunction with these obligations. Where there is inconsistency, the applicable public procurement 146 framework obligations take precedence. 147

The legislative, policy and ethical framework may include legislation, international obligations, local regulations 148 and also the specific procurement, ethics and sustainability policies that apply to the organization. 149

1 In this International Standard the term sustainability is used to qualify procurement actions that integrate social responsibility and contribute to sustainable development.

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viii © ISO 2002 – All rights reserved

150

Figure 1 — Content of this International Standard o n sustainable procurement 151

NOTE To facilitate reading and coherence between clauses the graphics illustrated in Figure 1 are included in the 152 relevant clauses of this standard. (At this point we have not included then in the introduction to each clause so it will 153 confuse the reader if we state this at this time) 154

. 155

COMMITTEE DRAFT ISO/CD 20400.3

© ISO 2015 – All rights reserved 1

1 Scope 156

This international standard provides guidance to organizations integrating sustainable development and social 157 responsibility within procurement, independent of their activity or size, as described in ISO 26000:2010 - 158 Guidance on social responsibility. It is intended for stakeholders involved in or impacted by procurement 159 decisions and processes. 160

2 Normative references 161

The following referenced documents are indispensable for the application of this document. For dated 162 references, only the edition cited applies. For undated references, the latest edition of the referenced 163 document (including any amendments) applies. 164

ISO 26000:2010, Guidance on social responsibility 165

3 Terms and definitions 166

For the purposes of this document, For the purposes of this document, the terms and definitions given in ISO 167 26000:2010 and the following apply. 168

3.1 169 absolute rights 170 civil, political, economic, social, cultural and environmental rights of humans 171

3.2 172 business ethics 173 a set of principles and criteria that govern and direct the organization against its behavior towards 174 stakeholders in a sustainable manner 175

[SOURCE: ISO 26000:2010, Guidance on social responsibility] 176

3.3 177 environmental labels and declarations 178 claims that indicate the environmental aspects of a product or service 179

NOTE to entry: An environmental label or declaration may take the form of a statement, symbol or graphic on a 180 product or package label, in product literature, in technical bulletins, in advertising or in publicity, amongst other things. 181

[SOURCE: ISO 14020:2000 Environmental labels and declarations – general principles] 182

3.4 183 fair operating practices 184 practices that promote a healthy relationship between the company that buy goods or services and another 185 that is providing them. 186

3.5 187 gateway review 188 to be filled 189

3.6 190 good or service 191 product 192 to be filled 193

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2 © ISO 2015 – All rights reserved

3.7 194 indicator 195 measurable representation of the condition or status of operations, management, or conditions 196

[SOURCE: ISO 14031:2013 – Environmental management -- Environmental performance evaluation -- Guidelines] 197

3.8 198 key performance indicator (KPI) 199 indicator of performance deemed by an organization to be significant and giving prominence and attention to 200 certain aspects 201

[SOURCE: ISO 14031:2013 – Environmental management -- Environmental performance evaluation -- Guidelines] 202

3.9 203 labor practices 204 all policies and practices relating to work performed within, by or on behalf of the organization, including 205 subcontracted work that should promote productivity to contribute to sustainability 206

[SOURCE: ISO 26000:2010 - Guidance on social responsibility] 207

3.10 208 life cycle 209 consecutive and interlinked stages of a product system, from raw material acquisition or generation from 210 natural resources to final disposal 211

[SOURCE: ISO 14040:2006 – Environmental management -- Life cycle assessment -- Principles and framework] 212

3.11 213 tier 1 supplier 214 tier 1 suppliers supply the main company (for example, an original equipment manufacturer) 215

3.12 216 life cycle assessment 217 compilation and evaluation of the inputs, outputs and the potential environmental impacts of a product system 218 throughout its life cycle 219

[SOURCE: ISO 14040:2006 - Environmental management -- Life cycle assessment -- Principles and framework] 220

3.13 221 local supplier 222 provider that offers a product or service to the organization and that is based in the same geographic market 223 (i.e., no cross-border payments to the supplier are made) 224

NOTE to entry: The term "local" may refer to the surrounding community operations, to a region within a country, or a 225 country (source from the GRI G4) 226

3.14 227 mutually beneficial relationship 228 an association between two parties in which each member benefits 229

3.15 230 objective 231 result to be achieved 232

[SOURCE: ISO/IEC Directives, part 1 Consolidated IS0 Supplement Procedures specific to ISO] 233

3.16 234 policy 235 intentions and direction of an organization, as formally expressed by its top management 236

ISO/CD 20400.3



3.17 238 procurement 239 activity of acquiring goods and services from suppliers (internal and external) 240

NOTE to entry: The procurement process spans the whole cycle from identification of needs through to the 241 end of a services contract or the end of the life of an asset, including disposal 242

3.18 243 responsibility 244 state of being responsible, accountable or answerable, as for an entity, function, system, security service or 245 obligation 246

[SOURCE: ISO/TS 17574:2009 - Electronic fee collection - Guidelines for security protection profiles] 247

3.19 248 risk 249 effect on uncertainty 250


3.20 252 risk assessment 253 overall process of risk identification, risk analysis and risk evaluation 254

[SOURCE ISO 31000:2009 - Risk management -- Principles and guidelines] 255

3.21 256 SMO 257 To be filled 258

3.22 259 satisfactory working conditions 260 decent conditions of work with regard to wages, hours of work, weekly rest, holidays, health and safety, 261 maternity protection and ability to combine work with family responsibilities. 262

NOTE to entry: fair and appropriate consideration should be given to the quality of conditions of work as they 263 greatly affect the quality of life of workers and thus enhance their performance and productivity that contribute 264 to economic and social development. 265

3.23 266 social responsibility 267 responsibility of an organization for the impacts of its decisions and activities on society and the environment, 268 through transparent and ethical behavior that: 269

contributes to sustainable development (3.2), including the health and the welfare of society; 270

takes into account the expectations of stakeholders (3.3); 271

is in compliance with applicable law and consistent with international norms of behavior; and 272

is integrated throughout the organization and practiced in its relationships 273

NOTE 1 to entry: Activities include goods, services and processes. 274

NOTE 2 to entry: Relationships refer to an organization’s activities within its sphere of influence. 275

[SOURCE: ISO 26000:2010, definition 2.18] 276

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3.24 277 specification 278 document stating requirements 279

[SOURCE: ISO 17665-1:2006 - Sterilization of health care products -- Moist heat -- Part 1: Requirements for the 280 development, validation and routine control of a sterilization process for medical device] 281

3.25 282 stakeholders 283 all individuals, groups of people, internal functions or external organizations 284

on whom an organization’s supply activity has a direct or indirect, positive or negative impact, 285

who have a direct or indirect, positive or negative impact on the same organization 286

3.26 287 subcontractors 288 body (organization or company, public or private) that undertakes aspects of the processing, handling, 289 homogeneity and stability assessment, characterization, storage or distribution of the reference material on 290 behalf of the reference material producer, on a contractual basis, either paid or non-paid 291

[SOURCE: Guide 34:2009 General requirements for the competence of reference material producers] 292

3.27 293 supplier 294 organization or person that provides a product 295

[SOURCE: ISO 9000:2005 - Quality management systems -- Fundamentals and vocabulary] 296

3.28 297 sustainability aspects 298 aspect of an activity or product that, during the life cycle of the activity or product, can affect sustainability 299 (3.30) 300

3.29 301 sustainable development 302 development that meets the environmental, social and economic needs of the present without compromising 303 the ability of future generations to meet their own needs 304

NOTE to entry 1: derived from the Brundtland Report [17]. 305

[SOURCE: ISO Guide 82 – 2014 - Guidelines for addressing sustainability in standards] 306

3.30 307 sustainability 308 system, including environmental, social and economic aspects, in which the needs of the present are met 309 without compromising the ability of future generations to meet their own needs 310

NOTE 1 to entry: the environmental, social and economic aspects interact, are interdependent and are often referred to as 311 the three dimensions or three pillars of sustainability. 312

[SOURCE: ISO Guide 82] 313

3.31 314 sustainable procurement (SP) 315 procurement that delivers long-term social, economic and environmental benefits 316

NOTE 1 to entry: SP involves the sustainability aspects related to the goods and services and to the suppliers along the 317 supply chain 318

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NOTE 2 to entry: SP contributes to the achievement of organizational sustainability objectives and goals 319

3.32 320 transformative solution 321 to be filled 322

3.33 323 universal design 324 design of products, environments, programs and services to be usable by all people, to the greatest extent 325 possible, without the need for adaptation or specialized design 326

NOTE 1 to entry: universal design should not exclude assistive devices for particular groups or persons with disabilities 327 where this is needed. 328

[SOURCE: ISO/IEC GUIDE 71 - 2014 - Guide for addressing accessibility in standards] 329

4 Fundamentals 330

4.1 Introduction to fundamentals 331

This clause is primarily written for use by top management of an organization to help define the strategy and 332 policies in connection with sustainable procurement. As a result it considers what sustainable procurement is, 333 what the main organizational sustainability issues and drivers are, and how sustainability should be integrated 334 into procurement policies and strategies. 335

4.2 What is sustainable procurement? 336

4.2.1 General 337

Sustainable procurement in general terms means making sure that the goods or services that an organization 338 buys have the lowest environmental and the most positive economic and social impacts as feasible. 339

As such, sustainable procurement allows an organization to meet their needs for goods or services and work 340 in a way that makes both fiscal senses on a whole life cycle basis in terms of generating benefits not only to 341 the organization, but also to society and the overall economy, whilst minimizing damage to the natural 342 environment. 343

Sustainable procurement is good procurement and should not be viewed as an abstract, idealistic goal but as 344 a reasonable, practical and achievable aim for all private and public organizations, irrespective of their activity 345 or their size. 346

Purchases and supplies are essential aspects when an organization considers requirements for sustainability 347 and fair and just commerce. 348

In this respect, ISO 26000:2010- Guidance on social responsibility is an important reference for an 349 organization wanting to implement sustainability and improve their contribution to sustainable development. 350

4.2.2 Principles of sustainability 351

According to ISO 26000:2010, the principles for sustainability are: 352

accountability: each organization should be accountable for its own impacts on society, the economy and 353 the environment. Therefore the focus for sustainable procurement should be: "how do we share 354 accountability with the supplier?". The sustainable procurement policy and practice can be tested by the 355 following question: "does our procurement practice encourage or discourage the supplier to embrace 356 accountability on sustainability? ; 357

ISO/CD 20400.3


transparency: each organization should be transparent in its decisions and activities that impact society 358 and the environment. An organization should encourage their suppliers to be transparent. An organization 359 that is not transparent about their own sustainability practice does not encourage their supplier to be 360 transparent. Mutual transparency is the basis for stakeholder dialogue and long-term collaboration; 361

ethical behavior: each organization should behave ethically and promote ethical behavior. Ethical 362 behavior is defined by international standards but each organization and supplier should identify how they 363 should be applied to their own activities. An organization that enforces its code of ethics on a supplier will 364 remain accountable; 365

respect for stakeholder interests: each organization should respect, consider and respond to the interests 366 of its stakeholders. Organizations should respect the interests of the supplier and vice versa; 367

respect for the rule of law: each organization should accept that respect for the rule of law is mandatory. 368 An organization may expect suppliers to abide by the law and should test compliance as situations 369 require; 370

respect for international norms of behavior: each organization should respect international norms of 371 behavior. An organization may expect suppliers to abide by the international norms of behavior and 372 should test compliance as situations require; 373

respect for human rights: each organization should respect human rights and recognize both their 374 importance and their universality. An organization may expect a supplier to abide by the International Bill 375 of Human Rights and expect the suppliers to be aware of human rights violations in their supply chain, 376 regardless of the size of the supplier. 377

4.3 Why procure sustainably? 378

Practicing sustainable procurement is one way an organization can contribute to sustainability and improve its 379 social, environmental and economic performance. Organizations involved in sustainability should consider 380 integrating sustainability into the procurement process. If managed effectively, this should encourage more 381 sustainable solutions, promote more sustainable business practices and positively influence the sustainability 382 performance of suppliers. Achievement of desired outcomes may also enhance perception of an 383 organization’s performance particularly in terms of business positioning, operational efficiency, its stakeholder 384 relationships and its reputation. 385

There are many reasons for practicing sustainable procurement. Organizations should analyze how strongly 386 they are driven by the following factors in order to inform the identification of key sustainability issues, 387 establishment of goals and priority setting. 388

Examples of organizational drivers are: 389

customer: customer and consumer sustainability expectations throughout their supply chains; 390

cost optimization: optimizing use of resources may lead to cost saving and reduced environmental 391 impacts; 392

risk management: sustainability issues may influence brand value, market share, market cap, legal 393 exposures, financial liabilities, moral/ethical exposures, price fluctuations and the risks associated with 394 operating licenses; 395

supply chain security: avoiding disruptions due to product recall, financial penalties, etc. 396

legislation and regulation: compliance with environmental and social legislation throughout the supply 397 chain; 398

investor confidence: sustainable procurement may improve scores from rating agencies and attract 399 investment; 400

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political expectations: government policy intended to exploit the transformative potential of sustainable 401 procurement; 402

competitive advantage: in competitive markets the ability to offer a sustainable value proposition, 403 supported by the supply chain, can be a differentiator; 404

stakeholder expectations: responding to increasing stakeholder pressure to take account of 405 environmental and social factors in order to maintain a societal license to operate; 406

workers: paying attention to sustainability issues can lead to greater productivity and attract, motivate and 407 retain talent; 408

innovation: using sustainable procurement to stimulate innovation from the supply chain to gain greater 409 shared value; 410

supplier commitment: improving supplier relationships leading to improved supplier contribution to 411 organizational objectives; 412

economic value creation: more comprehensive information related to total costs and benefits could assist 413 the organization to be more effective; 414

personal leadership: passionate leadership from key people in the organization; 415

organizational ethics: the right thing to do, alignment with organization culture and values; 416

increasingly governments are imposing regulations that obligate organizations to operate more 417 sustainably, i.e. restrictions on waste to landfill, supplier diversity, carbon disclosure. 418

4.4 Integrating sustainability in the organization’ s procurement policy 419

4.4.1 Alignment of the organizational sustainabilit y policy and the procurement approach 420

Many organizations have views and commitments about sustainability that are reflected in an organizational 421 sustainability policy, strategy or both. The organizational sustainability policy is usually formalized in a 422 document and is a declaration of intent that informs the direction of an organization expressed by its top 423 management. It should provide clear guidance to all stakeholders and should be understood and implemented 424 at all relevant functions and levels of the organization. 425

NOTE: In many cases, particularly for SMOs, it is possible that the organization’s global strategy, policy and 426 objectives exist, but are not formally documented. 427

When an organization has an organizational sustainability policy, the procurement function should also take 428 responsibility for its implementation i.e. implementation of sustainable procurement. The first step in 429 sustainable procurement is usually for an organization to establish a sustainable procurement policy, which 430 should clearly set the intentions and objectives the organization is striving to achieve through its procurement. 431 When establishing a sustainable procurement policy, the three pillars of sustainability: economic, social and 432 environmental aspects should be included. Also the seven core subjects found in ISO 26000:2010 should be 433 considered as illustrated below. 434

However, some organizations first approach sustainability by starting with a concern on what it purchases. In 435 these cases the organization should realize that the involvement with sustainable procurement implies it being 436 aware of its responsibility for the societal and environmental impacts of its decisions and activities. The 437 expression of how to deal with those responsibilities can be the establishment of a sustainability policy. 438

The sustainable procurement policy should be clearly aligned to the wider organizational policy or strategy for 439 sustainability, which should provide the foundation within which the whole of the procurement activity operates. 440 It does not have to be a standalone document; it can be part of a general procurement or organizational 441 sustainability policy (or both). Often, the sustainable procurement policy merges into the procurement policy 442

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over time as sustainability becomes recognized and embedded into the values. Therefore, sustainable 443 procurement can be an integral part of the organization’s procurement policy and overall strategy. 444

When establishing the sustainable procurement policy the seven core subjects as described in ISO 445 26000:2010 should be considered (see annex A) and the following sustainability issues should be taken into 446 account: 447

human rights: the sustainable procurement policy should incorporate respect for human rights, the 448 promotion of absolute rights and the control of risks to human rights. According to this, risks to human 449 rights are prevented mainly by integrating human rights in the organization’s general policy ; 450

labor practices: the sustainable procurement policy should stipulate requirements for satisfactory working 451 conditions and social protection. The procurement policy should establish or conserve balanced relations 452 between the supplier, subcontractors and distributors and its employees, and should include at least the 453 recommendations of the ILO; 454

environment: the sustainable procurement policy of the organization should promote the sustainable use 455 of resources, prevent pollution, mitigate climate change and adapt to it, protect the environment and 456 restore natural habitats; 457

fair operating practices: the sustainable procurement policy should promote the establishment of 458 balanced business relations, especially on the price and delivery terms of the purchased goods or 459 services, on terms of payment for the supplier and on respect for established contractual terms. It should 460 stimulate procurement of sustainable goods and services, as a way to influence its supply chain towards 461 responsible practices without replacing the natural role of the state in this area. It should ensure respect 462 for supplier’s property rights and prevent, detect and correct risks of corruption. Finally, it should fulfill its 463 tax responsibilities; 464

consumer issues: in order to take into account consumer’s rights, the sustainable procurement policy 465 should promote the protection of consumer health and safety, including avoidance of planned 466 obsolescence, promote sustainable and responsible consumption of the good/s or service/s supplied, 467 including avoidance of overconsumption, and respect fair marketing and sales practices. It should also 468 provide the consumer a fair complaint resolution system; 469

community involvement and development: in order to increase community involvement and development 470 it is recommended that the policy encourages assessment of offers from local suppliers and enables 471 increased access to contracts. The organization should also consider making sure that its policy does not 472 create barriers to entry for such suppliers, as they could have beneficial effects on the social fabric and 473 ecosystem, as well as fair trade, diversity or minority sourcing and social enterprise sourcing. 474

NOTE According to the approach given in ISO 26000:2010 clause 6.7.1.1, within the framework of the core subject 475 consumer issues, the term consumer could be applicable to customers procuring good/s or service/s for commercial 476 purposes. 477

These core subjects should also be considered throughout the procurement process from top management to 478 buyers and their main impacts on the relevant stakeholders should be assessed and taken into consideration. 479

Organizational governance is the seventh overarching core subject of ISO 26000. It is an essential driving 480 force to successful implementation of sustainable procurement as it enables the organization to assume 481 responsibility for the impacts of its decisions and activities and takes account of social responsibility both 482 internally and in terms of its relationships. 483

Organizational governance may impact four major areas concerning sustainable procurement: 484

policy formation for sustainable procurement, which should be interrelated to the organization’s global 485 strategy, policy and objectives and should integrate sustainability criteria; 486

the strategic integration and deployment of sustainable procurement, whose objectives should reflect the 487 concept of cost-effectiveness, i.e. the evaluation of overall performance including the costs and revenues 488

ISO/CD 20400.3


generated as well as the attainment of social, societal and environmental goals. The objectives should 489 equally enable the implementation of mutually beneficial relationships between the organization and its 490 stakeholders both within (the other functions of the organization) and outside (suppliers, government 491 etc.); 492

the operational deployment of sustainable procurement, commencing with the implementation of a 493 strategy and an action plan. Reporting will be required to monitor the overall activity, analyze variances 494 against the defined objectives and strive for continual improvement. The strategy and the action plan 495 should apply throughout the supply chain and encompass both suppliers and subcontractors; 496

responsible communication; to enable the organization to share its commitments, progress and results. 497 The purpose is to inform its stakeholders as to the extent of application of sustainable procurement, 498 engage in dialogue and facilitate the operational implementation of the program in conjunction with 499 suppliers by providing them with guidance. 500

4.4.2 Other important considerations for sustainabl e procurement 501

In addition to the ISO 26000 core subjects, it is useful to take the following advice into account when 502 implementing sustainable procurement: 503

seek transformative solutions: procurement should seek transformative solutions to fulfill needs prior to 504 solutions that achieve incremental or gradual improvements; 505

use procurement to deliver more sustainable outcomes: procurement is a strategic process and a way of 506 achieving organizational objectives through a supply chain. Sustainability objectives of an organization 507 should be addressed at an early stage of the procurement process through strategic procurement 508 techniques; 509

focus on impacts relevant to the organization. It is important to clearly understand organizational drivers, 510 objectives and goals related to sustainability. This enables goals to be set for the supply chain; 511

one size does not fit all: sustainability issues and goals should be mapped against categories of supply 512 and high priority issues/categories should be addressed first, further analysis of the supply chain based 513 on these priorities is necessary to complete action plans; 514

manage and review demand: operate the business more efficiently by reviewing demand and buying only 515 what is actually needed (considering other options such as rental, for example); 516

integrate sustainability into current procurement practice: it is important to achieve more sustainable 517 outcomes through the current procurement practices of an organization; 518

look at the full supply chain/life cycle: organizations need to take responsibility for what is happening in 519 their supply chains. The overall supply chain should be considered and organizations should look to 520 where there are often significant risks (e.g. noncompliance with labor standards) or opportunities (e.g. 521 positioning local SMOs) in lower tiers; 522

encourage innovation and adapt to changes in the society, environment and climate: the process should 523 encourage innovation related to more sustainable and universally designed goods and services, through 524 effective market research and use of outcome specifications; 525

develop a competitive sustainable supply chain: there should be emphasis on maintaining or improving 526 the competitive market for more sustainable goods or services. This may mean developing suppliers with 527 lower capability or collaborative initiatives to improve the competence of specific sectors; 528

full and fair opportunity: local procurement, minority owned business’s, SMOs etc. are often significant 529 stakeholder priorities and should be supported through the supply chain where appropriate. However, this 530 needs to be set in the context of full and fair opportunity and not positive discrimination unless there is a 531 legal obligation or organizational policy requirement; 532

ISO/CD 20400.3


total costs: an economic analysis at the relevant steps of the process referring to total cost and value 533 creation should encompass the following: purchase price, product life cycle cost (including cost of use 534 and end of life), costs of risks and also value creation. The aim is to achieve a global optimization of the 535 costs and benefits of procurement. 536

4.4.3 Summary (procurement) steps and materiality p rocess 537

Top management should establish a sustainable procurement policy that: 538

is appropriate to the purpose of the organization; 539

provides a framework for setting sustainable procurement objectives; 540

includes a commitment to satisfy applicable requirements. 541

When implementing a policy of sustainable procurement, it is recommended that the organization: 542

reflects its own values and displays its sense of commitment to sustainability; 543

assesses the applicable sustainability risks and opportunities in terms of its activities and therefore, of its 544 goods or services; 545

defines its policy clearly and precisely; 546

verifies the fit of its procurement policy and the organization’s policy as a whole; 547

ensures effective communication of its policy so as to ensure that all stakeholders have been 548 appropriately informed; 549

takes into account the three pillars of sustainability: economic, social and environmental considerations 550 and the seven core issues of ISO 26000:2010. 551

5 Organizing the procurement function towards susta inability 552

5.1 General 553

This clause is primarily written for use by procurement management and describes the conditions that need to 554 be created and management techniques that should be employed to enable sustainable procurement to be 555 successfully implemented and continually improved. These conditions are key to successfully integrating 556 sustainability considerations into the procurement process described in clause 6. Five enablers are discussed: 557 priority setting, enabling people, governing procurement, engaging stakeholders and measuring performance. 558

5.2 Setting priorities 559

5.2.1 General 560

Not all categories of supply have the same impact. Setting priorities enables organizations to deliver 561 sustainable procurement efficiently and effectively and without adding unnecessary work and cost to internal 562 staff and the supply chain. Sustainable procurement priorities are dependent on a number of factors such as: 563

corporate and supply chain objectives; 564

categories of supply; 565

expenditure by category; 566

ISO/CD 20400.3


materiality of the issues (social, environmental, economic); 567

leverage over the supply chain; 568

nature and geographical location of the supply chain. 569

The priority setting process therefore takes place at a number of levels as the organization develops a better 570 understanding of the supply chain. 571

572

Figure 2 — Priority setting process 573

574

5.2.2 Mapping the supply chain 575

In order to set priorities, it is necessary to have an overview of the supply chain for goods and services by 576 asking the following questions: 577

what are the core processes in the supply chain that are needed to deliver goods and/or services? 578

how is the supply chain organized? 579

who are the important actors and partners in the supply chain? how do goods, services, payments and 580 information flow through the supply chain? 581

what are the external influences that influence performance in the supply chain? 582

When mapping the supply chain it may be helpful to: 583

perform a 'spend analysis' to understand each category of supply, expenditure, suppliers and their 584 location; 585

ISO/CD 20400.3


for goods, understand where most significant raw materials and/or semi-finished products come from; 586

for services and works, understand from where labor is sourced; 587

verify how and by whom, goods are transported (where possible). 588

5.2.3 Understand organizational goals in relation t o sustainable procurement 589

Clause 5.5 of this standard describes how organizational goals and standards should be set. These can be 590 broken down into more specific issues to provide greater clarity and adapted to create measurable objectives. 591 Senior management should be engaged to adapt the corporate goals and issues into clear objectives for 592 sustainable procurement. This should take into account the organization’s strategic choices such as 593 externalization, enhancing subcontracting abroad, increased partnerships, mergers and acquisitions, which 594 can have significant impact on the way to conduct business in the future. This exercise should result in the 595 establishment of SMART (Specific, Measurable, Achievable, Time bound) objectives for the key issues 596 identified for sustainable procurement. 597

5.2.4 Understand sustainability issues for each sta keholder 598

Developing a sustainable procurement strategy involves a number of internal and external stakeholders. 599

Clause 5.4 deals with stakeholder engagement in more detail but key stakeholders should be identified at this 600 stage. The table below shows a typical range of key stakeholders to engage from a procurement perspective 601 and why they should be engaged: 602

Stakeholders Groups Examples (Who) Examples of objectives (Why)

Supply chain

• Suppliers (rank 1, 2…) • Subcontractors • Industry groups • Trade associations

• Deliver specific sustainability requirements

• Create value based on sustainability programs

• Participate in sustainability development programs

Customers

• Consumers • Consumer groups • Distributors • (B2B) OEM, contractors…

• To know expectations, satisfaction • To have coherent strategies

Employees • Organization employees • Subcontractors employees • Trade unions

• Empowerment • Social dialogue

Society

• Community, territory • Public sector • NGOs • Other institutions

• Community involvement • Public contracting bases • Build a constructive dialogue • Collaborate on issues of mutual benefit

Others • Sustainability agencies • Other consultants • Technical experts

• Sustainability evaluation bases

Table 1 — Typical range of key stakeholders to enga ge from a procurement perspective and why they 603 should be engaged 604

605

5.2.5 Mapping purchase categories to sustainability issues 606

The next step is to set priorities by mapping the core subjects/issues to the categories of supply. This should 607 be a collective exercise between procurement people, internal customers and those who have knowledge to 608 contribute from other parts of the business. This could be technical staff with a deep understanding of the 609 categories of supply, sustainability specialists, or customer facing people who understand customers’ needs 610 and expectations. The group should consider: 611

ISO/CD 20400.3


the purchase volume of the category; 612

the inherent (or gross) risk related to the good or service and key sustainability issues; 613

the location of current key suppliers for the category. 614

This mapping of the organization’s various purchase categories’ core subjects and issues could look like the 615 following: 616

Category of product / services

Organizational governance

Human rights

Labor practices

Environment Fair operating practices

Consumer issues

Community involvement

and development

Category 1

Category 2

Category 3

Category 4

Category 5

…

Category n

617

Table 2 — Mapping of the organization’s various pur chase categories’ versus core subjects and 618 issues 619

5.2.6 Mapping critical suppliers’ sustainability is sues 620

At this stage it is helpful to give consideration to suppliers. The process detailed below can be considered in a 621 number of ways depending on the current procurement strategy and the availability of organizational 622 resources: 623

a) map all suppliers in red and/or orange categories at this stage, or 624

b) if the organization has a strategy to select critical suppliers for supplier relationship management (SRM), 625 map those suppliers and deal with prioritized sustainability issues in the SRM process and deal with the 626 rest in clause 6, or 627

c) skip this process and deal with all impacts in clause 6. 628

Sustainability issues related to suppliers can be evaluated in 2 dimensions: 629

630

Figure 3 — Sustainability supplier management appro ach 631

632

In red : very high impact In orange : medium impact In green : low impact

ISO/CD 20400.3


The following guidelines can be used: 633

a) consider scope of influence (leverage). This is considered to exist where the organization has the ability 634 to affect change in the practices of the supply chain. Leverage may reflect one or more of a number of 635 factors, such as: 636

1) whether there is a degree of direct control between the organization and the supplier; 637

2) the terms of contract between the organization and supplier; 638

3) the proportion of business the organization represents for the supplier; 639

4) the ability of the organization to incentivize the supplier to improve performance in terms of future 640 business, reputational advantage, capacity-building assistance etc.; 641

5) the reputational benefits for the supplier of working with the organization, and the reputational harm 642 of that relationship being withdrawn; 643

6) the ability of the organization to collaborate with other buyers to incentivize improved performance; 644

7) the ability of the organization to engage government in requiring improved performance by the 645 supplier through implementation of regulations, monitoring, sanctions, etc. 646

b) understand the supply chain. It is often necessary to understand the supply chain below Tier 1. This can 647 be done by considering the following: 648

1) which lower tier suppliers have a high level of sustainability maturity and can make a contribution? 649

2) evaluating and working with lower tier suppliers transparently to identify key risks lower down the 650 supply chain and to improve their capacity (see clause 5.5.4); 651

3) working with organizations with a significant influence in business relationships – such as traders, 652 merchants, intermediaries, distributors, etc.; 653

4) examining which suppliers the organization has developed a partnership with and also what the 654 quality and depth of this partnership is like; 655

656 c) focus on opportunities as well as risks. The following table illustrates how risks can lead to opportunities 657

and value creation when the sustainability maturity of the supplier progresses. 658

659

ISO/CD 20400.3


660

661

Monitor Convince Encourage Collaborate Risk example

No visibility on sub-contractors

No guarantee of social standards

No incentive for supplier progress

No implementation of SP commitments

Poor traceability of the supply chain

No lobbying for sustainability in the client’s sphere of influence – despite efforts sometimes made by suppliers

If no leverage due to impossible partnership with suppliers, then high risk

Opportunity Example

Reputation

Traceability of supply chains

Operational

Co-innovation: supplier’s R&D is housed with the client

Improvement of suppliers RSO practices

Strategic support to the territories

Support to SMOs

Support to local employment

Lack of economic risks but strong levers for sustainability

Managerial

Better control of supply chains

Cost pooling (for verification, training, etc.)

Global cost reduction through a better breakdown capacity of the life cycle of purchased goods

Development of innovation capacities

Table 3 — Illustration of how risks can lead to opp ortunity and value creation when sustainability 662 maturity of the supplier progresses 663

5.2.7 Mapping the sustainability issues to procurem ent processes 664

The various steps of the procurement process and the techniques can be used in different ways to influence 665 sustainability outcomes through the supply chain. It is helpful to understand how these can be made to work in 666 order to improve the competence of the procurement function. 667

For instance: 668

when global cost and value creation represent an important opportunity for a category, strong planning 669 and specification steps might generate additional opportunities in environmental and social issues, as well 670 as improved economic consequences in the long term; 671

supplier qualification can reduce the selection of risky suppliers in terms of human rights at an early stage, 672 provided the pre-qualification stage is not so bureaucratic that it discourages smaller suppliers; 673

good contract management can reduce risks and conflicts with suppliers as well as deliver more 674 sustainable outcomes; 675

partnerships with strategic suppliers can generate sustainable innovation; 676

payment terms, pricing conditions and conflict management can influence supplier economic health, 677 human rights and working conditions of employees, including subcontractor’s employees. As a result it 678 can also impact on the development of territories. 679

680

681

Weak High

Examples of supplier’s sustainability level of matu rity

ISO/CD 20400.3


The issues can be considered and mapped according to the procurement steps as shown below: 682

683

Table 4 — Illustration of mapping the sustainabilit y issues to procurement processes 684

5.2.8 Consolidate and prioritize risks and opportun ities 685

The objective at this step is to describe how the materiality principle recommended in ISO 26000:2010 can be 686 adopted within an organization. The completion of this objective needs to consolidate and prioritize risks and 687 opportunities that have been identified through previous steps such as: organizational goals, stakeholders, 688 categories, suppliers and process. 689

The “importance” of an identified item can be established for example through group discussion with internal 690 and external stakeholder representatives: 691

rating of risks: combination of gravity and frequency criteria (for example, very high impacts may need to 692 be addressed regardless of cost/complexity); 693

rating of opportunities: combination of importance of impacts and cost/complexity of implementation (for 694 example “quick wins” have a big impact and little cost and should be implemented quickly). 695

696

Figure 4 — Rating of risks and opportunities 697

ISO/CD 20400.3


5.3 Enabling people 698

5.3.1 General 699

Effective delivery of sustainable procurement policy and strategy requires that all personnel involved in 700 procurement decisions, including internal stakeholders such as production staff or others engaged with 701 suppliers in any capacity, understand the reasons for implementing sustainable procurement. It is also 702 important that all stakeholders understand how to play their part in such implementation, and are given the 703 means to do so. This may involve changing the mindset of top management, as they need to comprehend 704 basic sustainability information – like the shift from buying the lowest price item to buying more sustainable 705 items – to more specific information, such as details on the risks and opportunities of the procurement to the 706 organization. This not only applies to buyers, but to budget holders, specifiers, internal customers, quality 707 management, technical specialists and operational managers as well as sustainability professionals. 708

People tasked with delivering sustainable procurement should be enabled to do so through a supportive 709 organizational culture, performance management, training and support. 710

5.3.2 Organizational culture 711

Introducing a relatively new concept to staff requires managed integration to the organizational culture. 712 Inspirational communication from senior management, a culture that embraces change and an environment 713 where innovation and appropriate risk taking is encouraged facilitates effective implementation. Key 714 stakeholders should be encouraged to network and become involved in relevant groups to share learning and 715 benchmark performance provided engagement with these groups can add value to the business. 716

5.3.3 Performance management 717

The procurement function should review its existing arrangements to ensure that the following elements reflect 718 the organization’s sustainable procurement policy and objectives: 719

recruitment and induction programs; 720

staff job descriptions and personal development plans; 721

personal objectives and related reward and recognition packages. 722

5.3.4 Developing competence 723

Competence may be seen as a fusion of knowledge, skills and attitude. Applying a sustainable procurement 724 strategy requires acquisition of new knowledge and developing skills to apply that knowledge practically. For 725 example, in depth product category expertise should be acquired to understand the relation to sustainability 726 issues. 727

Procurement organizations should identify the learning and development needs of those involved in the 728 procurement process. 729

Considerations might be job shadowing or internal/external job exchanges, training, participation in relevant 730 social media groups, sharing best practices, working in project teams and engagement with associations or 731 other organizations focused on sustainability. 732

Buyers cannot fully achieve sustainable procurement practices without ensuring that key stakeholders and 733 budget holders also have the necessary skills and knowledge. 734

However, procurement professionals should not be expected to be sustainability experts: the organization 735 should ensure that professional sustainability advice and support is available for them. 736

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5.4 Governing procurement 737

5.4.1 General 738

A clear governance structure is essential to ensure accountability and management involvement in 739 procurement planning, the procurement process and delivery of sustainability objectives. 740

Organization-wide governance is covered in clause 4. It is important to embed sustainability into existing 741 governance arrangements and not to develop a new governance program. There should be a clear 742 connection between how procurement is governed and the core subjects and impacts described in this 743 standard. 744

5.4.2 Governance groups 745

Typically organizations have a group of senior people to provide governance over issues such as approving 746 procurement strategies, gateways and commitments, monitoring savings and other functional KPIs. This 747 group (or groups) should incorporate governance of sustainability issues in accordance with this standard. 748

5.4.3 Accountability 749

Clear accountabilities for sustainable procurement should be established. The accountability at a senior 750 management level usually resides with the head of procurement. This plus integrating sustainability into the 751 teams’ objectives and job descriptions may be sufficient. However, as most sustainable procurement 752 programs involve a degree of change management, it may be necessary to allocate accountability to 753 implement this standard. 754

5.4.4 Procedures and systems 755

Governance requires a set of rules that people need to follow. For most organizations, this typically comprises 756 a set of documents: policies, systems, procedures, standards and templates, etc. These documents need to 757 be aligned with the organization’s sustainability and procurement objectives. Some organizations use systems 758 (e.g. e-tendering, contract management system, ERP systems etc.) to support their workflow and procedures. 759 These systems should also be aligned with the organization’s sustainability objectives where necessary. 760

5.4.5 Guides 761

Tools and guidelines can be provided to enable procurement professionals to achieve sustainability objectives. 762 For example: 763

sustainability guides per category; 764

guides on accredited social and environmental labels, management systems, analytical tools, industry 765 regulations, etc.; 766

evaluation tools, such as whole life cost models; 767

case studies. 768

5.4.6 Assurance 769

Existing assurance processes should embed sustainability. Typically this would include audits, gateway 770 reviews, management reviews, external verification and certification. 771

ISO/CD 20400.3


5.4.7 Economic analysis 772

Whenever important decisions have to be made, it is recommended that economic analysis is completed at all 773 relevant stages within the procurement process. Examples of such economic analysis are; life cycle costing, 774 costs of risks and value creation, circular economy evaluation and true cost analysis. 775

NOTE For more information, see Annexes A and C 776

5.4.8 Search for best practices 777

It is important to have a watch function that allows the organization to take into account issues, subjects and 778 good practices which are fast moving. It could also be useful to join collaborative initiatives. 779

NOTE For more information, see Annex C 780

5.5 Stakeholder identification and engagement 781

5.5.1 General 782

An organization is responsible for the impacts of decisions and activities over which it has formal control. In 783 addition to being responsible for its own decisions and activities, a procurement organization may have the 784 ability to affect the behavior of suppliers with which it has relationships. There are situations, determined by 785 the prioritization, where a procurement organization has a responsibility to exercise influence. 786

Change management towards sustainable procurement practices requires the engagement of key players 787 such as internal stakeholders and suppliers. Few outcomes can be delivered without their full contribution. 788

Stakeholder identification and engagement assists the organization in addressing its sustainable procurement 789 policy by providing an informed basis for its decisions. It should be interactive and is intended to provide 790 opportunities for stakeholders’ views to be heard. 791

5.5.2 Identifying key stakeholders 792

The organization should consider mapping their key interested parties in relation to its sustainable 793 procurement initiative. 794

The table below shows an example of a typical range of key stakeholders to be identified, prioritized and 795 engaged from a procurement perspective and why they should be engaged: 796

Stakeholders Groups Examples (Who) Examples of objectives (Why) Supply chain

• Workers • Suppliers • Industry sector groups • Trade associations

• Deliver specific sustainability requirements. • Create value based on sustainability programs. • Participate in sustainability development programs • Stimulate innovation and collaborate on issues of mutual

benefit to supply chain stakeholder groups. Internal stakeholders

• Internal customers • Sustainability professionals • Customer facing people • Workers

• To support/endorse the sustainable procurement approach within their sphere of influence.

Peers

• Other buyers • Sector bodies • Professional institutions

• Increase leverage on suppliers • Share learning • Collaborate on issues of mutual benefit

External stakeholders • Central and local government • NGOs • Consumer groups • Investors and rating agencies

• Increase leverage on suppliers • Knowledge/expertise to support sustainability

development programs • Stimulate innovation • Facilitate investors' confidence and improve finance

conditions

Table 5 — Engagement of key stakeholders 797

798

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5.5.3 Engaging Internal stakeholders 799

5.5.3.1 General 800

Completion of the prioritization process is likely to be one of the first steps in an organization’s efforts to 801 implement sustainable procurement. By engaging effectively to set priorities there is a logical extension to 802 continue this engagement when delivering them. Much of this is through normal procurement processes such 803 as development of category plans, specific procurement or contract management activities. 804

Where specific priorities are identified for change management, such as a major contract renewal or an action 805 plan to address a sustainability issue, it may be necessary to engage in specific meetings with senior 806 executives. Amongst other things, these meetings should aim to develop targeted communication plans and to 807 set up working groups to develop specific plans and initiatives. 808

5.5.3.2 Assessing capacity of influence 809

An organization should consider its ability to influence its supply chains. This should be done through 810 systematic evaluation of the organization and its relationship with its supply chain. Where possible this should 811 be integrated with a wider commercial evaluation of the supply chain. An example of how to assess capacity 812 to influence is given in sub-clause 5.2.6. 813

5.5.3.3 Exercising influence 814

An organization’s influence should always be guided by ethical considerations and other sustainability 815 principles and practices. When exerting its influence, an organization should first consider engaging in 816 dialogue aimed at improving awareness of sustainability and encouraging socially responsible behavior. If 817 dialogue is not effective, alternative actions should be considered. 818

819

820

821

822

Methods of exercising influence include:

engaging with stakeholders (through open dialogue, workshops, symposium, etc.);

supplier code of conduct;

publishing a sustainable procurement charter;

sharing knowledge and information;

conducting joint projects;

setting contractual provisions or incentives;

making investment/procurement decisions;

undertaking responsible lobbying and using media relations;

promoting good practices; and

forming partnerships with sector associations, suppliers and others.

ISO/CD 20400.3


Where the supplier is crucial to the organization but it lacks leverage to influence performance, its priority 823 should be to seek ways to increase its leverage to enable mitigation. This could take a number of forms, for 824 example: 825

offering capacity-building support to the supplier to help it address the problems; 826

working collaboratively with other organizations that have relationships with the supplier to incentivize 827 improvements; 828

working with other organizations on a broader regional or sectorial basis to incentivize improvements; 829

working with local or central government to the same ends; 830

involving the supplier early in the planning stage to promote significant improvements. 831

If these efforts prove unsuccessful, the organization either needs to take steps to end the relationship, or it 832 needs to be able to demonstrate that it has done everything reasonably possible to improve performance. It 833 also needs to be prepared to face any consequences for its decision to maintain the relationship. 834

5.5.4 Engaging the supply chain 835

A fair and proper process based on engaging the most relevant suppliers should be developed. The interest 836 (or interests) of suppliers should be genuine. Effective supplier engagement is based on good faith and goes 837 beyond public relations. 838

A procurement organization should be conscious of the effect of its decisions and activities on the interests 839 and needs of its suppliers. It should have due regard for its suppliers as well as their varying capacities and 840 needs to engage with the organization. 841

Supplier engagement is more likely to be meaningful when the following elements are present: 842

a clear purpose for the engagement is understood; 843

the suppliers’ interests have been identified; 844

the relationship that these interests establish between the organization and the supplier is direct or 845 important; 846

the interests of suppliers to sustainability are relevant and significant; 847

the suppliers have the necessary information and understanding to make their decisions. 848

An organization should encourage suppliers to identify their sustainability risks and opportunities and act 849 accordingly. Where possible, mutual analysis and prioritization leads to appropriate dialogue and potentially 850 improved alignment between the organization and supplier. 851

Various engagement techniques can be used depending on how ambitious the organization’s objectives are 852 regarding the management of sustainability impacts in its supply chain and how competent the supply chain is 853 to deliver them. 854

5.5.5 Engaging peers and other external stakeholder s 855

Additional research may identify new stakeholders, e.g. organizations that could support the implementation of 856 actions such as peers, universities, NGOs, labor unions, etc. This can help to increase leverage, share 857 learning and/or promote collaboration to implement joint projects on sustainability issues. 858

Engagement needs to be aligned with the organization’s approach and should be coordinated with externally 859 facing functions such as customer and investor relations, public affairs, CSR etc. 860

ISO/CD 20400.3


Government can be an important stakeholder to organize a level playing field, especially in cases where 861 sustainability initiatives are insufficiently competitive. In these cases an organization can exercise influence by 862 working with the government to set policy and standards. 863

Engagement can be on a one-to-one basis or can be more effective through groups such as trade/sector 864 organizations, government supported groups or NGOs and other non-profit organizations focused on 865 improving sustainability performance. 866

When engaging in direct peer-to-peer dialogue, care should be taken to ensure that any engagement is ethical 867 and cannot be deemed anti-competitive and that due consideration is given to protecting confidential 868 information or intellectual property and protection against any risk of bribery or fraud. 869

5.6 Measuring and improving performance 870

5.6.1 General 871

Measuring and monitoring is necessary to: 872

establish a baseline measurement; 873

monitor performance and take corrective action if necessary; 874

show results and engage with decision makers and internal stakeholders; 875

benchmark the organization against competitors and sustainability leaders; 876

communicate to external stakeholders, e.g. through annual reports. 877

The procurement function should define key performance indicators, goals and targets then put in place 878 systems to collect and analyze the data and use them to support its sustainable procurement approach. 879 Measurement might have both qualitative and quantitative dimensions and may be applied to both 880 procurement practices and outcomes. Consideration should also be given to soft indicators such as surveys 881 and any feedback provided from staff and suppliers. 882

There are different types of indicators that can be considered. These include: 883

organizational indicators: related with the measurement and monitoring of progress towards the 884 achievement of organizational policy, objectives and goals, etc.; 885

outcome indicators: related with the measurement of the outcomes of the sustainable procurement policy 886 implementation and of the sustainable procurement process in itself; 887

macro-economic indicators: related with the performance of the organization, especially those aspects 888 that are affected by the sustainable procurement process. 889

5.6.2 Metrics and Indicators 890

Metrics are the raw data that are collected to understand performance. Indicators are the information used to 891 assist in management. For example, metrics related to sources and use of energy can be converted to an 892 indicator related to carbon emissions. 893

It is important to measure the baseline position so the impact of sustainable procurement activities can be 894 monitored and measured. Time is needed for the impact of a sustainable procurement program to flow 895 through from organizational indicators, to outcomes and eventually to have an impact on the macro-economic 896 impact of the organization. 897

ISO/CD 20400.3


5.6.3 Outcome indicators 898

An organization should understand the outcomes of its sustainable procurement activities. This begins with 899 setting targets and key performance indicators (KPIs). 900

Targets and KPIs should be aligned with the organization’s broader goals and objectives and the objectives of 901 the sustainable procurement policy in particular. 902

Efficient and effective data collection is critical. Data should be collected at the appropriate tier in the supply 903 chain and aggregated to an organization, product or project level. In setting up a system of outcome indicators, 904 the following issues should be taken into consideration: 905

on-line tools can enable efficient collection and aggregation of performance data; 906

the supply chain should only be asked to provide data on impacts dictated by the prioritization detailed in 907 clause 5.2; 908

collection of unnecessary data should be avoided. Data should only be collected if it can be used in a 909 meaningful way and failure to do this adds cost for no benefit. Generic questionnaires are an example of 910 this and should be considered only if the information is to be used to inform procurement decisions; 911

where possible use existing data collected for other purposes to prevent duplication. For example where it 912 is necessary to collect information about people working on site for health and safety purposes, the same 913 information may be used to provide data about employment. 914

5.6.4 Macro-economic indicators 915

These are not typically used at the supply chain level. However, some organizations might use such indicators 916 to inform their overall strategy. An example would be social return on investment (SROI), which may in turn 917 impact on objectives for the supply chain and the criteria for making procurement decisions. 918

5.6.5 Reporting 919

It is important to report sustainable procurement performance openly and transparently. When doing so, the 920 procurement team needs to make sure that aggregated data is presented in a way that is meaningful for 921 management and publication purposes. 922

5.6.6 Benchmarking 923

An organization might choose to benchmark itself against peer organizations. One way to do this is by means 924 of comparison to formally established indexes. For example, there are a number of robust corporate 925 responsibility measurement indexes available. These are not limited to supply chain activities but take into 926 account all aspects of an organization’s business practices including supply chain. 927

6 Integrating sustainability into the procurement p rocess 928

6.1 General 929

Clause 6 addresses the procurement process and is intended for individuals who are responsible for the 930 actual procurement within their organization. This clause may also be of interest to those in associated 931 functions. 932

When adopting sustainable procurement, it should be integrated into existing procurement processes and the 933 creation of a parallel process should be avoided. Figure 4 illustrates a typical procurement process flow used 934 as the structure of this clause. 935

ISO/CD 20400.3


936

Figure 5 — Integrating sustainability into the proc urement process 937

Principles referred to in clause 4 should be integrated into the procurement process which may then be 938 engaged on the basis of the following five key phases: 939

integrate sustainability considerations at the outset by identifying stakeholders, determining requirements, 940 analyzing the supply market and analyzing profitability based on product lifecycle and product cost data; 941

define precise specifications reflecting the key sustainability issues and include details of specific 942 technical environmental features, production methods, the use of specific criteria, as well as procedures 943 for verification of compliance; 944

select suppliers on the basis of a pre-agreed scoring methodology that includes principles of sustainability, 945 life cycle approach and of product lifecycle costs; 946

award contracts, issue orders and monitor execution. It is important that contractual clauses include 947 sustainability requirements and are agreed on; it is also recommended that compliance with contractual 948 requirements is monitored; 949

assess the experience acquired and suppliers’ performance on all relevant criteria including sustainability, 950 capture input from customers; then adjust policy based on findings; and finally, develop recommendations 951 with a view to continual improvement. 952

Sustainability, materiality and priorities should be considered and integrated in the different steps of the 953 procurement process; however some aspects such as respect for the rule of law, business ethics and anti-954 corruption are to be fully respected. 955

These concepts are detailed in the following clauses related to organizational and operational aspects of 956 sustainable procurement. 957

ISO/CD 20400.3


6.2 Planning 958

6.2.1 General 959

This clause is intended to define the best sustainability strategy for a specific procurement project. While it 960 might take time initially, it enables organizations to: 961

tackle the significant sustainability risks and opportunities of the good/service and avoid focusing on 962 details and minor issues; 963

start a collaborative program of work with internal clients and business users; 964

define sustainability requirements that suppliers can respond to, while achieving value for money. 965

Key elements of procurement planning are: 966

sustainability risks and opportunities: this involves the identification of the relevant sustainability issues 967 related with the good or service to be purchased. Some questions should be asked, such as: what are the 968 major sustainability risks and opportunities related to this specific good or service? What plans can be put 969 in place to mitigate these risks and/or realize these opportunities? The starting point for this process is the 970 prioritization described in clause 5; 971

business need: what is the actual need that has generated this procurement project? How do the 972 requirements lead to increased sustainability impacts? Certain questions should be asked, such as: is 973 there really a need to buy this good or service? Can the organization change the requirements to 974 minimize the sustainability impacts and/or promote positive impacts? If so how can this be done? It 975 should be noted that demand management is important and the most sustainable option may be not to 976 purchase at all in some instances; 977

market analysis: investigate and assess the feasibility of the market to supply and comply with the 978 requirements that have been set, including those addressing the sustainability issues. Some questions 979 should be asked, such as: what is the capability of the supply market to address the organization's 980 sustainability risks/opportunities and to meet business needs? Does the organization need to build the 981 capability of existing suppliers or to find new ones? Can the market exceed the expectations? 982

All these elements should then be embedded in a sustainable procurement strategy, so that sustainability 983 considerations become part of strategic decision making. 984

985

986

987

988

989

990

991

Figure 6 — Inputs to a procurement strategy 992

ISO/CD 20400.3


6.2.2 Assess sustainability risks and opportunities 993

Sustainability risks and opportunities can hugely vary from one good or service to another and from one 994 supplier to another. They depend on technical aspects, sourcing locations, supply chain structures, etc. 995

The prioritization described in clause 5, should be aligned with both the sustainability issues relevant to the 996 organization and with the sustainable procurement policy. Frequently that prioritization is made on larger 997 classes or categories of goods or services. At the planning stage this process should then be repeated and 998 analysis of sub-categories and/or individual goods or services should be completed using the same 999 sustainability criteria. This approach should also identify any issues or opportunities that are unique to an 1000 individual good or service. In other words, the prioritization completed when ‘setting priorities’ of the 1001 organization considers the category of good or service as a whole. The results of this exercise should be used 1002 to inform the overall priorities for the category, as part of a category management approach. At the planning 1003 stage of the procurement process the focus should be more specific to the particular good/service and context, 1004 while aligning with the organization’s directions. 1005

This analysis should not be done in isolation. Quite the opposite, identifying the real sustainability issues 1006 requires a multidisciplinary approach to capture knowledge from: 1007

technical experts that have a deep knowledge of how the good/service is manufactured, processed, 1008 delivered, etc.; 1009

sustainability experts that can provide technical advice on matters such as Health and Safety, 1010 Environmental Management, Legal issues, etc.; 1011

business users that know how the good/service is used by the organization. 1012

Together with sustainability risk and opportunity assessment, a life cycle approach should be used. This 1013 technique consists of assessing sustainability impacts associated with all the stages of a product's life from-1014 cradle-to-grave, for instance: raw material extraction, materials processing, manufacture, distribution, use, 1015 repair and maintenance, and disposal or recycling. Even though the technique is mostly used to assess 1016 environmental impacts, the same approach can be applied to all sustainability issues. 1017

6.2.3 Analyze business needs 1018

When analyzing the need, think about what alternative options might exist to deliver the same outcome in a 1019 better way, e.g.: 1020

eliminating the demand; 1021

reducing the frequency of use/consumption; 1022

identifying alternative methods of fulfilling demands; 1023

aggregating and/or consolidating the demand; 1024

sharing use between divisions or organizations; 1025

encouraging reuse/recycling where appropriate. 1026

Disposal requirements should be factored in throughout the design, procurement process and during 1027 operational phases of the product life including product take back and reverse logistics. This includes ensuring 1028 consideration for disassembly and reuse at the design stage, optimum choice of components and materials 1029 stated in the requirement to maximize recycling opportunities, and recovery of subsystems and resources 1030 whilst minimizing the use of hazardous materials that could be dangerous and costly to dispose of. This is 1031 sometimes referred to as a cradle-to-cradle approach that supports the notion of a Circular Economy where 1032 no resources are wasted. 1033

ISO/CD 20400.3


The organization should consult key internal stakeholders (e.g. budget owners, business users) to assess the 1034 feasibility of potential ‘sustainable’ solutions, adapt recommendations and engage them to support changes 1035 required. Where external stakeholders participate in determining the demand, for example government 1036 organizations, it may be necessary to engage them upfront in examining options. 1037

1038

6.2.4 Analyze the market 1039

The objective is to gain a deep understanding of the existing and future capability of the supply market to 1040 support the organization’s sustainability needs, while providing the same or improved level of price and quality 1041 of service. Also make sure the organization understands if the sustainability requirements reduce or increase 1042 the level of competition and/or the organization’s buying power. 1043

If these issues are identified as significant in the prioritization, the organization should make sure that the 1044 market research includes local suppliers, SMOs and disadvantaged populations and communities (e.g. 1045 suppliers owned and/or employing disabled people, indigenous communities, etc.). 1046

Suppliers can be ahead of their clients in terms of creativity and innovation. It is important to engage with a 1047 diverse range of suppliers early on in the process to determine if new technologies, new products, new 1048 suppliers or advances in sustainable business practices could meet or exceed business requirements. 1049

Consider the market position between the buyer and the market. The diagram below can be used as a guide. 1050

1051

Figure 7 — Market engagement Matrix 1052

In areas where significant leverage exists, it is possible to influence or even move markets to a higher level. 1053 Where there is less leverage, it is necessary simply to evaluate and select the most sustainable option. 1054 Leverage should not just be considered in financial terms. Some suppliers could be attracted to the idea of 1055 developing more sustainable goods or services for a small customer with a view to creating more competitive 1056 advantage with larger ones. Leverage can also be improved through collaboration with other purchasing 1057 organizations, with due consideration to ethical issues and competition law. 1058

Market research should not be limited to external sources: an organization’s own business areas might be 1059 able to provide valuable insights on sustainability requirements and opportunities. 1060

6.2.5 Complete procurement strategy 1061

The procurement strategy describes how to deliver the best outcome for the procurement project. It can be as 1062 short as one page for a simple procurement project (e.g. a briefing note) or considerably longer for a complex 1063 procurement project. 1064

The strategic direction related to sustainability should be embedded in the different sections of such a 1065 document, e.g.: 1066

ISO/CD 20400.3


key findings about sustainability risks and opportunities, needs and the supply market; 1067

the actions required to manage key sustainability risks and opportunities; 1068

the recommended demand-related approach (elimination, reduction, reuse, recycling, etc.); 1069

how the sourcing approach delivers sustainability objectives; 1070

how sustainability requirements are incorporated into the specification, including any go/no go criteria at 1071 the prequalification or tender stage; 1072

the weight given to sustainability in the evaluation criteria, with a careful consideration to finding the best 1073 balance with other criteria such as price or quality; 1074

the expected sustainability benefits, including whole life savings; 1075

the impacts of the sustainability approach on the project plan and budget. 1076

The decisions made at this stage influence the whole procurement process. Decisions should be supported 1077 and agreed by all key stakeholders, and should ultimately be written in a document. Many organizations use a 1078 gateway review at this stage with sign-off by senior stakeholders before progressing to the next stage. 1079

6.3 Requirements 1080

6.3.1 General 1081

Once a decision is taken on the procurement strategy, the requirements should be defined and put in a 1082 document or set of documents such as a specification, brief or scope of work and other applicable documents 1083 so that they can be finalized accordingly. Sometimes there is only one document, the specification, but in 1084 other cases there are different documents addressing the requirements, in accordance with the organization’s 1085 culture, such as a draft contract, the establishment of prequalification criteria etc. 1086

When establishing the requirements, the results of the sustainability risks and opportunities should be 1087 considered. The sustainability aspects should be translated into requirements that are both objective and 1088 verifiable. Some of these requirements apply directly to the good or service. Others may apply to the 1089 production and process methods used to deliver the good or service and others to the supplier organization in 1090 itself. 1091

Using the specification and related documents to incorporate sustainable elements is the most effective 1092 means of ensuring sustainable aspects are incorporated into the purchasing decision. 1093

Inclusion of sustainability requirements in specifications should be done in coordination with key stakeholders, 1094 in order to reflect practical and technical considerations. 1095

When writing requirements, the organization should take care that: 1096

specifications and others requirements documents are compliant with laws and fundamental rights; 1097

the sustainability requirements are defined without any risk of bias or connivance; 1098

all specifications and others requirements are transparently and effectively communicated to potential 1099 suppliers; 1100

all requirements allow for fair competition and in doing so that particular attention is paid to SMOs and 1101 their capacity to respond to such requirements. 1102

ISO/CD 20400.3


6.3.2 Types of requirements 1103

There are different types of requirements that can be used: 1104

technical requirements: specify a physical characteristic of goods or services (= attribute), e.g. recycled 1105 content, mercury-free, or the way in which the product is manufactured or delivered (= process) e.g. 1106 organic or sustainably managed timber and fisheries; 1107

performance requirements: define the performance standards to be met by the goods or services. For 1108 example, standards of care and number of clients for a social care service; 1109

functional requirements: define the proposed function to be fulfilled by the goods or services required. For 1110 example, the strength and durability of concrete to be supplied, energy/fuel efficiency. 1111

Generally, a combination of performance and functional requirements are preferred as they enable suppliers 1112 to propose the most efficient technical solution for the required performance or function, leading to potential 1113 sustainability benefits such as better energy performance, reduction of waste, better safety for users, universal 1114 design, etc. The organization should be careful when using technical requirements not to specify particular 1115 brands unless it is absolutely unavoidable and accepted by the law. 1116

6.3.3 Mandatory and optional requirements 1117

Requirements can be: 1118

minimum when they establish minimum acceptable performance, actively excluding undesirable features, 1119

optional when they define preferred sustainability solutions. In this case, they should be related to an 1120 evaluation criterion that is used to reward performance that exceeds the minimum standards, and 1121 possibly to a KPI that should be managed during the contract. 1122

In addition to these two main options, a buyer can use additional techniques such as variants in order to 1123 encourage better alternative solutions. 1124

The previous analysis of the market informs the decision about what should be mandatory and optional. For 1125 instance, the degree to which suppliers can meet the organization’s sustainable requirements might not 1126 always be known when writing the tender, or the market analysis revealed that there was a huge gap between 1127 suppliers sustainability performance. In that case, the risk to restrain the competition and exclude capable 1128 suppliers should be avoided, except if the requirement is an absolute necessity for the organization. 1129

Requirements Vehicles Construction works Office paper

Minimum requirements Minimum standard <100 g CO2 /km.

Minimum standard 5% of working hours to socially disadvantaged people

Minimum standard 100% recycled or FSC/PEFC labeled or equivalent

Optional requirements + Evaluation criteria

One point awarded for every 10 g below threshold.

Best offer gets 10/10. 5% only gets 0/10.

10/10 if 100% ecolabel that guarantees additional environmental benefits throughout the lifecycle

Table 6 — Examples of mixed minimum/optional requir ements 1130

6.3.4 Verification of sustainability claims 1131

Different initiatives aim to assure better performance of a good or service or process related with specific 1132 impacts. Some of these initiatives focus on environmental issues, others on social aspects, whilst others focus 1133 on quality or safety characteristics. Some of these initiatives allow the use of seals, marks or labels to identify 1134 those products or services that comply with the requirements set. In many cases, the requirements are 1135 included in technical standards which may be national, regional or international. In addition such standards 1136

ISO/CD 20400.3


may be public or private. For some standards the award of a mark, label or seal is the result of an 1137 independent third party assessment, whilst in other cases award requires a self-assessment only. 1138

Such initiatives appear to offer a quick solution for buyers looking to specify sustainability requirements for 1139 goods or services. However, they still cover only a small range of industries and goods or services. Care 1140 should be taken when using these due to the different levels of assurance that each specific initiative can 1141 have. 1142

When setting requirements it is possible to use the criteria required by the Eco label to set the technical 1143 requirements for the product or service. Therefore, any good or service that meets these requirements can be 1144 purchased, without being awarded the Eco label. The other option is to make award of the Eco label a 1145 technical requirement. The same concept applies in the use of certifications, marks, seals and labels. 1146

It should be noted that in some cases the second possibility is not allowed, usually due to legislation 1147 constraints for example public procurement legislation restricts this in some regions. 1148

NOTE For more information on Eco labels and certification, see Global Eco labeling Network (GEN): 1149 www.globalecolabelling.net and ISO Standards 14020, 14021, 14024, 14025 and 17065". The ISO/CASCO standards and 1150 guides give guidance on the use of conformity assessment procedures and the selection of the most appropriate 1151 conformity assessment tools to be considered. 1152

However in some instances legislation requires a specific certification for a good or service. This is commonly 1153 the case with standards related to safety. In these cases, the requirements should demand full certification to 1154 ensure that all requirements have been met. 1155

Management systems enable organizations to improve their performance through a process of continual 1156 improvement. An oversimplification is "Plan, Do, Check, Act". A more complete system includes accountability 1157 (an assignment of personal responsibility) and a schedule for activities to be completed, as well as auditing 1158 tools to implement corrective actions in addition to scheduled activities, creating an upward spiral of continual 1159 improvement. Management systems can help in multi-criteria analysis or selection steps. 1160

Many organizations implement management systems related to sustainability issues such as the environment 1161 or health and safety. These are often specific to industries and can be supported by an industry-specific 1162 standard or code of conduct. There are also third party certified management systems related to sustainability, 1163 such as: 1164

ISO 14001 for environmental management; 1165

OHSAS 18001 for health and safety management; 1166

SA 8000 for human and labor rights. 1167

Management systems certifications should not assess the quality or sustainability of a good or service but the 1168 quality of the management of an activity, process or site. They don’t guarantee an absolute sustainability 1169 performance but a process driving continual improvement in terms of sustainability impacts. 1170

6.4 Sustainability aspects of supplier selection 1171

6.4.1 General 1172

The objective of this stage is to evaluate the capacity of suppliers to comply with or exceed the organization’s 1173 requirements. Therefore, when integrating sustainability into the procurement process, it should also assess 1174 the capacity of the supplier to contribute to the organization’s goals on sustainability through the supply of 1175 goods or services. Buyers should not evaluate suppliers on their approach of sustainability in general, but on 1176 specific requirements related to the customer/supplier relationship, particularly to the goods or services to be 1177 purchased and used. 1178

Supplier selection usually comprises prequalification and tendering. The main difference between the 1179 prequalification and tendering stages are: 1180

ISO/CD 20400.3


prequalification usually focuses on overall capabilities of the supplier to deliver sustainability outcomes; 1181

tendering usually focuses on the capacity and commitment to deliver detailed and specific sustainability 1182 requirements for the good or service, which are described in the requirements. 1183

When conducting supplier selection, ensure that all legal requirements (e.g. public procurement regulations) 1184 are respected and that open and fair competition is promoted between potential suppliers. In doing so, 1185 particular attention should be paid to: 1186

ethics, prevention of corruption, and internal controls; 1187

transparency and accountability of the whole selection process; 1188

referencing/dereferencing practices; 1189

inclusion of all enterprises of any size, status or positioning with the capacity to fulfill the requirement. 1190

6.4.2 Prequalification 1191

The purpose of prequalification is to gather information about the capability of suppliers to participate in 1192 tenders and in some cases to evaluate tenders against go/no go criteria. The strategy needs to identify any 1193 sustainability criteria subject to this condition, to ensure that it is agreed with stakeholders and made clear to 1194 the market. The requirements for prequalification should be clearly established and take into account relevant 1195 sustainability issues. The following should be taking into consideration: 1196

any sustainability risks and opportunities that are related with the supplier’s organization; 1197

applicable legislation. 1198

Many industry specific standards, codes of supplier conduct and management systems are used in pre-1199 qualification. For example, compliance with International Labor Organization (ILO) Standards for working 1200 conditions and human rights may be a mandatory criterion. An organization should also decide whether to 1201 encourage suppliers to sign their own sustainability code of conduct or charter. 1202

Organizations may choose to use different degrees of evidence at various points across the procurement 1203 process. At the prequalification stage, it might be sufficient to request evidence of ethical trading and labor 1204 policies by means of supplier’s declarations of conformity (self-claims) on those subjects. However, as the 1205 process progresses and potential suppliers are further assessed through the tender process, audits and other 1206 means of collecting evidence of conformity (second party or third party assessments) might be used to provide 1207 further assurance. The choice of the most appropriate conformity assessment method should be the result of 1208 a risk assessment of the consequences of a failure to fully conform to the requirements. 1209

Some prequalification criteria may be optional and can be used to inform a weighted evaluation to further 1210 shortlisted suppliers who comply with all the mandatory criteria. For example, one supplier with a proven track 1211 record in reducing carbon emissions may be selected ahead of a supplier with less experience in this area. 1212

ISO/CD 20400.3


1213

Figure 8 — Example for pre-qualification question a nd criteria 1214

The example above could be used as a go/no go condition, with “Good” as a minimum requirement, or as a 1215 way of shortlisting if there are no minimum mandatory criteria. 1216

If suppliers are deselected, it is good practice to formally notify them and provide a debrief. Suppliers should 1217 be made aware if and how their credentials fell short of the requirement (including those related with the 1218 sustainability issues), which in turn sends a clear signal to the market regarding the importance of sustainable 1219 business practices. 1220

6.4.3 Tender 1221

Suppliers may be invited to attend a pre-tender briefing to outline the bid process and ensure ongoing 1222 communication, depending on the scale, market and complexity of the purchase. This is a further opportunity 1223 to ensure suppliers fully understand the commercial and sustainability expectations and to encourage joint 1224 proposals from firms with complementary sustainability features (e.g. a large company can form a joint 1225 venture with a small sustainability oriented company). 1226

Transparency, accountability and ethics are key to the tendering stage: all bid evaluation criteria, evaluation 1227 methodology and benefits assessment should be agreed in advance of tender issue and communicated 1228 clearly to suppliers. The organization should ensure that the suppliers fully comprehend the importance of all 1229 aspects of the proposal, including the sustainable business requirements. Buyers should also be clear on how 1230 far down the supply chain they need to go when assessing impacts. This depends on the corporate policy 1231 position and risk. 1232

Criteria can be assessed in several ways, including: 1233

setting minimum requirements or performance standards (go/no go criteria); 1234

weighting criteria; 1235

whole Life Cost (WLC) evaluation; 1236

monetizing certain impacts such as energy consumption and waste. 1237

ISO/CD 20400.3


1238

Figure 9 — Example of tender question and evaluatio n criteria 1239

The supplier with the best performance on the sustainability issues will not always win a tender competition if 1240 they are not competitive in other areas. In this case it may be appropriate to award a contract conditional upon 1241 achieving a minimum standard over a specified timeframe. In the example above, the contract may be 1242 awarded conditional upon the supplier achieving “Good” standard after a period of time. 1243

Suppliers with unsustainable practices might be able to offer lower prices than suppliers with better conditions. 1244 Unless robust pre-qualification and tender processes and criteria are in place to ensure good minimum 1245 standards before the supplier is taken on, the organization could be constantly undermining its own 1246 sustainability policies, exposing itself to a wide range of risks, and giving a signal to the market that it 1247 undervalues sustainability against other issues. 1248

The tender responses should be evaluated in line with the pre-agreed evaluation methodology, usually set out 1249 in the procurement strategy and included in the tender documents. The requirements should always capture 1250 sustainable elements in as much detail as possible. However, there are also other ways to promote 1251 sustainable outcomes at the evaluation stage. 1252

6.4.4 Selection of the supplier, negotiation and aw ard 1253

Private sector organizations and some public bodies might have the ability to negotiate following tender 1254 evaluation. This stage represents risks of reduced sustainability commitments from the supplier(s), especially 1255 through a focus only on cost, as well as opportunities to get more engagement from them. 1256

Four common methods can be used to promote sustainable outcomes at the evaluation stage: 1257

rewarding superior standards and performance, this is presented in the requirements clauses; 1258

qualitative judgment can be used in some specific contexts. Suppliers, especially in service industries, 1259 may be requested to summarize their experience and method in relation to sustainability criteria within 1260 their tender response. This enables buyers to assess their approach to managing major sustainability 1261 risks and/or opportunities identified during the planning stage. It is often advisable to conduct face-to-face 1262 interviews with key personnel and to make site visits to places where similar services take place to 1263 ensure qualitative judgments are supported by the best evidence possible; 1264

fit for purpose assessments that enables identification and evaluation of goods or services that might not 1265 be sufficiently robust, leading to higher repair and replacement costs. Other proposals might be over 1266 engineered, providing unwanted functionality or service at added expense. Neither extreme provides a 1267 sustainable solution and this should be reflected in the evaluation. Eco label criteria, the characteristics 1268

ISO/CD 20400.3


stated in Environmental Product Declarations and other product standards can help to evaluate the 1269 credentials of a good, including the relevant sustainability issues. Alternatively evidence based on trials or 1270 other client references help to evaluate this important aspect; 1271

whole life costing to ensure that true value for money is achieved, resulting in the selection of the most 1272 economically advantageous supplier over the life of the contract. If correctly applied, this technique helps 1273 to monetize sustainability impacts such as energy costs, early replacement or repair of less durable 1274 goods and disposal at the end of life. Where possible, future costs and anticipated environmental and 1275 social taxation should be taken into account to achieve the best balanced cost evaluation. 1276

Requirements related to sustainability issues should be included in the preparation of a negotiation meeting 1277 and/or a negotiation strategy, and to represent sustainability interests during important negotiation meetings, 1278 e.g. CSR, Health and Safety, Environment representatives. 1279

Key outcomes of the negotiation can include the following: 1280

requirements related with sustainability issues have been secured; 1281

agreement has been made to take actions to manage sustainability risks identified in the earlier pre-1282 qualification or tender evaluation stage; 1283

proactive influence on the supplier’s future sustainability agenda has been achieved. 1284

Where possible, sustainability commitments are recommended to be written into the contract to ensure that 1285 the supplier is contractually bound to deliver them or improve their performance over time. If it is not possible 1286 to negotiate contractual commitments, a more informal and flexible approach might be required to persuade 1287 suppliers to embrace sustainability initiatives. These initiatives should not be contractually binding and are 1288 usually captured in a separate supplier improvement plan or a memorandum of understanding. Example 1289 initiatives include commitments to switch to (or increase the use of) sustainably managed timber, reduce or 1290 eliminate the use of a hazardous chemicals, increase the use of local SMOs or to ensure improved working 1291 conditions further down the supply chain. 1292

Upon conclusion of the negotiation, the supplier should be formally awarded the contract, which should be 1293 fully approved by the key stakeholders and delegated authorities (organizations may have a formal gateway 1294 review at this point). The relevant internal stakeholders should be informed of the new arrangements. 1295

Unsuccessful suppliers should be notified and fully debriefed. Suppliers should be informed if and how their 1296 sustainability credentials fell short of the requirement. This in turn reinforces the importance of sustainable 1297 business practices within the supply market. 1298

6.5 Contract management 1299

6.5.1 Ensuring the quality of the supplier relation ship 1300

Sustainability commitments of an organization should be reflected in the quality of the relationship with its 1301 suppliers. Achieving sustainability outcomes often requires developing a long term vision, which has a better 1302 chance of success if it is shared by a supplier that considers the purchasing organization as a "customer of 1303 choice". 1304

The quality of the supplier relationship can be guaranteed and enhanced through a combination of practices. 1305 These include: 1306

full compliance with legal requirements in terms of the client-supplier relationship; 1307

balanced clauses, fair conditions (e.g. guarantees, deadlines…) and penalties in contracts; 1308

robust procedures (e.g. base-contracts, protection of intellectual property) and conditions (e.g. prompt 1309 payments) generating better health for all supply chain stakeholders; 1310

ISO/CD 20400.3


prompt issue of orders whenever the organization client and supplier agree to begin the work and 1311 avoidance of hidden costs and risk increase for both parties when ordering; 1312

controlled and improved payment performance, in respect to contractual terms and legal requirements, 1313 even when suppliers are responsible for late delays; 1314

avoidance of conflicts through dialog and efficiency in dispute resolution; 1315

focused attention paid to the different categories of suppliers: strategic, SMOs, fragile suppliers, etc. 1316

6.5.2 Implementing the contract 1317

There is a period of transition and bedding in at the start of any new contractual arrangement and frequently 1318 the influence and involvement of stakeholders' changes as the contract becomes operational. From a 1319 sustainable business perspective, it is critical that awareness and focus on sustainable elements and 1320 associated performance targets are communicated and understood by relevant internal stakeholders to 1321 ensure that any sustainability commitments made in the contract are fully implemented. 1322

The supplier should also fully support the implementation of sustainability practices, right from the start of the 1323 contract. It is the role of the contract manager to make sure sustainability is at the head of the supplier’s 1324 agenda. 1325

6.5.3 Contract management plan 1326

Linking the organization’s sustainable targets with the contract management plan puts sustainability firmly on 1327 the commercial agenda and helps sustain focus and momentum for sustainability. 1328

Many organizations use key performance indicators (KPIs) to measure their own performance and that of their 1329 suppliers. Targets and related KPIs can cover the whole spectrum of sustainable impacts and depend on the 1330 priorities set in the procurement strategy and refined during the tendering stage: from raw materials sourcing, 1331 labor standards across the supply chain, local sourcing and training, through to production, use and end of life 1332 management. 1333

At this point, the contract manager and supplier should revisit any sustainability risk and opportunity analysis 1334 completed by the organization throughout the planning and selection stages. Corresponding action plans 1335 should be revisited or developed to ensure supplier buy in, alignment and continued focus on sustainability 1336 key risks and opportunities. These should be referred in the contract management plans and, where 1337 appropriate, incorporated into supplier development plans. 1338

In some cases, there might be a conflict of interest and improving sustainability practices might not be in the 1339 supplier’s short-term financial interest. For example, waste contractors who are paid by the tonne might be 1340 reluctant to embrace waste reduction initiatives, or IT equipment suppliers might not be supportive of 1341 customer attempts to increase product lifespan through product upgrade as opposed to replacement. In such 1342 instances, a combination of incentives and remedies may be adopted to re-align profitability with sustainability. 1343 For example: 1344

supplier bonuses could be paid for achieving targets; 1345

fixed price contracts could be agreed (in this case reducing waste or improving efficiency would improve a 1346 supplier’s profit margins), 1347

gain share agreements could be put in place here the customer and the supplier split any gains from 1348 improvements in sustainable supply arrangements. 1349

6.5.4 Manage performance and relationship 1350

Ongoing performance monitoring is essential for the duration of the contract to ensure that the supplier 1351 continues to deliver in accordance with the requirements, contract terms and/or separate action plans. 1352

ISO/CD 20400.3


Many organizations adopt methodologies where sustainability criteria can be monitored alongside service, 1353 quality delivery, cost and technical requirements (balanced scorecard methodologies are an example of such 1354 an approach). If any individual results or combined results show a negative trend or falls below an agreed 1355 threshold, the supplier should be required to take corrective action. 1356

Review meetings should be set at agreed intervals and for key suppliers these should be held face-to-face. 1357 These meetings should provide an opportunity for both parties to communicate, share concerns, promote 1358 understanding and foster a good business relationship. Organizations should consistently attempt to harness 1359 suppliers’ expertise to maintain competitive advantage and a constructive review process fosters this. 1360

It is good practice for organizations to carry out periodic audits of suppliers throughout the life of the contract, 1361 especially for important and complex contracts, to verify that sustainability claims and work practices meet 1362 stated requirements. The audits do not ensure full compliance to requirements. Audits create focus on issues 1363 and create awareness on expected standards. 1364

Suppliers with outstanding performance regarding sustainability could be recognized through awards or 1365 similar initiatives in order to reward and promote efforts towards continual improvement of their goods or 1366 services. 1367

The sustainable procurement policy can promote the use of mediation to solve any dispute between the 1368 organization and a supplier. For that purpose, it is recommended that a dispute resolution process is 1369 developed. It should outline steps for mediation and assign responsibilities for the facilitation of dispute 1370 resolution. 1371

6.5.5 Supplier/customer joint initiatives 1372

Organizations should champion initiatives to improve sustainability and this frequently involves suppliers and 1373 customers in joint approaches. Supply chains can be long and complex and efforts to improve downstream 1374 sustainable practice require the proactive support of key tier 1 suppliers. For example, efforts by customers to 1375 improve working conditions or gain assurance of integrity of source materials could be greatly facilitated by 1376 proactive support from these suppliers. 1377

Where appropriate, joint initiatives should be put in place to improve the sustainability issues identified when 1378 priorities were set. In some cases, the market may not be capable of delivering new or challenging 1379 sustainability standards. In this case supply chain development programs may be necessary to improve 1380 competence and capacity (see clause 5.5). 1381

Examples of joint initiatives are sector initiatives to deal with labor conditions in their supply chain, finding and 1382 developing alternatives to conflict minerals, share audit data and developing a supplier code of conduct. 1383

6.5.6 Supplier failure 1384

In some cases it might be necessary to exit a relationship with a supplier where the supplier has failed to 1385 make the required sustainability improvements. It is important to treat failure to meet sustainability 1386 requirements in the same way as any other failure by a supplier. 1387

This should be a last resort and only taken after the organization has made the effort to support the supplier to 1388 meet agreed requirements, but where the supplier has made little or no effort to improve or has proved to be 1389 incapable of improvement. To continue to source from such a supplier indicates to the supply market that the 1390 organization is not serious about its sustainability commitments across its supply chains. 1391

6.5.7 Disposal and end-of-life management 1392

Some goods, equipment and infrastructure require disposal strategies to be developed for the end of their 1393 useful life; examples include product take back and reverse logistics. 1394

At this point, disposal options should be reviewed and assessed with the aim of minimizing environmental 1395 impacts, maximizing recycling and reuse and determining all opportunities to minimize landfill and pollution. 1396 Unethical disposal can have significant remediation costs and damage reputation. 1397

ISO/CD 20400.3


6.6 Contract review and lessons learnt 1398

It is important to ensure that debrief does not just occur at the end of a contract but that lessons learned are 1399 shared throughout the duration of the contract to improve ongoing sustainability performance. 1400

At the end of the contract it is helpful to develop a debrief document to feed into the next procurement strategy. 1401 This document should contain: 1402

priority sustainability risks and opportunities, objectives and targets; 1403

overview of sustainability performance; 1404

analysis of key success criteria; 1405

key lessons for future contracts. 1406

The next procurement strategy should draw on lessons from the last one. This enables new thinking to be 1407 incorporated into the process alongside a review of priorities and objectives to promote continual improvement 1408 and drive more sustainable outcomes. 1409

It is best practice to publish lessons learned in detail and in a way that other organizations can learn from 1410 them. 1411

ISO/CD 20400.3


Annex A 1412

(informative) 1413

1414

Help box 1415

The following table shows how ISO26000 core subjects relate to sustainable procurement issues. 1416

ISO 26000 CORE SUBJECT ISSUE

SP ISSUE

ORGANIZATIONAL GOVERNANCE

Definition and decision of a sustainable procuremen t policy

• Respecting the principles as given in ISO 26000 “accountability, transparency, ethical behavior, respect for stakeholder interests, respect for the rule of law, respect for international norms of behavior and respect for human rights”

• Possibly formalized in a commitment document

• Distributed internally for raising employee awareness

• Supporting dialogue with suppliers, allowing them to adjust their policy and production

Strategic integration of the sustainable procuremen t policy

• It should be implemented on a strategic level and incorporated in the CSR criteria as well as “quality/cost/timeline” with:

o The concept of “the best offer”: “overall economic performance” including the costs related to the products’ life cycle, social and societal objectives, in particular, respect of the ILO, and environmental targets

o Mutually beneficial relations with suppliers.

• Principles for decision-making that call on responsibility of management and a sharing of responsibility

• Listing of the economic, legal, environmental and social risks (cf. table 2 list of risks) and opportunities; with identification of risk with dialogue with stakeholders

Operational implementation of the sustainable procu rement policy:

• Setting a strategy and an action plan for each purchasing category across the supply chain

• Tracking and measuring implementation

• Asking suppliers in a privileged position to act as relays in the downstream deployment all over the supply chain and the purchasing process

Accountability, transparency and responsible commun ications inside an d outside the organization:

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• The principle of “accountability”, as explained in ISO 26000, should be applied to procurement policy, which is: “an organization should be accountable for its impacts on society, the economy and the environment”.

• Operational implementation with suppliers

• Right image and conformity (stakeholders)

• Crisis management

HUMAN RIGHTS 1) Due diligence Firm commitment to respect human rights within the procurement policy , as

recommended in ISO26000: Eight major human rights issues should be taken into consideration in the organization's global sustainability policy: due diligence, human rights risk situations, avoidance of complicity, resolving grievances, discrimination and vulnerable groups, civil and political rights, economic, social and cultural rights and fundamental principles and rights at work.

2) Human rights risk situations

Prevention of risk to human rights and dealing with any impacts in purchasing criteria:

• Promotion of “absolute rights”, fight against discriminations, refrain of taking advantage of situations where human rights are violated

• Implement process of surveillance, HR control and alerts

3) Avoidance of complicity Avoidance of complicity all along the supply chain: As it is specified in ISO 26000 (6.3.5.2), an organization should “not enter into a formal or informal partnership or contractual relationship with a partner that commits human rights abuses in the context of the partnership or in the execution of the contracted work”

4) Resolving grievances Promotion of human rights throughout the supply chain by proa ctive initiatives like:

• Commitments as UN Global Compact or in a SP charter between the organization and its suppliers

• Creation of process of control of impacts internally and for suppliers

5) Discrimination and vulnerable groups

Allocation of requisite budgets, resources and proc ess improvement to ensure respect of human rights in all procurement:

Identifying critical points with suppliers, motivating suppliers to take their responsibilities, using means of assessment and control and plans of progress.

6) Civil and political rights 7) Economic, social and cultural rights 8) Fundamental principles and rights at work LABO R PRACTICES

1) Employment and employment relationships

Principle and means of g uarantee of satisfactory working conditions applied to the purchasing function, to the organization and to its suppliers and subcontractors

• A balanced relationship between the supplier and its employees;

• The quality of working conditions and a decent level of social protection for the suppliers' employees;

• Guarantees covering the health and safety of the employees and the

2) Conditions of work and social protection

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suppliers involved in the organization's activity

3) Social dialogue Conservation of balan ced relations between the supplier and its employee s

• Best practices to limit social consequences in case of restructuring

• Implementation of a HR management policy

• Verification that strategic suppliers and key subcontractors, have their own sustainability policy or charter

4) Health and safety at work

Inclusion of recommendations encouraging supply cha in partners to implement best practices and go beyond local labor legislation :

In checking that working conditions comply with the legislation and national regulations and are as much as possible compatible with the applicable international labor standards.

5) Human development and training in the workplace

Develop employability of personnel: By promoting specific policies, competence development and training.

ENVIRONMENT

1) Prevention of pollution Firm environmental commitments:

Using the procurement policy and practices to prevent pollution, to make sustainable use of resources, to mitigate and to adapt to climate change, to protect the environment and to restore natural habitats

2) Sustainable resource use

Prevention of pollution and of emissions of greenho use gases throughout the life cycle of the products or services bought

• Map out the environmental impacts and define and monitor the prevention plans

• Research into alternative solutions

• Encourage suppliers, to apply criteria that take account of the prevention of pollution and emissions of GHG

3) Climate change mitigation and adaptation

4) Protection of the environment, biodiversity and restoration of natural habitats

Inclusion of requirements for reuse, protection and restoration of biodiversity and ecosystems across the entire suppl y chain in procurement decision making:

Developing impact studies and repairing damage in collaboration with external stakeholders.

FAIR BUSINESS PRACTICES

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1) Anti-corruption A real commitment to respect the notions of ethics and good conduct and prevention of corruption in procurement policy and practices: This approach requires the inclusion of commitments in the purchasing policy including relevant recommendations and regulations addressing the fight against corruption and a specific management system for:

• Ensuring alignment with the public policies that are beneficial to society in the long term

• Avoiding manipulative or coercive behaviors

• Promoting exchanges on good practices

• Limiting risks of deviation caused by the use of transfer prices between entities of the same organization.

• Sharing commitments in a charter for example.

2) Responsible political involvement

Establishment of balanced relations between the orga nization and its suppliers in terms of:

• Prices, that respect equity in terms of global costs and creation of value and equitable distribution of the costs and benefits all along the supply chain

• Supplier payment terms that are compliant with international best practices: 30 days, and as a minimum with local regulations. More broadly, a coherent payment policy has to be established for the organization’s people

• Promotion of best practices for the organization’s people relating more broadly to suppliers relationships (and not only cost saving negotiations)

• Train and supervise all relevant professionals to get full individual commitment to the principles of sustainable procurement, especially for critical decisions such as conducting supplier selection

3) Fair competition Treating SMOs in an equitable manner in:

• Reducing customer-supplier dependency by introducing greater flexibility for small startups and developing companies.

• Applying anti-trust and anti-dumping practices

• Treating SMOs in an equitable manner (nondiscriminatory access, allotment,)

4) Promoting sustainability in the supply chain

Promoting sustainability in the supply chain

As specified in ISO 26000(6.6.6.1): “An organization should consider the potential impacts or unintended consequences of its procurement and purchasing decisions on other organizations, and take due care to avoid or minimize any negative impacts. It can also stimulate demand for socially responsible products and services. These actions should not be viewed as replacing the role of authorities to implement and enforce laws and regulations.”

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5) Respect for property rights

Respect for property rights throughout the supply c hain, for suppliers and subcontractors impacted by this issue:

Property rights cover both physical property and intellectual property and include:

• Other physical assets, copyrights, patents, geographical indicator rights, funds, moral rights and other rights.

• Broader property claims, such as traditional knowledge of specific groups, such as indigenous peoples, or the intellectual property of employees or others.

As specified in ISO 26000 (6.6.6.7.1): “Recognition of property rights promotes investment and economic and physical security, as well as encouraging creativity and innovation.”

CONSUMER ISSUES 1) Fair marketing, factual and unbiased information and fair contractual practices

Promotion of fair operating practices in terms of s ales and marketing, information and contracts:

By deploying sound communications with relevant internal departments as well as clients, consumers, end users

2) Protecting consumer’s health and safety

Participation in prevention of risks related to con sumer health and safety by:

• Identifying and sharing all the input in its possession

• Respecting the technical solutions chosen by the recognized "specialists" in the prevention of risks to consumers.

3) Sustainable consumption

Contribution to promotion of sustainable consumptio n: Working on a design of sustainable products and services with suppliers and subcontractors

4) Consumer service, support and complaint and dispute resolution

Providing necessary information for consumer servic e, support, and complaint and dispute resolution controlling its su pply chain and its suppliers.

• Validation of traceability of raw materials and provision of health and safety with clear labeling, especially, official labels controlled by regulators

• Encouraging business committed to sustainability

5) Consumer data protection and privacy

To be described later

6) Access to essential services

Promotion of access to essential services: Ensuring that the suppliers guarantee access and do not impede access to essential services by the population, even if this is not protected in the country in question

7) Education and awareness

Contribution to education and awareness of consumer s The procurement function should contribute to providing necessary information enabling the consumer to develop skills for assessing products and services and to raise awareness about the impact of consumption choices on others and on sustainability. (In terms of: health and safety, legal information, labeling, instructions, characteristics and specificities, risks in use, environmental information…etc.)

COMMUNITY INVOLVEMENT AND LOCAL DEVELOPMENT

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1) Community involvement

Firm commitment that community and local developmen t is taken into consideration in procurement policy and practices:

In terms of involvement with the local population, job creation and skills development, education and culture and the development and transfer of technology.

2) Education and culture

6) Health

7) Social investment

3) Employment creation and skills development

The guarantee of positive impacts of the purchases on the local fabric, ecosystem, education and culture, health of communi ties and social investment

• According to ISO 26000 (6.8.7.2) study the possibility of giving preference to local product and services and of contributing, if possible, to the development of these suppliers.

• Take into account possible impacts of its purchases on health, education and culture and social investment policy.

4) Technology, development and access

Systematic assessment of offers from local supplier s and increasing their access to contracts:

• Analyzing all offers from local suppliers

• Taking measures intended to allow local suppliers to access its contracts (allotting, networking, joint bids…)

Encouraging partnership and technology transfers, training and digital economy

• Launching entrepreneurship programs, development of local suppliers and trying to strengthen economic resources and social relations that facilitate economic and social welfare or generate community benefits.

5) Wealth and income creation

Table A.1 — 7 Core subjects of ISO 26000:2010 and i ssues in sustainable procurement 1417

This transposition reveals a range of relevant actions and opportunities relevant to sustainable procurement 1418 and also addresses evolving issues (e.g. the fight against corruption) that may be addressed when 1419 undertaking sustainable procurement. Note that sustainability is a dynamic concept; as such new issues or 1420 further information relevant to sustainability impacts may emerge (see 6.1 ISO26000). 1421

A.1 Risks and opportunities 1422

The following table shows examples of positive business impacts or opportunities connected to ISO26000 1423 core subjects that may be realized by effective sustainable procurement: 1424

CORE SUBJECTS EXAMPLES OF OPPORTUNITIES


• Cost reduction of products and services (including social and environmental benefits)

• Promotion of suppliers sustainability practices (through, for instance, better integration of sustainability performance into purchasing processes)

• Extension of sphere of influence

HUMAN RIGHTS • Reduction of significant incidents • Better understanding of aggravating risks and corrective actions

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LABOR PRACTICES • Promotion of fair relationships between employers and employees

(through trade union, if local laws recognizes freedom of association)

ENVIRONMENT

• Reduction of GHG emissions • Reduction of pollutants • Promotion of eco labeled products • Better market recognition


• Reduction of penalties in case of corruption • Development of supply chains

CONSUMER ISSUES

• Better information for the consumer • Gain competitive advantage and differentiation by providing clients with

a deeper information on sustainability impacts of products / services that are sold

COMMUNITY INVOLVEMENT AND

LOCAL DEVELOPMENT

• Support for SMOs, local companies, diversity, disabled persons, etc. • Support local employment

1425

Negative impacts, both internal and external, to the organization are risks also connected to ISO 26000 issues, 1426 examples include: 1427

CORE SUBJECTS RISKS


• Stakeholders calling senior management or the purchasing function into question,

• Reputational damage inside and outside the organization, depending on the extent of communication and visibility of the initiative

HUMAN RIGHTS

• Risks of labor conflict, legal • Financial risks, as well as risks in terms of reputation and image in the

eyes of purchasing authorities and end customers. • Situation in which an organization’s practices contradict its commitments • Contagious effect inside the organization by external social risks

LABOR PRACTICES

• Legal and financial risks, due to poor knowledge, of or the failure to respect applicable regulations, resulting in financial penalties;

• Operational risks, such as the breakdown of the supply chain, if the employees in partner organizations block production in order to demand better working conditions;

• Social risks, in particular if the organization asks suppliers to work on the organization's site when the organization's treatment of these workers is significantly different, to the extent that it might prompt action by the personnel representatives;

• Reputational risk if NGOs intervene through publications in the media or social networks.

ENVIRONMENT • The over-consumption of natural resources, operational and financial

risks, including ecological accidents and their impacts on human beings and the ecosystem


• Higher economic risks for suppliers resulting in a breakdown in the supply chain leading to a supply risk for the organization itself;

• Reduction in economic efficiency, thereby destroying value and increasing hidden costs on both sides;

• The level of risks increased incurred by the organization, if a strategic supplier should default;

• Possible financial penalties or legal sanctions if the regulations are breached or the costs of a conflict, if the established contracts or agreed rules of partnership are not respected;

• Risk of image from customers and its suppliers, if malpractice is published; have an adverse effect on customer / consumer satisfaction and the corresponding income, if the quality of the service or the product

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deteriorates due to suppliers lower down the supply chain.

CONSUMER ISSUES

• Loss of markets or opportunities due to a poorly adapted offer resulting in a loss of income and customers,

• Deterioration of the organization's reputation, both internally and with intermediate customers, purchasing authorities and end consumers, for example negative media headlines due to poor quality products/services

COMMUNITY INVOLVEMENT AND

LOCAL DEVELOPMENT

• Negatively impacting the local economic and social fabric especially if the customer organization is a major contributor to the local economy (examples include difficulties in recruiting, specialization in one type of agriculture to the detriment of the agriculture that meets local needs for food);

• The development of favoritism and bias; • The deterioration of the organization's image and reputation, internally,

locally and with purchasing authorities and consumers, for example if the organization fails to respect the fundamental principles associated with working conditions, the environment and public health.

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Annex B 1428

(informative) 1429

1430

ISO 26000 tool box 1431

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Annex C 1432

(informative) 1433

1434

Global cost and value creation method 1435

Whenever important decisions have to be made, there is a need, at each step of the procurement process, to 1436 refer to an appropriate economic analysis through detailed costing and revenue items covering life cycle of 1437 products/services as well as costs of risks and value creation, such as the following map invites to do it 1438 (source Obsar- France- august 2014): 1439

1440

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Bibliography 1442

UN Global Impact - https://www.unglobalcompact.org 1443

OECD - www.oecd.org 1444

GRI - https://www.globalreporting.org 1445

UN Protect Respect and Remedy Framework - business-humanrights.org 1446

UN Guiding Principles on HR - http://business-humanrights.org/en/un-guiding-principles 1447

SDG’s - https://sustainabledevelopment.un.org/topics/sustainabledevelopmentgoals 1448

John Henke Study regarding partnership benefits 1449

AA1000 Stakeholder Engagement Standard 1450

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