Measuring & Improving Sustainable Procurement with ISO 20400

The ISO 20400: 2017 guidance standard on sustainable procurement is an excellent tool for private and public organisations. This new global norm has been adopted by 52 industry countries, representing 65% of the world population, 85% of the world GDP, and a hefty 73% of the CO2 emissions. (Source: ISO20400.org).

Over the last decades we have seen several definitions on sustainable procurement and a wide array on terms related to sustainable procurement. (To mention a few: green purchasing, circular procurement, social return, ethical purchasing, green procurement, responsible sourcing). Each of these terms will produce thousands of academic and practitioners’ documents on Google. Contrary, the term “ISO 20400” still only produces 68 academic papers from 2014 onwards. So why bother?

A Better Mousetrap – a New Sustainable Procurement Definition

So far, at Hanze University we used a long and academically-sound definition from the Johnsen e.a. text book (2014) based on Brundtland (1987) and Van Weele (2010). However, for its brevity and positive perspective I very much like the ISO 20400 definition:

Procurement that has the most positive environmental, social & economic impacts possible over the entire life cycle.

This definition does not explain procurement itself. Luckily the ISO 20400 text (page 3) also provides a succinct definition which considers the entire cycle from need identification through to the end of a service contract or the end of life of goods:

Procurement is the activity of acquiring goods or services from suppliers.

Again, CIPS, Van Weele, the NEVI, and others (cf. Callender e.a., 2009, p. 681) have offered a wide raft of procurement or purchasing definitions. In 2006 or earlier, CIPS already included “disposal and the end of the life” in its procurement definition (Kidd, 2006, p. 4). Miemczyk e.a. (2012) mentioned the aspect that sustainable purchasing provides value to the [buying] organisation “and also to society and the economy”. Note that some organisations or countries explicitly add a (fourth) cultural dimension. For example, in New Zealand, sustainable public procurement includes the well-being related to the Maori culture. (cf. the draft Auckland Council Sustainable Procurement Framework, 2017, p. 5).

Assuming, that in procurement practices the “most positive” impact will no longer equal the “least negative impact” this new ISO 20400 definition on sustainable procurement promises to help the profession move forwards.

The ISO 20400 pilot @Hanze

Last week the Professoriate in procurement management at Hanze University of Applied Sciences started a unique pilot on the ISO 20400. It involves 22 student researchers, 8 participating regional public and private organisations, the Dutch association of purchasing managers (NEVI) and the Dutch Normalisation Institute (NEN). Main objectives of this 10-week pilot are to:

1. validate the newly developed NEVI-NEN maturity webtool ISO 20400 on Sustainable Procurement;
2. help the 8 participating organisations with a zero measurement and a benchmark on the ISO 20400 sustainable procurement guidance;
3. define 5 opportunity statements for each participant;
4. draft 1 or 2 improvement plans or capture low-hanging fruit for each participant.

Students will conduct several company interviews. They also organise a world research café (Fouché & Light, 2010; Schiele e.a. 2011) to develop and share knowledge and best-practices. On 21^st of June, they will present their research findings with a poster presentation; the best team will win a purchasing award.

It is expected that this pilot will be the first step in a multi-year programme (cf. Weber e.a., 2008, p. 245) to help regional organisations improve on their sustainable procurement processes.

The Professoriate currently explores funding to organise a learning structure for approx. 25 organisations with 50 students and researchers. Increasingly, organisations depend on their supply chains for goods and services and procurement is the linking pin. On average 50–80% of sustainable impact may come from suppliers. Hence this programme will have a positive effect on sustainable development of participating organisations, their (regional or global) supply chains, and other stakeholders.

This sustainable procurement programme will have similarities with earlier procurement excellence programmes as based on the Michigan State University model (Trent, Monczka 1991, 1999, 2003). In the Netherlands at least this programme has stimulated procurement maturity and also performance (cf. PEP programmes, NEVI 2004; 2009; 2014; cf. essays on purchasing development, Van Poucke, 2016). The difference with previous programmes is that the drivers or motivations for once do not primarily come from procurement or finance departments. Contrary, the key considerations for sustainable procurement are:

1. managing opportunities & risks,
2. addressing negative effects through due diligence
3. setting priorities for sustainability issues
4. exercising influence, and
5. avoiding complicity.

The organisations in the pilot will benefit in several ways (ISO 20400, p. 16). They will get a practical framework in which the organisation’s key functions work together; they will improve on risk management; they can get ahead of future requirements from clients and regulators; they can obtain a competitive advantage and demonstrate real supply chain engagement. Moreover, applying the guidance helps in annual reporting for both private and public organisations.

The above Figure from an annual survey by CIPS, EcoVadis and the French HEC Grande École (2017, p. 7) among 120 large multinational corporations shows that costs savings is only on the fourth position as a driver. (But we now live in good economic times – undoubtably cost will again become more important in economic downturns). In a related report, EcoVadis (2017) found that smaller organisations (< 1000 staff) generally do better on corporate social response supply chains than larger (≥ 1000 staff) organisations. Also, that European companies do somewhat better than companies from the AMEA region or the Americas.

It becomes clear, that the ISO 20400 guidance necessitates a change in our buyer-seller relationships. (See also the free brochure, p. 3). This is confirmed by recent research. For example Rentizelas, De Sousa Jabbour e.a. (2018, p. 28) found that coercive pressure can “quickly force an industrial sector” to attain a level of sustainable procurement. However it is not sufficient to develop sustainable practices in suppliers if these organisations themselves do not show initiative. Coercion will lead to compliant rather than innovative practice. Moreover, such coercive pressure alone does not lead to continuous improvement due to ceiling effects, i.e. suppliers will only meet the minimum requirements. The nature of supplier audits also may have to change from ticking boxes into joint development and cooperation on improvements or innovations. This will pose new contractual and relational challenges. A framework by Legenvre (2017) could help as it distinguished 6 types of procurement organisation, depending on the complexity or speed of change at the buyer versus the seller slide.

In each type sustainable (or likewise innovation) procurement should be organised differently. From a Brazilian survey (N = 54) Delmonico e.a. (2018) suggest that cultural changes are necessary to advance sustainable public procurement. This confirms earlier research by Brammer & Walker (2009, 2012) who additionally found that acquisition costs and budget constraints are critical barriers.

The Process of the ISO 20400 Pilot

To start with sustainable procurement requires 5 simple steps. Start with selecting sustainability objectives; select sustainable procurement objectives & priorities; ensure governance and alignment in procurement policy. Apply sustainability in your procurement processes AND measure outcomes. (Based on NEVI).

Following leadership & governance principles (as also applied in ISO asset, quality, and safety management standards), students will start their inquiry with investigating the alignment of general policies & strategies with sustainable procurement strategies & policies. (Discussed in Clause 5 of the Guidance). The guidance (Appendix A; p. 41) offers improvement suggestions based on ISO 26000:2010 on social responsibility. Students will mainly interview general (top) management.

Students will then investigate enabling management aspects of sustainable procurement (Clause 6). This is similar to the enabling MSU cycle but additionally helps the organisation to prioritise on their sustainable procurement and conduct stakeholder analyses. Students will interview procurement management and possibly budget management.

Finally, students will investigate several sustainability aspects in actual procurement processes. (This Clause 7 seems the largest in this guidance). Students will probably prioritize on what commodities they investigate. The ISO 20400 is an international effort with contributions from many countries.

\😊/ As a Dutchy it is good to recognise the NEVI five-step procurement cycle in the guidance. (Page 27). In fact, the relation between the 3 Clauses is well-explained in this brief YOUTUBE video, with Dutch Wheel 1, and 2.

After all scan results have been downloaded into the NEVI-NEN webtool, students and participating organisations will discuss opportunity statements, prioritisation, form a heat map, and capture low-hanging fruits or write an improvement plan. (See also Appendix C in ISO 20400). This is really the fun part where students apply and test their fresh procurement knowledge in practice.

Some Considerations on the Sustainable Procurement Guidance Standard

1. In the past there has been criticism on organisational green washing in sustainable procurement. Companies commonly favoured an incremental approach (cf. Collins e.a., 2010, p. 492), only harvested low-hanging fruit, or acted wrongfully only to improve on their brand image (cf. the Berkeley study of Delmas & Burbano, 2011, p. 70). This could change. Large multinational corporations are now said to be front-runners on sustainability (“light-years ahead”), and the material in the guidance may not be new to them. (Erickson, Neibergall as quoted on Spendmatters.com, 2017). Nevertheless, the standard helps us in speaking the same language and should be beneficial to many other organisations, especially in commoditised markets with competitive supplier pools. (Spendmatters.com, ibid).
2. In their recent study, Blome e.a. (2017, p 18 – 21) concluded that ethical leadership from top management has a positive impact on green supplier championing. Contrary, a high focus on obedience to authority together with ethical incentives can stimulate green-washing by suppliers.
3. Conducting ISO 20400 scans and drafting opportunity statements may seem straightforward. However, the Blome study and other studies show that implementing sustainable supply chains and conducting sustainable procurement in industry practice may be some tough work.
4. Sustainable procurement knowledge has increased, for instance on particular commodities or countries (for examples see PIANOO.nl, European Commission.eu), or on ecolabels (also check ISO14024:2018). Still, there are many things we do not yet know, or cannot correctly apply in specific circumstances.
5. Research or industry findings are often inconclusive. How do we compare the impact of local sourcing versus global sourcing which would greatly help a local community elsewhere? How do we correctly apply life cycle costing in a complex supply chain? How should we use strict-step approaches in maturity assessments on sustainable procurement? When do we need to be strict on suppliers, and when do we need to be more cooperative? How sustainable are we in times of supplier crises, or when top management wants more? What is the impact from public procurement on stimulating radical versus incremental sustainable supplier innovations? On what aspects do we need more strict regulations? Do we need radical change and innovations in supply chains? Do we … et cetera.
6. These are big questions. The pilot is based on applied research. We need good interaction from students, researchers, and participating organisations, to solve some manageable questions in the context of our participants.
7. There is yet another critical note. According to Tregidga e.a. (2015, p. 1, 3) we are biased as we only have a business perspective on sustainability. Our interpretation on sustainable procurement would be based on embedded assumptions where economic development, progress and profitability are still dominant. We are not aware that the concept of sustainable procurement is affected by “politics, vested interests, power, lobbying, regulatory capture […]”. We should be aware “about the inherent contradictions between economic growth, sustainable development, and ecological limits”.

Nevertheless, I hope that applying the ISO 20400 guidance will not be “business-as-usual” or “business-a-little-less-than-usual” (Tregidga e.a., ibid, p. 4). I hope we can make headway by jointly-developing and applying knowledge and insights on more advanced levels of sustainable procurement.

After all, together we are less than a pale blue dot in a black and cold ocean of space. (Carl Sagan, 1994; see my previous blog). We have nowhere to go to, and hence should preserve this tiny planet and the people on it. The left blue dot in the above picture is the earth; the right whitish dot is the moon. Human mankind is less than one camera pixel. (Source: NASA. Picture taken zillions of kilometers away, i.e. from outer space).

At Hanze we begin a pilot on sustainable procurement with pitfalls and moments of glory. Thanks already colleagues for putting your enthusiasm into this pilot. Also thanks to Erik van Assen and Karin van IJsselmuide from the NEVI, Hans Kröder from Learn2Improve, and Rob Bonting from the Municipality of Groningen for supporting this pilot. Thanks also the other guest lecturers in our procurement minor. And thumbs up to the student-researchers and participating organisations. I am certain we will meet many more people on this exciting journey.

Enjoy the ride, BR Anne Staal

A. Please contact me for more information on the ISO 20400 pilot at the Hanze.

B. Check this link when you want to conduct a ISO 20400 Quick Scan of NEVI-Purspective.