In 2017 a new standard for Sustainable Procurement, ISO 20400, was released to guide better procurement of goods and services. What do you need to know about ISO 20400 if you are a supplier of cleaning products and services? And can procurement managers use it to demonstrate the false economy of buying the cheapest products and services? Read on to find out how.
Supply chain management. Source: Smart Solidity
How sustainable is your supply chain?
Whether you are responsible for the budget of a government department or a small business, a significant proportion of revenue will be spent on your supply chain. Supply chain refers to any supplier of the goods and services you need to operate, plus those that supply your suppliers with the goods and services they need, and so on and so forth up the chain until you reach the raw ingredients.
Furthermore, your company is part of your customer’s supply chain. With increasing consumer and shareholder pressure on the Government and the Corporate dollar to be spent responsibly, this expectation is being passed on via cleaning tenders.
We operate in a global economy. The conditions of a Bangladesh factory that produces plastic containers, or the environmental impact of a paper recycling plant in China, are no longer hidden from view. And what we see is all too often disturbing. How do we make sure our dollar is not adding to the problem?
Unless you have the resources a multi-national to visit every factory engaged in supplying ingredients in the products you buy or sell, it can be almost impossible to obtain accurate information about their ethics and sustainability. And unless you have the buying power of a multi-national, the only way you can influence your supply chain is to shop somewhere else.
It was this very reason that led to the development of voluntary environmentally preferred Eco-label certifications. But there’s a catch.
Why is it so hard for organisations to pay for green products?
A procurement manager’s core objective is to save their organisation money. Regardless of the organisation’s stated values and policies for environmental sustainability, if the upfront costs of a certified product or sustainable innovation are higher than a non-credentialed competitor, it is likely to be rejected.
The long-term return on investment (ROI) may result in savings (or at least break even), or there may be other organisational savings and benefits, but they can’t be accounted for in a competitive bidding tender.
For suppliers of sustainable products and ethical services who have made often significant investments for the greater good, (and also for the sustainability managers and consultants pushing for change), this short-sighted price barrier can be incredibly frustrating and potentially devastating.
ISO 204000 can help to break this gridlock.
ISO 204000 is for Social and Environmental Sustainability
While ISO 20400 is only a guidance Standard, meaning organisations can’t be certified against it, it provides a clear framework and a practical guide for procurement departments.
The standard consists of four sections:
- Fundamentals: underlying principals, considerations and drivers (i.e. reputational risk, shareholder or government policy).
- Policy and strategy: plan and prepare for sustainable procurement.
- Enablers: conditions that need to be in place to make it happen, and
- Procurement process: a step-by-step guide to incorporating sustainability into a procurement process.
Importantly, the Standard places an equal focus on social and environmental sustainability. In fact, the very definition of Sustainable procurement enshrines an issue that has been giving the cleaning industry a lot of bad press lately – employee working conditions:
Sustainable procurement is the process of making purchasing decisions that meet an organization’s needs for goods and services in a way that benefits not only the organization, but society as a whole, while minimizing its impact on the environment. This is achieved by ensuring that the working conditions of its suppliers’ employees are decent, the products or services purchased are sustainable…”
Who is really responsible for the social sustainability of cleaning services?
Hint – who ultimately pays for the cleaning service? Topping the list of ISO 204000’s key principals for procuring products and services, are:
- Accountability
- Transparency
- Ethical behaviour.
The Standard emphasises the responsibility of the procurer to conduct due diligence and to avoid “complicity”. It acknowledges that the procure effectively sets the price via the tender they accept. Unless that contract price is realistic, none of the environmental and social sustainable principals of ISO 20400 can be effectively achieved.
Competitive bidding and the constant drive for efficiencies, has created a race-to-the-bottom in the cleaning industry with very few winners. Under-priced contracts mean the service provider must trim costs to enable a profit. With the largest cost being labour, it leads to cleaner exploitation and illegal sub-contracting practices.
If the Fair Work Act (FWA) is found to be breached, the purchasing organisation and the responsible individuals are at risk of financial penalties for “Accessorial Liability”. The reputational damage for such organisation can be even more costly.
Bad procurement costs more than sustainable procurement
The Sustainable Procurement Standard prioritises “sustainable supply” rather than “sustainable supplier”. Why is this significant? Because it focuses on the service delivery – not just the policies. It requires referrals and demonstrated experience to be evaluated, not just fancy triple certification logos. It seeks collaborative partnerships, not penalties and punitive contracts.
ISO 20400 provides clear guidance on managing the contract life-cycle, such as: the supplier relationship, implementing the contract, using a contract management plan, managing performance, customer/supplier joint initiatives, managing supplier failure and managing the end of contract.
A procurement department can use ISO 20400 to consider the potential long-term pain of risks and hidden costs, over any short-term gain made in savings, such as:
- Poor standards of cleanliness and hygiene increasing complaints and loss of customers/tenants
- Surface damage from missed periodicals and grime build-up requiring additional cleans and costs
- High turn-over of workers needing retraining of security / waste / requirements
- Under-resourced supplies and cheap (or missing) consumables
- Overall lack of control and poor communication chewing up management time
- Business continuity risk
- Security risk (seriously – who is really cleaning your building?)
And that list does not even begin to consider other costs to the organisation such as health and wellbeing impacts of occupants from poor cleaning practices and toxic chemicals. Or the potential added value for money from having a well-trained and engaged workforce that is directly employed and properly paid by the contractor.
ISO 20400 enables procurement departments to shift the current price barrier and address these risks factoring in. A simple beginning is specifying Eco-label certified materials, requiring full transparent tendering and by cost benchmarking the true life-cycle cost of buying and managing a service and its supply chain.
HPC Solutions are experts at writing Sustainable Cleaning Specifications and Request for Tender documentation and guiding organisations through the maze of green purchasing. And if the whole life-cycle costs are evaluated, it shows that sustainable products and services do not cost more – in fact they can even be cheaper.
We believe that a Sustainable Procurement policy should result in sustainable services in every sense – environmental, social and financial. Because bad procurement costs more than sustainable procurement.
About the author
Bridget Gardner is Director and Principal Consultant of HPC Solutions (formerly Fresh Green Clean). This updated article was originally published in Inclean Magazine, in September 2017.
