Saturday, November 30, 2013
Thursday, October 17, 2013
Indicators for Sustainable Public Procurement (SPP)
When one talks of indicators, the first that comes
across our mind is, of course, Gross Domestic Products (GDP), which has charmed
eyeballs of millions of people across the world. Its movement is tracked 24x7
and thousands are employed to measure its movement to the nearest second digit
after decimal. Such is its stimulus that politicians, economists, corporates,
bankers et al take pride in predicting it (and never forget to take credit for
the same!). Though GDP remains on top of the list of indicators in people’s
minds, its continued dominance is threatened in a resource-constrained and environmentally-challenged
world we live in today. Its capacity to
deliver on the claimed social and
economic benefits trickling to society has
increasingly been questioned in recent time.
With the evidences of limitation of economic growth
measured in terms of GDP (someone called it Grossly Distorted Picture) becoming
more and more apparent, the focus is gradually shifting to more broad based development
that attaches equal weight to people and planet. The effective translation of
sustainability goals into innovative policy processes still remains a matter of
debate, even at experimentation stage, as new policy initiatives are
hypothesized, tested and implemented across the world. One such policy that promotes sustainable
consumption and production pattern and simultaneously helps nations in
achieving their developmental goal is Sustainable Public Procurement (SPP). It has
significant potential for developing and poor nations, where more consumption
of resources is predicted in future to meet developmental aspirations of their
people. This realization has led many
developing nations such as China, Thailand and Indonesia in Asia; Chile, Brazil
and Uruguay in South America; Tunisia, South Africa in Africa etc. to embrace
SPP policy wholeheartedly. Many more countries from around the globe are
seriously looking at this option and waiting to climb on the SPP bandwagon.
Therefore, it has become quintessential to envision a dashboard of indicators not
only to evaluate and communicate progress on the stated objectives of SPP policy
but also to identify hotspots that need attention.
An indicator
can assist in actual assessment, management and monitoring of impacts of SPP
policy on sustainability goals, as well as in reporting the actual performance
of decentralized units within a nation. Further, lack of indicators on sustainable
procurement could be a major problem, hindering efforts in assimilating
sustainability initiatives within a nation. Therefore, developing an
evidence-based approach for monitoring effectiveness/performance of sustainable
public procurement is considered essential to make sure that the sustainability
objectives are being achieved.
Many countries and organizations have already made
attempts to develop indicators on SPP and many others are in the process of
refining already developed indicators based on past experiences. In a recently
concluded workshop on “Indicators for Resource Efficient Green Asia”, organized
by UNEP in Beijing in September 2013, policy makers, practitioner, and
researchers had gathered to discuss development of indicators to measure
progress on Sustainable Consumption & Production (SCP) policy adopted by
countries in this region. The discussion focused on finding that elusive
indicator that embodies the characteristics, simplicity and robustness of GDP
and at the same time measures the tangible and intangible impacts of SCP
policy. The workshop brought forth more than ten headline indicators. Though
the final decision on these indicators will be taken later by technical
committee of Asia-Pacific Roundtable on SCP, ten is a fairly large number to begin
with. I am sure as the concept of SCP itself matures over a period of time, we
will have indicators on SCP that will match the features of GDP as indicator.
Take the case
of tenders. The related indicator on SPP developed till now has focused on
measuring percentage of green tenders in terms of numbers and value out of
total numbers/value of tenders in measurement period. While some countries have focused on tender
the others have focused on finalized contracts. This is an important and very
fine differentiation that needs to be debated. Actually, it really depends on
what do we want to measure – intent or outcome? When we integrate environmental
criteria in tenders, it shows our intent
of buying greener and resource efficient products and services. But unless the
tenders materializes into contracts, which happens many times, it will not give
us the desired outcome. Also, sometime
a tender may contain several products and green criteria may apply only to some
of them. In such situation, if indicator is based on number of tenders, it is
likely to throw us inflated level of SPP penetration. On the flip side, an
indicator based on tenders also has some advantages. The main advantage of
monitoring tenders is that they can be tracked more easily than contracts, as
all the information is found in the tender itself and does not require data
input from different people or from suppliers.
Another
issue, which is equally important for developing indicator, is need to track
and/or gather information from different data sources to measure level of SPP.
Survey, as a data source, has several disadvantages such as the fact that they
are time consuming, have poor response rate and so on But they can raise
awareness about SPP program among stakeholders. However, if data is centrally
available, which is now possible through central e-procurement system, it is
very easy to track information in much more reliable and faster way.
As many
countries strive to develop their own indicator on SPP, it is time we focus on
having a common indicator on SPP. Ultimately, having a common indicator on SPP
for a country or region will depend on how much coherence exists in policy
objectives pursued by different entities within a country and region.
Therefore, in order to have common indicator, the primary objective of a region
shall be to first develop coherent policy across nations in region. This is not
a small task, but I can see some positive movement in ASEAN countries, who
recently agreed to pursue common SCP objectives. EU nations already have common
guidelines on GPP. These developments have kept my hopes alive for having a
global indicator on SPP!
Sunday, September 8, 2013
Implementing Sustainable Public Procurement in India - A Case Study
(Originally published in UNOPS 2012 Annual Supplement on "Balancing Social, Environmental and Economic Considerations in Procurement", Copenhagen, Denmark)
Introduction
The total volume of public procurement in India is estimated to constitute about 30 percent of the country’s gross domestic product. However, the use of public procurement as a tool to influence market trends in favour of environmentally and socially sustainable products and services is a very new concept in India.
There is currently no overarching legislation governing sustainable public procurement in India. The General Financial Rules issued by the Ministry of Finance defines the key principles of efficiency, economy, fairness, consistency and promotion of competition in public procurement. However, these guidelines in their current form do not mandate public authorities to incorporate environmental and social concerns in their buying decisions. Nevertheless, awareness about the need to incorporate sustainability into government decision-making has been gaining traction in recent years.
While stakeholders in India are grappling to understand this subject and its implications, multilateral agencies such as UNEP, the German development agency GIZ and others have increased their sustainable procurement activities in the country. Their efforts, which have included workshops and seminars, have led to greater awareness among stakeholders. Moreover, in 2012, two noteworthy milestones were reached. First was the introduction of the Public Procurement Bill in Parliament stating that the environmental sustainability of a product can be adopted as one of the criteria for evaluating a tender. Second, a committee nominated by the Ministry of Environment and Forests recommended introducing legislation that encourages a shift in supplying greener products and services. Though these events have created some buzz around this topic among public procurers, the fact remains that only a handful of them are aware of sustainable public procurement.
Many studies have highlighted the barriers to adopting and implementing sustainable public procurement. A study carried out in the Indian context identified the following key challenges in implementing sustainable public procurement in the country: a lack of stakeholder awareness, knowledge and skills; the absence of clear policy guidelines; non-availability of green products in the market; a lack of vendor preparedness; and the perceived higher cost of green products and services. These findings have been corroborated by other studies carried out on developing nations.
Case: Purchasing environmentally friendly paper for Indian Railways
The Ministry of Railways, the body that operates Indian Railways, is one of the central ministries of the Government of India. The procurement of goods, works and services by the Ministry of Railways is governed by the General Financial Rules and other codes, manuals and departmental guidelines. The ministry has the largest cadre of trained procurement professionals in India but faces similar challenges as described earlier in integrating environmental and social considerations into public buying decisions. The foremost among them is the lack of awareness and knowledge of sustainable public procurement concepts among stakeholders in India. More specific critical issues facing procurement professionals within the ministry are: legal and technical problems during the procurement process (inclusion of sustainability criteria, evaluation and monitoring); the lack of knowledge and experience in using techniques such as life-cycle costing and life-cycle assessment; and the dependency on experts to define specifications and mitigate potential financial risks due to the perceived high costs of greener products.
Despite these overwhelming challenges, sustainability champions in the public railway sector have resolved to integrate sustainability considerations into public buying. Their actions rest on the belief that although the current public procurement legislation does not explicitly mandate sustainability, it does not prevent any government agency from procuring ‘green’ products and services within the given policy framework.
At the beginning of 2013, the head of procurement for the Ministry of Railways identified ‘green’ procurement as one of the priorities for the financial year, and support from the political leadership was identified as crucial to its implementation.
In support of this goal, an advisory team was tasked to guide the ministries efforts by developing specifications for procuring greener products, and determining vendor availability and cost implications for buying such products.
The team assessed the ministry’s procurement of writing and printing paper. They initially found that while efforts to purchase environmentally sustainable paper were already being made, there was still a long way to go before achieving true sustainability. For example, because calls for tender stipulated that paper made from 100 percent agro-based pulp would be the only type accepted, recycled paper manufacturers could not participate in this process. Unhappy with this condition, recycled paper manufacturers proceeded to discuss the potential economic and environmental benefits of buying their product with the ministry.
In an effort to develop specifications for environmental friendly paper, the advisory team initially considered incorporating government-approved Ecomark ecological labels. But this option was dropped after it was discovered that only eight Indian paper manufactures were certified, with four of them located in one state alone. The team then consulted with various national paper manufacturers with the aim of developing universally accepted specifications, but these consultations did not yield many tangible results. During the consultations, it was discovered that there are three distinct types of paper manufacturers using three distinct types of pulp: wood based, agro based or recycled. Each type of manufacturer claimed that their paper was the most environmentally friendly. However, comparing the life cycles of the different types of paper revealed that recycled paper is the most environmentally favourable. It was also found that recycled paper costs the least in the Indian market.
Despite its advantages, printers working with the ministry were concerned that the use of recycled paper would decrease the efficiency of their printing press and result in more wastage, leading to higher printing costs. They were also apprehensive about the durability of paper manufactured from recycled pulp. To assuage their fears it was pointed out that quality and suitability of paper should be assessed not on the type of pulp, but on other quality parameters set by the Bureau of Indian Standards. Following these consultations, the ministry decided to start buying paper made from a minimum of 60 percent recycled pulp, a more sustainable and inclusive policy.
Impact of the advisory project
The Ministry of Railways annually procures about 10,000 metric tons of paper. The shift to recycled pulp could result in electricity savings of up to 31.6 mega units per year and the reduction in greenhouse gas emissions by 9,382 metric tons per year. Moreover, the decision should encourage more manufacturers to produce recycled paper and promote recycling habits among consumers.
Key Lessons learned
The case highlights the importance of embedding ‘green campaigners’ to drive sustainable public procurement within an organization, or establishing a committed pool of sustainability experts in the long run. It also demonstrates how support from top management, such as head of procurement at the Ministry of Railways, can provide the required synergy and motivate sustainability champions to explore and develop appropriate solutions. It is therefore not only important to train procurement professionals in sustainable public procurement processes but to also sensitize other stakeholders, including top management, on role of governments in demanding environmentally friendly products.
The role of governments in driving sustainable public procurement has often been examined in literature. But the role of small and medium enterprises (SMEs) in implementing sustainable public procurement has not been analyzed in much detail. The case illustrates how SMEs, such as paper manufacturers, can utilize their collective bargaining power in democratic environments to influence the political leadership into incorporating sustainability considerations for the greater public good.
In addition, while a growing number of public procurement stakeholders are becoming more and more aware of sustainability, this in itself is not sufficient unless they truly understand the multifaceted nature of sustainable public procurement.
Furthermore, environmental and social criteria need to be integrated at every stage of the procurement process without becoming discriminatory or anti-competitive. A credible labeling scheme can prove to be an easy and efficient solution, as it can act as a reliable benchmark for buyers to make informed purchasing decisions. In this case study, the number of vendors with the Ecomark label was so few that recommending this type of labeling would have negative implications on the competition during the bidding process. But how does one make trade-offs between competitiveness in public procurement and the promotion of eco labeling schemes supporting sustainability? Managing this dilemma for public buyers is indeed a challenging task. One possible way that buyers can solve this could be to notify the market in advance of their intent to buy products with eco labels. This would help provide adequate time for manufacturers to acquire labels if they do not already have one and also avoid criticism that vendors are not given adequate time to prepare for the sustainable procurement process.
Lastly, several studies on the challenges of implementing sustainable public procurement in India have noted the expressed need for clear legislation and guidelines. In this case study, one of the largest public procurers in India, the Ministry of Railways, started buying recycled paper without such legal requirements. The ministry still managed to improve the sustainable procurement of its paper within the available framework. Though this strategy may be sufficient in the short-term, it is important to have unambiguous legislation and guidelines for long-term success. This would provide the much needed legitimacy, direction and framework for sustainable public procurement to be rolled out across India’s ministries and departments in a systematic manner.
Conclusion
This paper presents a first of its kind initiative for implementing a sustainable public procurement policy in India. The impact of this initiative may appear insignificant now, but its outcome could be considerable as more and more products incorporate sustainability considerations and consumers – big and small – get more motivated to buy green products and services.
Saturday, July 6, 2013
The debate goes on…. Company or Consumer?
Recently one of the members of a LinkedIn
group started a discussion – Whose
responsibility is social sustainability? It is sometimes interesting to
hold back one’s perspective and just read different shades of views coming 24X7 from professionals around the world. The thoughts expressed
by professionals reflected years of experience behind them. The discussion got
so tempting that I could no longer stop myself from joining in, only to receive
quick rebuttal from another member. The house was a divided lot on a rather
familiar line. Some arguably put forth the onus of sustainability on company
while others did the same on consumers. There was also an overwhelming third
view i.e. both company and consumers are responsible for current growth on
linear path that cares little for people and planet.
My view is closer to the third one.
A company, in most cases, represents the interest of shareholders, who are also
consumers of goods and services. In my view, what is good for consumers, is
good for shareholders too i.e., there is no conflict of interest. The problem begins
when duality of thoughts of shareholders of a company and its consumers becomes
obvious on sustainability issues. According to me, as one of the members
opined, society is an amalgam of everything that we do. So is the company,
tirelessly responding to consumers’ (and stakeholders’) needs and demands in
market economy. The company has taken the profit route because its consumers
(read shareholders) wish their company to show astronomical financial returns
on their investment without bothering about the planet and/or other people
getting affected by company operations. We cannot be indifferent to prevailing
reality of market economy. Turning a
blind eye would not resolve current sustainability issues. The day we, as
consumers/stakeholders, start demanding socially and environmentally sound behaviors from company
management, I think, the company would fall in line. In fact, consumers have
begun to understand their power and have already started exercising their
choices for socially responsible behavior from company. That is why we see so
many companies making deliberate attempt to integrate sustainability concerns
in their business. They know it is simply the right and the profitable thing to
do.
Contrary
to general belief, companies have no illusion on this matter. I think the days
of conservative economist like Milton Friedman, who advocated that proper
social responsibility of business is to focus on wealth maximization and
shareholder value, are long over. The attention has long shifted to stakeholders,
affected by business activities, beyond shareholders. Hence we see many companies
adopting Corporate Social Responsibility (CSR) in their agenda for survival. I
agree that some of these companies, might have adopted CSR purely as a marketing
ploy to increase their market share. But subsequently, many of them understood
the enshrined philosophy and potential benefits behind it and whole heartedly strived
to become good corporate citizens. Examples of such works are in plenty and
they are truly changing lives of people around the globe. I recently read about
Phillips Lighting project in Africa. The company is installing solar powered
LED systems for communities, which previously did not have light. This would really
be a game changer for people living in that area.
Now lets focus on consumers. When they talk about consumers,
people normally mean 6 billion individual consumers spread around this globe. As
someone noted in the post “If you are alive, if you
are working, if you shop -- then you own each and every action you take every
day and you are responsible for it”. I agree. I don’t think anyone can deny the
fact that everyone has a voice which one needs to raise to make oneself heard. Every
time you buy a product or service, you are casting a vote for
sustainability of some company. It is time we cast our vote for needs of future
generation. I understand that as an individual we are small fry for the
company and our voice may not make the impact that we want. But someone
somewhere has to make a beginning. Exercise your choice while buying a new
product!
Is it not surprising that we forget the big fat consumer,
such as governments, while demanding responsible behavior from consumers? They
are the one who spend about 20 – 30 % of
GDP of a country depending on their place on the development curve. They are the one whose activities have the
largest impact on society and environment. Why are they not demanding socially and
environmentally responsible behavior from the companies they deal with? The
government, as consumer, has some unique advantages too that individual consumer
does not posses. They have both regulatory and purchasing power! Their demand
for products and services are so big, they can trigger competition among
companies to produce greener products and services. Despite this, governments
in most developing nations have failed to realize this power. There is
absolutely no action on their part to integrate sustainability in their public
buying. Indeed many times they put the entire blame on consumers! Why? Because we,
as consumers, are not demanding from our government to spend responsibly and
provide us true value for our money. Remember
the government only reacts; the trigger has to come from the consumers.
Jeffrey Sachs has pretty well summed up this dilemma
in his book Common Wealth: Economics for
a Crowded Planet,
“Markets, we have emphasized,
won’t do the job by themselves. Social norms do not suffice. Governments are
often cruelly shortsighted. Sustainability has to be a choice, a choice of a
global society that thinks ahead and acts in unaccustomed harmony”.
Monday, June 17, 2013
Capacity Building on Sustainable Procurement – The Way Forward
Last
week I was witness to the divergent views prevailing among stakeholders on
sustainable procurement in India. In a workshop of leading public procurement
processionals organized by World Bank in New Delhi, I met many public procurement professionals,
who were quite excited to know about sustainable procurement ever since I told
in my introduction that I have a blog on the topic. When asked, during coffee
breaks, I explained to them how existing public buying concept based on initial
economic cost of products and services does not provide value for taxpayer’s
money because it does not consider all three dimensions of costs i.e. economic,
society and environment costs over whole life cycle of the products. It was indeed
heartening to see so many stakeholders showing such keen interest in this
topic. While I enthusiastically providing them the address of my blog, it was a
completely different scenario that confronted me on my return to my office the
very next day.
A very
senior procurement colleague wanted to know why was I perusing this topic? When I tried to convince him as to why this
topic makes sense for India, his next question was whether I really thought
such concept would take root in India? My reply of ‘why not?’ just made him
shake his head in disbelief. This experience was telling! For me, it brought
out the sharp contrasting scenario prevalent today and indicated the gap in
perceptions among stakeholders on sustainable procurement and the in-general
apathy for change. At one end there are people who have sustainability concerns
but the bulk remain unconvinced – at
least not to any degree of urgency. This brings
us to an important question i.e. why capacity building and training of
stakeholders is so vital for successful implementation of sustainable
procurement. The answer is – unless all stakeholders are on the same page, it
would be extremely difficult for this concept to make any inroads.
What worries me most is the complete silence on this issue. The documents
available in public arena give us hints on what is (not) happening inside the
corridor of power. The last time we heard about it when government gave mandate
to CII to suggest roadmap on green public procurement. Mr. Arun Maira, Member
Planning Commission, headed the committee and gave its final report in early
2012. Even members of the committee have no idea about what followed in
Ministry of Environment and Forest on that report. One can make wild guesses
but that is neither here nor there. The real issue, in my mind, is that
probably sustainable procurement is no one’s baby in the MoEF! India has
adopted national action plan on climate change, which has eight missions in
priority areas. Since it does not fit into any of the dedicated mission, it
finds no place in any public document. Other countries have adopted sustainable
procurement under sustainable consumption and production policy framework. In absence of such framework, adoption of
sustainable procurement policy remains a distant priority. This issue needs to
be resolved at the earliest as India is loosing a great opportunity to accelerate the shift towards more
sustainable consumption and production patterns, and more generally to contribute
to the achievement of sustainable development goals.
A
rough estimate by World Bank, India, tells us that there are approx. 7 million
people in India involved in one way or other in public procurement at central,
state and municipal level. This shows the enormity of the task ahead. It also
suggests that Government of India would be wise not to roll out sustainable
procurement policy in one go. Even if we
consider rolling out at central level in first phase, the number of procurement
professionals requiring training on sustainable procurement would be large. I
do not think conventional method of classroom training would be able to meet
this end. We would need to develop online training module available to thousands
of stakeholders simultaneously, free of cost, backed by designated national
accreditation body. The currently available GPP/SPP training tool kit of
European Union, IGPN, UNEP etc. are not relevant for India, though the concept
remains the same, as those were designed to cater to their needs. For example –
while the availability of eco labeled products is taken as granted in European
countries, eco label is a failed scheme in India! Therefore, the training
module has to be in conformity with existing rules and guidelines and
contemporary status of environmental standards and labeling in India.
Blogs
such as this one have their limitations. They definitely cannot reach out to
all stakeholders, who matter in the scheme of things. At best, they can facilitate
discussion among stakeholders, who are already on board. Therefore, we need to
have some kind of institutional supports for capacity building and training of
officials. And the time is now. We need to change our belief that sustainable
procurement will automatically get introduced everywhere once legislation is
passed in parliament. I agree that legislation will help but it cannot replace
the skills and tools required for making this happen. We need to test this
concept in our developmental context and build on the existing wealth of
knowledge. At present, sustainable procurement is not a part of any curriculum
offered by any institute or university. We need to immediately introduce module
on sustainable procurement at university level and in-service training
institutes. Similarly, the professionals getting into services should be
exposed to the concept so that we build critical mass of stakeholders, who can
take sustainability agenda forward in their own organisation.
There
is lots of knowledge available all around on this subject but unless we
deliberately make an attempt to use this knowledge to change our behavior, I
think implementing sustainable procurement in India would be a distant dream.
We have a choice – we could either remain like an ostrich, burying our head and
not acknowledging the problem or confront the problem head-on and start
embracing overarching concept like sustainable procurement wholeheartedly.
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