15 February 2012 | Simon Ramsay | WEB EXCLUSIVE
Simon Ramsay from University of Exeter Business School explains low-carbon procurement – from strategy to supply implementation.
No longer suffering from ‘elephant in the room’ syndrome, climate change is now firmly established as a process which demands – and will continue to demand – our attention and action. But as knowledgeable leaders, are we really comfortable with terms such as ‘low carbon economy’, ‘carbon footprinting’ and ‘scope 3 emissions’ when applied to our organisation? As part of a ‘new’ environmentally conscious generation, we understand that climate change has far-reaching effects on just about every aspect of modern life. But what, as businessmen and women, do we really understand by carbon reduction and its practical implications? Are we completely clear on impending governmental policy and market pressures in this area? And how does procurement play a major part in this process? Research conducted by the University of Exeter Business School via the Clear About Carbon project has been helping to shed some light on these key questions.
The climate change (and carbon reduction) revolution has, of course, been developing for some time. The UK government has been producing policies regarding climate change as far back as the 1990s, and the establishment of The Carbon Trust in 2001 and promulgation of the Climate Change Act in 2008 all represent notable steps in the UK’s increasingly educated climate movement. Moreover, there has been a growing recognition of the fundamental importance that informed procurement and supply chain management has to play in the local, regional, national and international commitment to create a low-carbon economy. Almost every policy document produced by the UK government relating to lowering carbon emissions over the past 10 years has identified procurement and supply chain management as one of the mechanisms best placed to deliver carbon reductions.
For buyers and suppliers in both the public and private sectors the consideration of carbon issues has been developing to encompass diverse measures such as:
- The setting and measurement of carbon targets
- The systematic embedding of carbon reduction in contracting
- An engagement with suppliers on development of solutions
- A requirement for suppliers to report on their own emissions and demonstrate reductions.
Such a comprehensive approach requires a far better understanding of carbon management concepts – from types of emissions to measurement and reporting standards – and, as existing methods of considering indirect emissions from organisations’ supply chains improve (new Greenhouse Gas Protocol standards were unveiled in 2011, establishing the first internationally agreed methods for measuring and reporting carbon emissions throughout product life cycles and corporate value chains), so the traditional relations between procurers and suppliers can be expected to change. The implementation of an inclusive approach to low-carbon procurement demands the demonstration of carbon reductions at both buyer and supplier level, which results in a requirement for alternative criteria during the purchasing process or, potentially, the establishment of new working formats.
A deeper understanding of the subject – including keeping abreast of governmental directives and initiatives (for example, the government’s Sustainable Buying Standards or the latest EU proposal to modernise the public procurement market) – is therefore vital for any procurement or supply chain manager. Happily, there is now a network of assistance, provided by various organisations, available for businesses. Developed by the Clear About Carbon project (details of which are below) together with the Department for Environment, Food and Rural Affairs, a free carbon literacy e-learning resource is one such piece of assistance now available (both public and private sector) procurement professionals to develop awareness and understanding of the terminology and principles associated with climate change and low-carbon procurement.
The e-learning resource is one of several diverse outcomes of the project, which has worked alongside public and private sector businesses in Cornwall, including Devon & Cornwall Police, the NHS, the Eden Project and Cornwall Council. The project’s workshops and learning sessions have given organisations the opportunity to bring together management, procurement, finance and leadership teams in order to discuss – often for the first time - the climate change agenda and how their organisations can best face the issues that manifest from it. Participating organisations have already experienced notable benefits – a rolling out of improved supplier criteria, deeper knowledge of financial benefits, a forum for discussing mutual benefits between supplier SMEs, etc. Other selected findings from the project include the following:
- SMEs and suppliers tend to blur the low-carbon procurement and business improvement processes together as part of a more general cost-cutting exercise
- Visualisation tools, such as process mapping, conducted early on in any change management process, can help to focus attention on where businesses can best reduce carbon emissions and costs
- Clear leadership capacity is necessary in order to build sustainable strategy
- There is a tendency for ‘information overload’, particularly on subjects such as government white paper and European directives. SMEs and suppliers need access to current, relevant legislation
- Global recession has tended to eclipse the issues of climate change. Businesses need constant reminding of the true, long-term consequences of this action.
With the low-carbon agenda constantly evolving, the Clear About Carbon project has given procurement managers in the southwest a base from which they can be confident of tackling the climate change agenda head-on. Without this foundation of understanding, any attempts at embarking on a low-carbon procurement strategy (and ultimately maintaining a successful business) would be fraught with failure.
What is low-carbon procurement?
It is the process whereby organisations seek to procure goods, services, works and utilities with a reduced carbon footprint throughout their life cycle and/or that lead to the reduction of the overall organisational carbon footprint when considering its direct and indirect emissions.
This includes the consideration of carbon management and reporting criteria on the purchasing of:
a) goods and services that will be owned and controlled by the organisation, leading to reductions in scope 1 emissions (through the purchasing of more energy efficient products or that will help the organisation become more energy efficient itself)
b) energy from third-party sources not owned by the organisation, leading to reductions in scope 2 emissions (through the purchasing of energy from non-carbon or lower carbon emitting sources)
c) upstream and downstream goods and services not owned by the organisation, leading to reductions in scope 3 emissions (through the purchasing of products or services with a reduced overall life-cycle carbon footprint when compared to alternatives, including considerations from extraction to disposal).
What is clear about carbon?
Financed by the European Social Fund Convergence Programme for delivery in Cornwall, Clear About Carbon is a three-year project that aims to find new ways to increase carbon literacy within businesses and the public sector.
It works closely with a number of Cornish SMEs and other organisations to determine the most effective methods of communicating the business issues of climate change and the opportunities that a low-carbon economy can offer. Delivery of the project is being carried out by a quartet of local organisations: the University of Exeter Business School, Cornwall Development Company, Eden Project and Duchy College Rural Business School.
By delivering outreach and training programmes to staff within the county, Clear About Carbon draws valuable conclusions from its work with practitioners. Using these insights, along with qualitative and quantitative research, the project’s findings will be summarised in a report in March 2012, which will aim to inform future policymaking at both UK and European levels.
☛ Simon Ramsay is associate research fellow at the University of Exeter Business School