HIGH IMPACT Supporting

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Thematic Supplement to the 2016 Annual Statistical Report on United Nations Procurement Foreword by UNOPS Executive Director

©Government of Norway/ Torgeir Haugaard

ith the latest edition of the This year’s publication focuses on how W Thematic Supplement to the procurement can have a high impact 2016 Annual Statistical Report, we on sustainable development – and in look ahead to 2030. achieving the Global Goals.

When the world came together To achieve the Sustainable and adopted the 17 Sustainable Development Goals, new thinking is Development Goals, it put into action essential. This applies to everyone, a roadmap to achieving a better world including UNOPS. So in the spirit of by 2030. The world gathered behind a exploring new and innovative areas, universal call to action to end poverty, we will close this series of publications, protect the planet and ensure that all and instead follow the principle people enjoy peace and prosperity. this final edition embraces: to now look towards new ideas, through Procurement is a vital component to which we can showcase how central achieving these goals. procurement is to delivering on Agenda 2030. It connects goods and services to the people who need them most. It’s I would like to thank all of the an area where improved efficiency authors for their contributions to this and can have a long-term publication and for sharing their ideas. positive impact on development. And, it can open the doors of opportunity to I hope that these articles will serve traditionally disadvantaged groups – as inspiration for us all as we work encouraging equality and stability. together towards building a better world for all.

Grete Faremo Executive Director, UNOPS

Table of contents

Efficient public Five rules for powerful procurement is necessary partnerships 24 for reducing poverty 7 By Jeanne Kling and Kate Vitasek By José Moscoso Rethinking procurement The SDGs, human rights for a circular economy 28 and procurement: An By Catherine Weetman urgent need for policy coherence 10 Promoting the By Olga Martin-Ortega participation of micro- and Claire Methven O’Brien and small enterprises in procurement 32 Promoting sustainable By Danielle Carvalho Ribeiro public procurement through demand Health sector aggregation 14 public procurers By Gian Luigi Albano as SDG pioneers 36 By Lorea Coronado-Garcia, Choosing the right Rosemary Kumwenda and Mirjana Milic colour condom: Green! 18 By Eric Dupont Blockchain: The missing piece? 41 Enabling carbon By Harry John reduction through health procurement 20 By Jerome Baddley, Simon Briggs and Eleni Pasdeki-Clewer 6 High impact procurement High impact procurement 7

Efficient public procurement is necessary for reducing poverty

By José Moscoso, UNOPS

he world’s poorest and most government. But these reforms were T vulnerable are the slow to make a tangible difference. most dependent on public goods and Why? services. They feel the brunt of waste and corruption in public procurement Previous procurement reforms often more than anyone else. Here’s how disrupted entire procurement systems we can contribute to making it better. – and daily work. Frequently, such reforms met with so much resistance Public procurement has evolved that they were given up on or watered from being merely a back office down. So how do you change not only supply function to the public sector, the systems, but also the workflows, to now being considered a key tool individual conduct, tools and, most in economic policy – and arguably importantly, minimize costs – all the most visible beacon of the while managing the resistance to quality of governance. Efficient change inherent in nearly all public public procurement also has a direct bureaucracies? impact on poverty reduction. As such, efficient public procurement is vital for The answer is to initiate major changes achieving Sustainable Development through targeted reforms – surgically Goal (SDG) 1 of ending poverty. Sound removing outdated, inefficient practices public investment and spending is and recognizing proper existing unquestionably an important factor practices to preventing disruption to in attaining the other 16 SDGs. the whole procurement system. The smart way of doing this is by building The world’s most vulnerable populations depend on goods The first wave of procurement reforms, blocks of competence (which includes and services purchased which started almost 20 years ago, people, resources and workflows), by public entities. Making focused on improving the regulatory targeting those areas where the biggest targeted reforms in public framework and building skills. Later improvements are possible, with the procurement processes can reforms combated corruption and largest combined impact. This requires save money that could be waste by improving accountability, a smart methodology to diagnose re-invested into key areas. transparency, and better integrating where you stand, before any changes ©Getty Images/MShep2 public procurement across are considered. 8 High impact procurement

Changes that have the by analyzing the strengths and UNOPS helped the government of biggest impact weaknesses of their procurement Jalisco save 24% – which translated into systems. This tailored approach $13 million – on the purchase of new UNOPS considers procurement enables them to identify what needs light rail wagons for public trains. reform to be a dynamic, iterative to be changed without throwing out process – testing and improving on what works, minimizing the overall cost UNOPS also supported the what already exists – to help the of the reform. This helps governments establishment of long-term agreements quality and efficiency of procurement focus their efforts on those actions that for the Instituto de la Infraestructura systems to leap forward. will have the biggest potential impact, Fisica Educativa del Estado de Jalisco improving procurement efficiency and for the procurement of educational At UNOPS, we’ve examined how we reducing costs. supplies for 27,000 students. The can help governments improve their government reduced administrative procurement systems as well as show and logistics costs, as well as a received the concrete advantages to doing so. Jalisco: An example the best value-for-money. The UNOPS ‘Procurement Efficiency of realizable savings Assessment Tool’ (PEAT) helps In 2016, UNOPS supported the In addition, UNOPS used the PEAT minimize disruptions to day-to-day Mexican State of Jalisco with methodology with other public entities work and validates existing effective promoting efficiency, transparency to develop recommendations on how practices, through a forward-looking and in public to enhance competition, increase (instead of a retrospective audit-like) procurement. The Jalisco project efficiency, and use currently available process that is carried out jointly with showed how UNOPS helped the state technologies to improve procurement an organization’s top and middle government to improve their public planning and execution. management. procurement processes, produce substantial savings – both in the short This unique tool uses a set of and long terms – prevent corruption, Seeing long-term gains, today questions, data and process reviews and increase accountability in the use Often, the benefits of more efficient to help governments set the of public funds. public procurement aren’t immediate. foundation for a targeted reform And if the benefits will be reaped High impact procurement 9

after the current decision maker’s administration is over, these reforms In Mexico, UNOPS helped the State of Jalisco promote may be less likely to be given priority. efficiency, transparency Hence, we see a lot of patchwork and sustainability in public attempts at improving the performance procurement. ©Getty of public procurement systems, which Images/RonBailey – after failure or limited results – delay a serious and comprehensive reform programme. José Moscoso is the Lead for Advisory Using PEAT methodology can Services in UNOPS concretely show a public manager Procurement Group. how much money could be saved An economist by in the short, medium and long term, education, José has simply by making a few changes. extensive formal training in public These savings could then be re- procurement. He joined UNOPS in invested into key areas identified 2008 as the Deputy Regional Director by the tool to achieve sustainable for Latin America and the Caribbean. improved performance. Prior to joining UNOPS, José worked as an independent consultant for A more efficient procurement system the UN system, the World Bank, the can also help governments save Global Fund and the Inter-American money and make sure they’re buying Development Bank, among other the right things at the best prices, as international financial institutions. well as attracting the best suppliers. His professional career began in 1991 Ultimately, this helps them buy more with the World Bank’s Africa Region, of the things that the world’s poorest and later in Latin America where he depend on was Senior Operations Officer. 10 High impact procurement

The SDGs, human rights and procurement: An urgent need for policy coherence

By Olga Martin-Ortega, University of Greenwich and Claire Methven O’Brien, Danish Institute for Human Rights

overnment purchasing comprises goals, for example, by infrastructure, the failure of G a significant share of the global integrating disadvantaged groups public authorities to avert human economy. Worldwide, it accounts into the labour market. Yet previously rights abuses by suppliers or their for €1 trillion per year, while across little consideration was given to public subcontractors is being regularly Organisation for Economic Co- bodies’ impacts on human rights highlighted. operation and Development (OECD) via purchasing. A number of recent countries, it comprises an average developments have, however, brought On the other hand, new standards 12 percent of gross domestic product such impacts into focus. have signalled the human rights (GDP).1 As ‘mega-consumers,’ consequences of public buying. governments hence have the power On the one hand, the involvement Foremost are the UN Guiding Principles to shift markets towards sustainable of public institutions in supply chain on Business and Human Rights production. abuses now attract increasing civil (UNGPs), endorsed by the UN Human society, media and public attention. Rights Council in 2011.2 The UNGPs For decades, governments have From surgical instruments and clarify that governments have a duty sought to use procurement to advance personnel uniforms, to mega- to protect human rights that extends High impact procurement 11

Sustainable Development Goal 8 aims to eliminate all forms of child labour by 2025. Achieving this requires leveraging public spending to drive respect for human rights in the private sector. ©Ananta Chowdhury

to procurement. At the same time, the aims to align with them. In addition, sustainable public procurement UNGPs underscore that all businesses, the International Labour Conference5 practices and to implement sustainable including supplying governments, and the Group of 7 (G7)6 now public procurement policies and have a responsibility to respect human emphasize the need for responsible action plans.7 rights. This responsibility requires global value chains as drivers of decent that they monitor and manage human work, as well as sustainable and But governments have failed to rights risks along their supply chains. inclusive growth. recognize, or take adequate steps to address, the human rights dimension The OECD,3 European Union (EU),4 Adopted in 2015, the Sustainable of sustainability in public buying. As international financial institutions, Development Goals (SDGs) reinforced indicated above, this is despite the fact investors and many global companies the role and significance of public that human rights abuses are endemic have committed to upholding the purchasing in securing a global in the production of goods (for instance, UNGPs. The International Organization transition to electronics, foodstuffs and apparel), for Standardization’s new 20400 and production. In particular, SDG as well as the delivery of services, Sustainable Procurement standard 12 calls on all countries to promote from construction to cleaning, 12 High impact procurement

that are routinely purchased by If in the past sustainable procurement contract clauses including a Code public bodies.8 efforts often focused on green of Labour Practices. These encourage considerations, it is imperative that suppliers to disclose factory locations There is evidence that procurement public buyers now adopt a joined-up so that labour conditions can laws and practices currently do as approach, by integrating business be monitored. much to undermine business respect respect for human rights as a fully- for human rights as to promote it. fledged sustainability criterion when Urgent action by governments and Legal rules requiring buyers to select implementing SDG 12. other stakeholders is needed to speed the cheapest – or best value – bid up and scale up such , may have a chilling effect on public In this regard, efforts by first-mover to remove residual legal and policy sustainability initiatives. Buying officers public buyers can provide inspiration. barriers to integrating human rights fear that tenders that include human Sweden’s county councils spend into public purchasing. Only by rights-related conditions in selection €13 billion per year via collective achieving respect for human rights or award criteria will be contested as procurement. Since 2010, they have – and policy coherence – in public discriminatory. used a common code of conduct for purchasing will the SDGs be realized suppliers, followed up on by supplier It can also be questioned to what questionnaires and targeted factory extent it is permitted to link the audits. A 2015 study found these award of public contracts to bidding measures significantly reduced serious companies’ efforts to implement labour rights abuses in workshops in corporate human rights due diligence Pakistan supplying the councils with as required by the UNGPs. Equally, it is surgical instruments, while workers unclear how governments can leverage in neighbouring facilities did not procurement to reward corporate experience similar improvements.9 efforts on supply chain transparency or non-financial reporting, as now New rules have also been introduced envisaged by legislation in many in Norway that obliges public countries. Even where public buyers authorities to include clauses on benefit from a permissive legal and wages and decent working conditions policy environment, the vast majority when purchasing construction, appear to lack the awareness, tools facility management and cleaning and resources needed to effectively services. Buyers must follow up on exploit this. the performance of such clauses, for instance by requiring supplier self- Once human rights are acknowledged declarations.10 as a dimension of sustainable procurement, it becomes clear that In the United Kingdom, universities are this situation obstructs the required to report under the Modern achievement of SDG 12. SDG 8 aims Slavery Act (2015) on their efforts to to eradicate forced labour, slavery identify, prevent and mitigate modern and trafficking, to eliminate the worst slavery, human trafficking and forced forms of child labour and to ensure labour in their supply chains.11 decent work for all. Given the heavy footprint of public purchasers across An EU-wide collaboration of public global markets, a continued failure bodies, Electronics Watch, seeks to leverage public spending to drive to address human rights abuses respect for human rights in the private in government ICT supply chains.12 sector will also exact high costs there. Participating buyers receive template High impact procurement 13

1 OECD, ‘Public Procurement:’ http://www.oecd. LexUriServ/LexUriServ.do?uri=COM:2011:0681: blog/reports/public-procurement-and-human- org/gov/ethics/public-procurement.htm. FIN:EN:PDF. rights-a-survey-of-twenty-jurisdictions/. 2 ‘United Nations Guiding Principles on 5 International Labour Organization, ‘Decent 9 SwedWatch et al., ‘Healthier procurement: Business and Human Rights: Implementing Work in Global Supply Chains,’ Report prepared Improvements for working conditions for the United Nations “Protect, Respect and for 105th Session, International Labour surgical instruments manufacture in Pakistan Remedy” Framework,’ U.N. Doc. A/HRC/17/31, Conference, 2016, p. 18: http://www.ilo.org/ (2015)’: http://www.swedwatch.org/sites/ (June 2011) [hereinafter UNGPs]: http:// ilc/ILCSessions/105/reports/reports-to-the- default/files/healthier_procurement.pdf. www.ohchr.org/Documents/Publications/ conference/WCMS_468097/lang--en/index.htm. 10 International Learning Lab on Public GuidingPrinciplesBusinessHR_EN.pdf and 6 The G7 Leaders’ Declaration called for tools Procurement and Human Rights, supra note 8. ‘Protect, Respect and Remedy: A Framework to support public procurers in meeting social 11 O. Martin-Ortega (2016), ‘Modern slavery for Business and Human Rights,’ UN Doc and environmental commitments. ‘G-7 Leaders’ and human rights in global supply chains: A/HRC/8/5, (April 2008): https://business- Declaration,’ Schloss Elmau, Germany (June 8, Roles and responsibilities of public buyers. humanrights.org/sites/default/files/reports-and- 2015): https://www.whitehouse.gov/the-press- Policy and practice insights for higher materials/Ruggie-report-7-Apr-2008.pdf. office/2015/06/08/g-7-leaders-declaration. education institutions in the framework of 3 The OECD Guidelines were updated in 2011 7 G.A. Res. 70/1, ‘Transforming our world: the their obligations under the UK Modern Slavery to align with the UNGPs: ‘OECD, Guidelines 2030 Agenda for Sustainable Development’ (25 Act,’ BHRE Research Series, Policy Paper No.2: for Multinational Enterprises’ (2011): http:// September 2015): http://www.un.org/en/ga/ https://static1.squarespace.com/static/56e9723 mneguidelines.oecd.org/text/. search/view_doc.asp?symbol=A/RES/70/1. a40261dbb18ccd338/t/5857c23dcd0f68bab21a 4 European Commission, ‘Communication from 8 International Learning Lab on Public 76b6/1487000267236/Modern+Slavery+and the Commission to the European Parliament, Procurement and Human Rights (C. Methven +Human+Rigths+Risks+in+Global+Supply+ the Council, the European Economic and Social O’Brien et al.), ‘Public Procurement and Human Chains+Insights+for+HEIs+2016.pdf. Committee and the Committee of the Regions: Rights: A Survey of Twenty Jurisdictions,’ 12 Electronics Watch: http://electronicswatch. A Renewed EU Strategy 2011-14 for Corporate 2015 Danish Institute for Human Rights org/en. ,’ COM (2011) 681 final and International Corporate Accountability (25 October 2011): http://eur-lex.europa.eu/ Roundtable: http://www.hrprocurementlab.org/

Olga Martin-Ortega Claire Methven (co-author) is a O’Brien (lead author) Reader in Public is the Strategic Adviser International Law on Human Rights and at the University of Business at the Danish Greenwich’s School Institute for Human of Law (United Kingdom), where she Rights where she provides expert leads the Business, Human Rights support to multinational corporations, and the Environment Research multilaterals, governments, civil Group. Her research focuses on the society and human rights responsibilities of business and public organizations, including in the area authorities concerning human rights of procurement and supply chain in global supply chain. She has also management. She is founder of the conducted research on post-conflict International Learning Lab on Public reconstruction, transitional justice and Procurement and Human Rights and international criminal law. Olga is a a Member of the Sustainable Public member of the Board of Trustees of Procurement Working Group of UN Electronics Watch, Board of Directors Environment’s 10-Year Framework of the London Universities Purchasing for Programmes on Sustainable Consortium, and Steering Committee Production and Consumption. In of the International Learning Lab on 2016, she was winner of Ireland’s Public Procurement and Human Rights. Procurement Leader Award. 14 High impact procurement

Promoting sustainable public procurement through demand aggregation

By Gian Luigi Albano, Consip S.p.A

n 2015, world leaders gathered bodies at the central government level I at the United Nations to reshape – would make the implementation of the Millennium Development Goals sustainability strategies more effective. into a global vision for sustainable development. The resulting Sustainable What is sustainable public Development Goals1 provide the procurement? overarching development framework for the world. Public organizations Sustainable public procurement (SPP) are on the frontline to put that can be defined as a: “process whereby framework into action. public organizations meet their needs for goods, services, works and utilities Using procurement for objectives in a way that achieves value for money beyond the mere acquisition of works/ on a whole life-cycle basis in terms products/services is a quite recent of generating benefits not only to intellectual achievement. the organization, but also to society and the economy, whilst significantly Thanks to a profound reformulation reducing negative impacts on the of public procurement regulations environment.”2 at a global level, promoted by forward-looking policymakers, and The fundamental ambition of SPP the emergence of a more qualified is to expand the scope of public procurement workforce, as well as of procurement by including a potentially specialized procurement organizations, wider array of externalities, be they we are in the historically most towards the environment or the favourable conditions to use public welfare of stakeholders, who are not necessarily parties to the public procurement for social objectives. Demand aggregation could contract. Some of those externalities be an important incentive In the remainder of this short paper, cannot properly be taken into account for economic operators to we shall emphasize how demand without evaluating the life-cycle costs pursue innovation focused aggregation – be it among separate (LCC) of any acquisition, which includes on environmentally friendly purchasing units belonging to a single the purchasing price, operating costs products and processes. public organization or among distinct (for example, energy, spares and ©Getty Images/lovelyday12 High impact procurement 15 16 High impact procurement

maintenance) and end-of-life costs demand aggregation could take place Indeed, especially when the political (for example, decommissioning within a single organization whenever a cycle tends to be short at the local and removal). single operational centre acts on behalf level, public decision makers, including of several procuring units. procuring organizations, tend to Stretching the time horizon for overestimate the impact of decisions evaluating the financial dimension(s) In this last case, SPP becomes in the very short term with respect of the value for money makes all easier to implement when separate to those generating their effects in a financial components more visible decision centres, managing different more distant future. As a result, the and transparent, thus allowing buyers budget items, are merged into one foundations themselves of the LCC to trade-off, say, a higher purchasing single procurement unit. If capital risk being undermined. cost today with a lower maintenance expenditures (such as computers or cost tomorrow. Expenditures at vehicles) and current expenditures When pursuing SPP strategies any different stages of the life cycle are (such as electricity and fuel) are small public buyer – such as a local emphasized, allowing public buyers to managed by different organizational municipality – reaps only a tiny fraction better plan – whenever admissible by units, the LCC approach may be hardly of the overall reduction of negative public accounting rules – budgetary implemented, as the unit in charge externalities (for example, carbon predictions over several years. These of purchasing a computer would not dioxide), so it is likely to be affected by potential advantages require, though, internalize the electricity consumption, a standard free-riding problem, that is, the ability to evaluate intrinsically more which affects another unit’s budget. to underestimate the value it attaches uncertain cost dimensions arising in Linking these two budget items is to lower pollution. When demand of the future. quintessential to the application of several public bodies is aggregated the LCC approach. – for instance, by means of a central purchasing body – the overall value of The role of demand Even when a single organization – lower externalities can be internalized aggregation in promoting such as a small municipality – adopts by a single (framework) contract sustainable public a centralized procurement structure, awarded on behalf of several final procurement it is far from being clear that it will users. Demand aggregation may then Public procurement procedures are be able to approach and solve the become an effective tool to (almost) often carried out by those procuring trade-off between more expensive fully internalize social benefits. entities that are also the final users of investments today, and lower operating the to-be-purchased goods/services/ costs and/or higher benefits for the Finally, demand aggregation could works. While this model is fairly environment tomorrow. This also come into play as an important widespread, novel organizational requires setting the ‘optimal’ discount incentive for the economic operators forms have emerged during the last rate to weight and value future benefits to pursue innovation focused on few decades, mainly consisting of a from sustainable strategies. To carry environmental friendly products separation between the organization(s) out such tasks a specialized know-how and processes. Most importantly, the in charge of preparing and running the is of paramount importance, which ‘pull’ effect triggered by centralized tender and the organization(s) making is not likely to be within the reach agencies is likely to provide more use of the awarded contract(s). of small public agencies. clear and coherent signals to the supply market on the most profitable kinds For instance, several centralized Moreover, it seems reasonable that of investments. On the other hand, procurement agencies are now active a central purchasing agency would low-value independent in many countries, and are entrusted plan its procurement strategies over carried out by a large number of small with the (almost exclusive) mission to a longer time horizon, as it is less public organizations would run the risk aggregate the needs of central and/or sensitive to the political cycle than any of not generating the pull effect for local government bodies by awarding single public organization. This implies making firms’ investments viable, and, often sizeable framework agreements that the discount rate set by a central even worse, may send contradictory on their behalf. Less visible, albeit not agency may result in a discount rate signals to the supply market as to the necessarily less effective, forms of closer to one that is socially optimal.3 kind of the required investments High impact procurement 17

1 You can see all 17 UN Sustainable and consumption led by UNEP and UN Development Goals here: https:// DESA: http://www.unep.fr/scp/marrakech/ sustainabledevelopment.un.org/sdgs. taskforces/pdf/Procurement2.pdf. The concept 2 Definition adopted by the Task Force on is very much linked to that of sustainable Sustainable Public Procurement led by development, which requires the present Switzerland. Membership includes: Switzerland, generation to pursue its own needs without United States, United Kingdom, Norway, the compromising the ability of future generations Philippines, Argentina, Ghana, Mexico, China, to meet their own needs. Czech Republic, State of Sao Paolo (Brazil), 3 Defining the socially optimal discount rate is UN Environment, International Institute for not an easy task. A fair amount of literature Sustainable Development, International exists dealing with the concept of social Labour Organization, European Commission discount rates and their relations with global (Directorate-General-Environment) and warming and . See: P. Dasgupta, International Council for Local Environmental ‘Discounting climate change,’ Journal of risk and Initiatives. Adopted in the context of the uncertainty, 2008, 37, pp. 141-169. Marrakech Process on Sustainable Production

Gian Luigi Albano is Head of Research at Consip, the National Central Purchasing Body (Italy) and Adjunct Professor of Economics at Libera Università Internazionale degli Studi Sociali (LUISS) Guido Carli (Italy). He obtained his Ph.D. in Economics from Université catholique de Louvain (Belgium) and a B.A. (Hons) from Università Bocconi (Italy).

He is the co-author of The law and economics of framework agreements – designing flexible solutions for public procurement, Cambridge University Press, 2016. He is an expert on public procurement for the European Commission, the Inter-American Development Bank, the Organisation for Economic Co-operation and Development, the World Bank and the United Nations. 18 High impact procurement

Choosing the right colour condom: Green!

By Eric Dupont, UNFPA

he Sustainable Development In 2016, UNFPA procured more than response to the long- and short-term T Goals (SDGs) are ambitious, 420 million male latex condoms that environmental goals of UNFPA. UNFPA and they will require enormous have efficiently protected people then monitored the implementation of efforts across countries, continents, against sexually transmitted infections suppliers’ action plans and suggested industries and disciplines – but they and HIV/AIDS. Yet despite the profound improvements. are achievable. UNFPA, United Nations social benefits of the work of UNFPA, Fund is working with male condoms remained the least Following the implementation of the governments, partners and other UN environmentally sustainable product UNFPA Green Procurement Strategy, agencies to directly tackle many of due to the quantities of water, all long-term agreement suppliers of these goals – in particular SDG 3 (good chemicals and raw material required male latex condoms are now ISO 14000 health and well-being), SDG 4 (quality for their production. Condoms also certified.1 As a result, UNFPA has seen a education) and SDG 5 (gender equality). have a large environmental footprint reduction in the environmental impact due to the type and amount of of these products, including monthly In 2016, for example, contraceptives resources used for packaging savings of: supplied by UNFPA reached 20.9 and shipping. million people, helping prevent an • 7.8 metric tonnes of carbon dioxide estimated 11.7 million unintended The high environmental impact of • 11.8 million kilograms of pregnancies, nearly 3.7 million unsafe condoms, which are leverage products solid waste abortions and an estimated 29,000 (high relative spend and low supply • 587,598 cubic metres of water used maternal deaths. risk) for UNFPA, led the organization • 995,397 cubic metres of to explore the possibility of procuring water treated UNFPA is proud to have enabled a more sustainable product via a four- • 1,301,554 kilowatt hours millions of women to exercise their point strategy with measurable goals of electricity fundamental human right to decide, to reduce: free of coercion, discrimination and The success of this initiative has violence, when or how often to have • Carbon dioxide emissions demonstrated that market-shaping children – and to have helped to nearly • Water consumption activities are not only limited to double modern contraceptive use • Hazardous chemical impacts bringing prices down. Other important worldwide from 36 percent in 1970 • Raw material consumption considerations can be taken into to 64 percent in 2016. account. UNFPA continues to monitor In implementing the strategy, the results regularly UNFPA is also committed to UNFPA communicated with donors, contributing to the achievement governments and beneficiaries, and of SDG 12 (responsible consumption engaged suppliers on a collaborative and production). Since UNFPA launched basis, focusing on long-term benefits 1 ISO 14000 certifications refers to its Green Procurement Strategy in and clearly communicating the what, environmental management 2013, one of the first objectives was why and when of the plan. to collaborate with its suppliers to reduce the environmental impact Suppliers were asked to define of the UNFPA supply chain. an action plan in their tenders in High impact procurement 19

High quality condoms are particularly important for guarding against unintended pregnancies and life-threatening sexually transmitted infections. ©UNFPA

Eric Dupont joined the United Nations in January 1993 and has been the Chief of the UNFPA Procurement Services Branch since November 2010. He has more than 25 years of experience in procurement and supply chain, both at UNFPA headquarters and in the field. Prior to joining UNFPA, he worked with UNOPS, UNICEF and for the European Union in Niger as a project manager on a water dam construction project. He is the current Chair of the UN High Level Commission on Management- Procurement Network. 20 High impact procurement

Enabling carbon reduction through health procurement

By Jerome Baddley, Simon Briggs and Eleni Pasdeki-Clewer, the Sustainable Development Unit for the National Health Service, public health and social care system

he United Kingdom’s (UK) employed by the National Health In 2009, SDU published the NHS T Climate Change Act (2008)1 forms Service (NHS) or other public sector Carbon Reduction Strategy for the backbone of the Government’s health and social care6 organizations England.10 This strategy articulated plan to reduce current and future – more if we include private and third a commitment by the NHS to be a carbon emissions. The Act was the first sector7 staff that deliver NHS services. leading sustainable and low carbon national legislation worldwide to set The health and social care system organization, fully supporting the targets and create policy instruments is a significant consumer of goods carbon reduction objectives set by to support carbon reduction. The aim and services. It also faces increasing the Climate Change Act. The strategy is to reduce (GHG) financial pressures due to population identified key areas for action, emissions by at least 80 percent by growth, increasing life expectancy and including procurement, with specific 2050 (against a 1990 baseline). efficiency targets. recommendations for improvement and anticipated corresponding The UK’s peaked at The global impacts of GHG emissions carbon benefits. Bespoke tools and nearly 1.3 million tonnes of carbon are shared by all of us. Recent analysis guidance were developed to support dioxide equivalents (CO2e) in 2007. into the effects of travel on the local implementation. Procuring for Carbon In 2013, it was 19 percent lower than environment and corresponding Reduction11 (P4CR) provided a tailored this.2 While every sector is expected health impacts further connected maturity matrix12 to drive policy to play their part, the public sector is local travel decisions and people’s changes across organizations, as well looked upon to take a leading role. health and health quality.8 Delivering as tools13 to prioritize expenditures This is not only in terms of managing high-quality healthcare is incompatible based on carbon impacts and to track its own operations, but also in its wider with unsustainable practices that may progress with implementation.14 reach. With a population of over 65 result in ill health. million,3 nearly 5.5 million4 of whom Developing the evidence base are public sector workers,5 the public Establishing the policy sector’s direct influencing potential, In 2012, the world’s first combined framework and its associated ripple effect, is health, public health and social care quite significant. To manage these impacts in 2008, carbon footprint for a national health a publicly funded national unit – the system was published. The analysis Sustainable Development Unit (SDU) – estimated the health and social care Why health procurement was established to work on behalf of, system carbon footprint to be 32 matters 15 and in support of, the health and social million tonnes of CO2e. Breaking Over 1.8 million people in the UK are care system in England.9 down that figure suggested that there High impact procurement 21

NHS, Public health and social care carbon footprint breakdown of procurement 2015

Building energy 4.9

Travel 3.5 Commissioned health services from outside system 3.1 Pharmaceuticals excluding Meter Dose Inhalers) 2.8

Business services 2.8

Medical instruments/euipment 2.6

ood and catering 1.3 11

reight transport 0.9 13

Meter Dose Inhalers 0.8 Construction 0.7 18 57 Manufactured fuels chemicals and gases 0.6 Paper products 0.6

Waste products and 0.5

Anaesthetic gases 0.5 Procurement

Other manufactured products 0.5 Building energy Travel Information and communication 0.4 technologies Commissioned health Water and sanitation 0.2 and care services from outside system 0 1 2 3 4 5 6

Carbon emissions MtCO2e)

Breaking down the carbon footprint demonstrates four key areas to focus carbon reduction activity. Please note that the pie chart above does not add up to 100% due to rounding. ©Sustainable Development Unit

are three broad contributing areas: In 2012, through the Coalition for intensity items procured by the Carbon from energy consumed in Sustainable Pharmaceuticals and NHS in England.20 Using a bottom- buildings, emitted during travel and Medical Devices,17 internationally up approach, and more specifically, transport, and embedded within the recognized guidance for identifying GHG material intensity factors goods and services sourced by the and reducing the impacts of (kilogram CO2e per kilogram of health and social care system. pharmaceutical products and medical material) from the ‘ecoinvent’21 devices was published.18 In 2014, database, a list22 of high priority The same research suggested that a report into high GHG intensity products was developed. The list in 2012, 21 percent of the GHG prescription items19 for the NHS can help the health and social care emissions for the NHS in England in England was made available. system target specific areas in the were attributable to pharmaceuticals Twenty items were identified as most procurement process. and 11 percent to medical devices. In significant in terms of their GHG parallel with the drive to reduce the contribution to the health and social Implementing and impacts of procurement decisions, care system’s overall carbon footprint. measuring impact SDU began multilateral dialogue with the pharmaceutical and medical In January 2017, SDU published a Our approach to embedding devices industry.16 study into prioritization of high GHG sustainable development principles 22 High impact procurement

within the health and social care organizations.25 A progress report – picture and system consists of four parts: Health Check26 – of the health and currently under active consideration. social care system was also launched Significant work on the social impacts • Planning: having board-approved in 2017. of health procurement has also taken Sustainable Development place. The recently refreshed ‘Ethical Management Plans, which include Procurement for Health’27 provides Emerging next steps commitments on procurement policy materials and supporting tools • Measuring and reporting progress Product and service level carbon to facilitate the inclusion of ethical and with implementation through an footprinting is a helpful but resource- labour standards in procurement. annual Sustainability Report (that intensive process. While input-output includes procurement) analysis is a useful approach for a Sustainability has often seemed to be • Evaluating commitment to system-wide, bird’s-eye view of GHG the preserve of estates and facilities sustainable development (including emissions, we are beginning to explore teams, who can show quick, cashable procurement) through the Good less intensive product and service- savings. However, the most significant Corporate Citizenship tool23 specific methodologies that can help impacts and rewards are often through • Engaging staff, service users, refine results and inform decision influencing procurement decisions and communities and the wider public24 making. An example is material-based supply chains. Providing the tools for factors that move away from cost- the job that are properly calibrated This combination of policy instruments dependent calculations and establish for the task – and the right support for and implementation tools for a causal relationship between types practitioners – is essential to progress procurement professionals, together and weights of primary materials and with embedding sustainability in with industry engagement, has enabled carbon emissions. procurement. SDU will continue to the health and social care system to work with the health and social care progress on the right path to reduce Equally, irrespective of the undeniably system to deliver sustainable health its carbon impacts. critical role of GHG emissions reduction, there are more dimensions In June 2016, a report was published to sustainable procurement. Water, on the financial benefits of sustainable waste and the use of non-renewable development as realized by health materials are part of the wider

1 https://www.theccc.org.uk/tackling-climate- inwork/publicsectorpersonnel. improving_health_nhs_carbon_reducti.pdf. change/the-climate-change-act/. 6 https://www.ons.gov.uk/ 11 http://www.sduhealth.org.uk/documents/ 2 https://www.gov.uk/government/uploads/ employmentandlabourmarket/peopleinwork/ resources/P4CR_workbook_rV2_SW.pdf. system/uploads/attachment_data/file/542558/ publicsectorpersonnel/bulletins/ 12 http://www.sduhealth.org.uk/documents/ Consumption_emissions_May16_Final.pdf. publicsectoremployment/mar2017. resources/P4CR_workbook_rV2_SW.pdf. 3 https://www.ons.gov.uk/ 7 https://www.nao.org.uk/successful- 13 http://www.sduhealth.org.uk/documents/ peoplepopulationandcommunity/ commissioning/introduction/what-are-civil- resources/P4CR_SCO2PE_Prioritisation_Tool_ populationandmigration/populationestimates/ society-organisations-and-their-benefits-for- V3.xlsx. articles/overviewoftheukpopulation/mar2017. commissioners/. 14 http://www.sduhealth.org.uk/documents/ 4 https://www.ons.gov.uk/ 8 http://www.sduhealth.org.uk/delivery/ resources/P4CR_self_assessment_tool.xls. employmentandlabourmarket/peopleinwork/ measure/health-outcomes-travel-tool.aspx. 15 http://www.sduhealth.org.uk/documents/ publicsectorpersonnel/bulletins/ 9 http://www.sduhealth.org.uk/about-us/who- publications/2014%20strategy%20and%20 publicsectoremployment/mar2017. we-are.aspx. modulesNewFolder/MODULE_carbon_hotspots_ 5 https://www.ons.gov.uk/ 10 http://www.sduhealth.org.uk/documents/ FINAL.pdf. employmentandlabourmarket/people publications/1237308334_qylG_saving_carbon,_ 16 http://www.sduhealth.org.uk/areas-of-focus/ High impact procurement 23

Jerome Baddley (co- Simon Briggs Eleni Pasdeki-Clewer author) is the Head of (co-author) is a (lead author) is the NHS’s Sustainable Communications an experienced Development Unit. Manager at the sustainable He has worked for 17 Sustainable procurement years in sustainable Development Unit. professional. She has development, with 10 of those years in His communications career has taken designed and delivered sustainable leadership roles. Most recently, he was him to Cambridge University, NHS procurement and supplier engagement Chief Executive of an environmental East of England and the Care Quality programmes across public and private social enterprise and Low Carbon Commission. He studied at Cardiff sectors in the UK. She has worked at Sector Chair of a local enterprise University where he earned a degree the Department for Environment, Food partnership in the East Midlands (UK). in Journalism, Film and Broadcasting. and Rural Affairs, the Department of His team produced the first full NHS Simon’s experience includes corporate Health and KPMG. Eleni is currently carbon management plans (2008), communications, events, stakeholder a Technical Expert on Sustainable the Nottingham City 2020 Energy engagement, media relations, Procurement at the Sustainable Strategy (2010) and the regional natural social media, video and digital Development Unit, a national team resource footprint for the NHS in the communications. that works on behalf of the health East Midlands (2012). He has spent and social care system in England, 10 years supporting health and social where she leads the implementation care organizations, businesses, third of sustainable procurement. sector organizations and communities to implement strategic and practical measures in sustainable development and resource efficiency.

carbon-hotspots/pharmaceuticals.aspx. WPZ1AKHVvnACIQFggkMAA&url=http%3A% publications/2017/SDU_health_check_ 17 Now the Coalition for Sustainable Healthcare. 2F%2Fwww.ecoinvent.org%2Fdatabase% 2017_WEB.pdf. 18 http://www.sduhealth.org.uk/documents/ 2Fdatabase.html&usg=AFQjCNGwFrEVc7Gta 27 http://www.sduhealth.org.uk/areas-of- publications/2015/Pharma_Full_Guidance_GHG_ YV0e0oQI365BB1vug. focus/commissioning-and-procurement/ Nov_2012.pdf. 22 http://www.sduhealth.org.uk/documents/ procurement/ethical-procurement-for- 19 http://www.sduhealth.org.uk/documents/ publications/2014/GHG_Prescription_Feb_ health-workbook.aspx. publications/2014/GHG_Prescription_Feb_ 2014.pdf. 2014.pdf. 23 http://www.sduhealth.org.uk/delivery/ 20 http://www.sduhealth.org.uk/documents/ evaluate.aspx. publications/2017/Identifying_High_ 24 http://www.sduhealth.org.uk/delivery/plan. Greenhouse_Gas_Intensity_Procured_Items_ aspx. for_the_NHS_in_England_FINAL.pdf. 25 http://www.sduhealth.org.uk/documents/ 21 http://www.google.co.uk/url?sa=t&rct=j publications/2016/Securing_Healthy_Returns_ &q=&esrc=s&source=web&cd=1&cad=rja Report_SDU_WEB.pdf. &uact=8&sqi=2&ved=0ahUKEwjHy-_i9d7UAh 26 http://www.sduhealth.org.uk/documents/ 24 High impact procurement

Five rules for powerful partnerships

By Jeanne Kling and Kate Vitasek, University of Tennessee

N Sustainable Development Goal $3.4 billion annually) – and still about global water non-profit that is using U 6 (SDG 6) aims to ensure available the same number of people remain a different approach to address the and of water without water.2 Countries are not challenge. The non-profit, herein and sanitation for all. getting ahead of population growth. referred to as NGO H2O,3 was the subject of University of Tennessee If money were the answer, the problem Many non-governmental organizations research on how to form highly would already be solved.1 “Twenty (NGOs) and organizations tackle the successful partnerships. years ago, we identified one billion global water/sanitation crisis using people without access to water,” faulty approaches. “The paradigm H2O is interesting not just because reports the director of an international that simply installs water systems as of their impact model, which aligns water supply consulting group. Since gifts and assumes beneficiaries will with SDG 6, but because of how they then, billions of dollars have been have water for the foreseeable future work to achieve their mission. The poured into the problem (on average does not work,” shares the CEO of a key to their success? Create true win- High impact procurement 25

Globally, more than 800 million people lack basic drinking water service. Source: World Health Organization ©UNOPS/Atsushi Shibuya

win collaborative agreements with water. Many raise donations and term, sustainable outcomes. This is partners who literally have a vested install wells in local communities achieved by changing the systems in interest in achieving the same goal. with volunteers from the Global North. which the services are provided – using The following is an overview of five But, when volunteers leave, water adaptable models, building evidence, key rules that H2O followed in building systems can break, sometimes from collaborating with partners, working and maintaining some of those lack of knowledge about long-term with governments and being humble. relationships. maintenance, or due to difficulty in locating spare parts or raising funds H2O’s CEO noted that success wasn’t to maintain the water systems. just about building infrastructure – it Rule #1: Focus on outcomes, was also about building the institutions, not transactions H2O doesn’t focus on short-term goals businesses and service authorities There are many organizations focused (for example, installing a pump) and needed to keep the systems running. on providing people access to potable quick wins. Rather they focus on long- 26 High impact procurement

Rule #2: Focus on the what, Does measuring for the long term for users, but high enough to cover not the how work? Yes. Evidence collected through the cost of maintenance and eventual these platforms has confirmed great replacement. H2O develops supply This rule means stakeholders in progress in water service levels across chains for spare parts and trains local the solution have input on how to all districts – almost doubling in just water and sanitation professionals. implement the solution. While H2O four years. This is a double win – ensuring and its partners agree on the what sustainability of systems while also (investing in solutions that provide providing local job opportunities. sustainable services forever), the Rule #4: Pricing model how is up for interpretation. Local with incentives Rule #5: Insight versus communities decide the details The secret to an effective partnership regarding the water and sanitation oversight governance is in how donations are used in pursuit structure solutions they will use and how to of stated goals. University of Tennessee ensure sustainability. researchers studying H2O found three Whether it’s Washington, D.C., keys to success. The Hague or a remote village, And sustainability can be found politics holds a mighty grip. Senior in unique ways. By providing local First is long-term thinking: Ensuring management should have autonomy community activists with training, solutions remain operational to make decisions and try innovations a bicycle and tools to repair and and self-sustaining long after a that work best in their countries, maintain local water infrastructure, project is finished. It also means provided they align with the vision of the organization has seen ripple effects developing solutions that can easily the organization for which they work. In worth noting. In India, one such activist be replicated by other NGOs or the case of H2O, country directors have went on to organize a team of mobile national governments to scale water flexibility on the types of procurement mechanics that keeps water points and sanitation services across entire and partnership agreements, as long as running, supporting the development countries. H2O is actively working they follow internal policies. Whatever of local businesses. This has also with national governments in Africa the form, the agreements almost increased the lifespan and decreased and Latin America to develop national always follow the Five Rules above the downtime of each water point. investment plans, frameworks and systems to meet SDG 6. Rule #3: Clearly defined and measurable desired Shared risk and shared reward creates outcomes a sense of accountability. Insisting on this ensures that all partners This rule means implementing a literally have a vested interest in the strong performance management success of the goal. Communities and process to measure success against governments contribute funds, labour goals. For several years, H2O has led and talent, in partnership with the NGO. efforts to transparently monitor and provide reporting systems, including The third ingredient is the focus on a through the use of mobile platforms flexible economic model. This allows to collect data. Using surveys, pictures local districts to create solutions that and videos on devices with GPS, staff evolve as needs change. Over time, and trained water and sanitation the goal is to shift economics so local professionals from the districts can communities become self-funded and upload real-time (or close to real-time, aid-independent. To find the right depending on connectivity) information model, it is important to work with to Google Earth and internet- communities to set appropriate rates based databases. for water systems that are affordable High impact procurement 27

Jeanne Kling (co- Kate Vitasek (lead author) is a Research author) is one of the Associate with the world’s authorities on Vested® team at highly collaborative the University of win-win relationships Tennessee. She has for her award-winning co-authored numerous Vested case research and Vested® business studies and two Vested books. Her model. Author of six books and a passion for education runs deep, Graduate and Executive Education having been elected to public office faculty member at the University three times, including serving as the of Tennessee’s Haslam College of President of the Minnesota State Board Business, she has been lauded by of Education and serving as the Chair World Trade Magazine as one of the of the National Association of State ‘Fabulous 50+1’ most influential people Boards of Education. The Business impacting global commerce. Vitasek and Professional Women Association is a contributor for Forbes magazine named her Minnesota Business and has been featured on CNN Woman of the Year. International, Bloomberg, NPR and Fox Business News.

1 Video, Back to the River, Editors Roger Dacier and Wesley Thomas, Producer Lisa Newman, Executive Producer Tessa Livingstone, a Small Media Large production, 2010. 2 Vested: How P&G, McDonald’s, and Microsoft are Redefining Winning in Business Relationships, Kate Vitasek, Karl Manrodt, Jeanne Kling; Palgrave MacMillan; New York, New York; 2012, Page 156. 3 H2O is a fictional name. The real identity of the NGO has been protected to ensure the objectivity and neutrality of the publication. 28 High impact procurement

Rethinking procurement for a circular economy

By Catherine Weetman, Re-think Solutions

he circular economy opens up T value opportunities in every sector, worldwide. Circular approaches reduce risk while increasing agility and flexibility. Business and society become resilient, sustainable and fit for the future. Procurement teams can lead the way, both internally and through suppliers.

Most industrial processes take some From leaky to loopy materials, make something, sell it and at end-of-use, throw it away; this is a linear economy. Resources embedded Make along the process – such as energy, Take labour, water and materials – are Make Recycle Use also wasted. Our increasing pressure on earth systems is pushing them Use Dispose beyond safe limits. Increasing pressure on society is creating hardships, Remake Reuse unrest and conflict, and demand is outstripping supply. How can we Pollute redesign the negative feedback loop of destruction and depletion of resources Transforming linear processes and living systems, so that we can to a circular economy. regenerate what we need, to have ©Catherine Weetman enough, for all and forever? High impact procurement 29

Typical challenges for procurement teams

Big data opportunities Risk

Talent and people Agility

Financial acumen Value vs. cost Procurement challenges Organization Product innovation integration

Globalization Transparency Collaboration Sustainability The circular economy can support the challenges highlighted in the green boxes below. ©Catherine Weetman

Opportunities and challenges consumption with use, with business The circular economy decouples models that recover products and products and services from resource has increased choices materials. consumption, going much further and reduced costs, but involves than resource efficiency and recycling. extended supply chain tiers, which Aiming for a 100 percent yield from It reduces externalities, including obscures the risks and challenges each resource, it creates more from pollution and deforestation, and at each stage. Three billion new less and converts waste to inputs. transfers jobs from extraction and consumers are set to join the global Take, for example, the process of mass production to service, repair, market between 2010 and 2030 – a making orange juice. Bio-refining remaking and resource recovery. fantastic business opportunity, but creates valuable by-products. Pectin, with complex challenges. How do we pulp and zest can be used in food How does the circular meet all our needs in a world of finite manufacturing. Orange essential oils economy support the resources, land and water? are valuable for pharmaceuticals and Sustainable Development cosmetics. Citrus peels can create a Goals (SDGs)? A useful open-source tool is the silk-like textile for fashion garments. 1 Future Fit Business Benchmark, based There are many ways that the circular on Natural Step system conditions Inputs are more sustainable as they economy can support the SDGs: aiming to: cycle finite materials; use can be renewable or recycled from safe, renewable or recycled materials; supply chain waste or other end-of- • Cycling finite materials and using regenerate living systems to secure life products. Circular products last sustainable renewable materials, abundant natural resources and longer, are used more intensively including water and renewable ecosystems; and create meaningful and reused, with efficient disassembly energy, helps both people and planet jobs and support local communities. and separation of each material for • Local flows and business models recovery. The tightest loops create designed to encourage durability, The circular economy supports these the most value: reuse, reselling, and repair-ability and reuse all help criteria. It is an intelligently designed, then repair and remanufacture – reduce waste and improve whole system approach, replacing while recycling remains the last choice. productivity 30 High impact procurement

• Resource efficiency, recovery of phones, including use, reuse and process inputs and converting safe recycling. The smartphone has a waste into new inputs and by- modular, durable and rugged design products reduces cost, creating new – and should it need repairing, you revenue streams and employment can simply order the parts online and • Remanufacturing and repair creates swap them out with a screwdriver. markets for more affordable, high- The organization is building a fair- quality products and equipment trade supply chain, sourcing materials that support local communities, and The framework below2 highlights sourcing conflict-free minerals. key intervention points along the value chain. Process design aims to use less, use renewables and convert waste into resources. You can now procure Circular economy framework solvents as a service, reusing your recovered resources and by-products, or selling them to others. Bio-refining is developing, extracting valuable Business models nutrients and chemicals from waste streams. Circular Product Process Circular inputs design design flows Circular flows include reuse, remanufacture or recycling – improving the economics and effectiveness Enablers and accelerators of recovery. A new design of textile thread dissolves when subjected to low-level microwaves, enabling easy separation of textiles, buttons, zips for Circular inputs materials should recycling and reuse. Other electronics’ The value chain: circular be safe and have secure supplies: circular projects include post-consumer economy intervention points. either recycled or renewable. Exciting recycled plastics in personal computers ©Catherine Weetman innovations use abundant, natural and packaging made from waste wheat materials, such as algae for fibres straw. Remanufactured products can and leather from fish skin. For be high quality, durable and come with example, a company grows mycelium the same warranty as new versions, from waste straw to use in packaging, but cost less. For major engineering home and construction materials. and industrial equipment producers in Another company collects and sorts America and China, it is an extremely textile waste from all over the world, profitable part of their business, and creating high quality yarns for a wide now Europe is seeing its potential. range of apparel, home, and industrial Reuse and sharing platforms are products that can be recycled into gaining traction, enabling exchange new yarn, for a closed loop solution. of resources within and between organizations. Product designs use less, are durable and can be reused. For example, Business models for ‘servitization’,3 modular houses can create jobs collaborative consumption and where they are needed, and smart performance contracts are evolving, ideas enable rapid construction above with established examples including existing car parks. Manufacturing is photocopiers, tyres-by-the-mile and more efficient than site construction, aircraft engines. Airlines buy power with higher production standards by the hour and both parties share and reduced waste. A start-up objectives for efficient performance mobile phone business is improving and no breakdowns! the end-to-end lifespan of mobile High impact procurement 31

Procurement opportunities sustainable sources, longer term get buy-in from other stakeholders. win-win supplier partnerships, or Subsequent phases might include How can the circular economy help by generating revenue from waste? packaging, new products or services, with those procurement challenges? • How can you work with suppliers – then core business items. Consider the following questions: and across your business – to drive product and service innovation, and Could you encourage suppliers • Are your suppliers facing risks, such develop future-fit solutions? to develop circular approaches, as , soil degradation • Circulating products, components creating a win-win solution? Are they and climate disruption? Could they and materials supports local flows, supplying something problematic, swap something toxic, scarce or reducing reliance on those opaque perhaps non-recyclable packaging? expensive for recycled or global sources. Could you negotiate a discount for renewable resources? Can you • Could you collaborate with returning end-of-use items when support smaller suppliers with suppliers or exchange by-products purchasing replacements? tools and training, help them with local organizations? diversify with new by-products • Circular, sustainable approaches Future-fit: Enough, for and co-products, and become more fulfil the Future-Fit system all, forever resilient? Could precision farming conditions, transforming business, or other regenerative practices help supporting the SDGs and creating The circular economy – using them – and help secure your long- enough, for all, forever. and sharing safe, secure and term supplies? renewable materials, instead of • How can you develop relationships consuming resources – is gaining Getting started and shared value opportunities traction with business leaders, with your suppliers? Can you re- Wherever you are on the sustainability governments and cities. Procurement specify materials or equipment to journey, there are opportunities for teams can lead the way by taking a improve agility, perhaps by creating procurement. systems perspective, and working the flexibility to use virgin or with a wider group of stakeholders, recycled materials? Risk assessing key services and to create new value opportunities, • Could you create new value (and materials in back office categories all along the supply chain build reputation) through more could produce some quick wins and

Catherine Weetman helps develop future-fit, resilient strategies, examining sustainability risks and value opportunities. Her book, A Circular Economy Handbook for Business and Supply Chains, was published by Kogan Page in 2016. She is a Visiting Fellow at the University of Huddersfield (UK) and is Vice-Chair of the Environment and Sustainability 1 Future Fit Business Benchmark: http:// Forum (Chartered Institute of Logistics futurefitbusiness.org/. and Transportation). She received 2 Weetman C (2016), A Circular Economy her MSc in Logistics from Cranfield Handbook for Business and Supply Chains: Repair, University (UK). Remake, Redesign, Rethink, Kogan Page, ISBN 978-0-7494-7675-5. Catherine qualified as an industrial 3 http://reports.weforum.org/toward-the- engineer in manufacturing, moving circular-economy-accelerating-the-scale- onto logistics solution design, project up-across-global-supply-chains/favourable- management, business intelligence alignment-of-enablers/?doing_wp_cron=150108 and supply chain consulting. Her career 3615.0163989067077636718750. spans food, fashion and logistics. 32 High impact procurement

Promoting the participation of micro- and small enterprises in procurement

By Danielle Carvalho Ribeiro, Minas Gerais State Government High impact procurement 33

Supporting the participation of micro- and small enterprises in public procurement processes can help promote inclusive and sustained economic growth. ©Getty Images/filipefrazao

n view of the 17 Sustainable In this scenario, supporting the National Statute of Micro- and Small I Development Goals (SDGs) and participation of micro- and small Enterprises. Among other provisions, the 2030 Agenda for Sustainable enterprises in these processes is this statute regulated the participation Development, this case study highlights strategic. Micro- and small enterprises of micro- and small enterprises in the experience of the Minas Gerais are great influencers of Brazilian social public contracting. Since then, Brazilian State Government in promoting the and economic development. They states and municipalities have been participation of micro- and small represent most of the country’s formal granted the ability to differentiate enterprises in public procurement. business sector and generate more and simplify the treatment of micro- than 52 percent of formal employment and small enterprises in their In Brazil, the money spent by opportunities. procurement processes. governments in procurement processes represents, on average, In 2007, through State Decree 44.630, Prioritization through 15 percent to 20 percent of the the Minas Gerais State Government legislation country’s gross domestic product created a new and simplified process (GDP) and mobilizes important In 2006, through Complementary for these enterprises. In 2011, State sectors of the economy. Law 123, Brazil established the Decree 45.749 mandated that the 34 High impact procurement

In many countries, micro- and small enterprises are a major source of private sector employment opportunities. ©Getty Images/shapecharge

acquisition of goods and services compulsory throughout Brazil enterprises registered in the General valued at less than or equal to from 2014 onwards. Suppliers Registry of Minas Gerais 80,000 Brazilian real (approximately • The possible reservation of increased by approximately 40 percent $25,000), be reserved for micro- and contracts for micro- and small between 2012 and 2015. In 2015, small enterprises. From 2013, this enterprises based in the same 22,339 enterprises of this kind were rule became mandatory for public city or region as the contracting registered, accounting for almost 70 procurement processes carried authority. Currently, state and percent of all suppliers in the state out by the executive branch of the municipal governments are database that year. Government, and for those carried out allowed to prioritize micro- and by the legislative and judicial branches small enterprises headquartered While changes in registration are of Minas Gerais. locally or regionally, providing that important, according to Célio Cabral the price of their offers does not De Sousa Júnior,2 full success requires In 2014, the Government of Brazil’s exceed 10 percent of the lowest that public procurers place greater Complementary Law 147 further priced, technically compliant emphasis on regional considerations expanded the benefits to micro- offer. This condition requires that when defining their public and small enterprises throughout the authorization has been included procurement criteria. For example, national territory. These included: in the bidding notice and is duly 78.5 percent of the total value of goods justified. The application of this and services purchased by Minas • An extension of the period for practice is based on the premise Gerais in 2005 (i.e. more than $186 micro- and small enterprises to that investing additional resources million), came from suppliers located demonstrate fiscal regularity in the same regions helps to drive in the Metropolitan Region of Belo from two to five business days. economic and . Horizonte (a micro-region of Minas After being selected as a winning • Shortly after its adoption, the Minas Gerais). More work is needed to ensure bidder, proving fiscal regularity is Gerais State Government altered that public procurement opportunities, a condition of doing business with and updated its own legislation and the economic and social benefits the government in Brazil. to adapt and align with the stemming from them, are equally • The mandatory reservation of innovations brought by the latter. distributed across regions. contracts valued at or equal to $25,000 for micro- and small In conclusion, the strategies Results enterprises. The Minas Gerais adopted by Minas Gerais are helping State Government, and some other According to data from Welson Brazil to reach SDG 8, promoting state and municipal governments, Kleiton Antônio De Souza and sustained, inclusive and sustainable had followed this rule since 2011. Leonardo Lacerda Bittencourt Maciel,1 economic growth, full and productive This change, however, made it the number of micro- and small employment, and decent work for all High impact procurement 35

1 Welson Kleiton Antônio De Souza and Leonardo Lacerda Bittencourt Maciel. ‘Fomento à participação de micro e pequenas empresas nas compras públicas: impactos da regulamentação da lei complementar,’ nº 147/2014 em minas gerais. In: IX Congresso Consad de Gestão Pública, Brasília, 2016. 2 Célio Cabral De Sousa Júnior. ‘Utilização do poder de compra do estado de Minas Gerais como instrumento de desenvolvimento regional e para a promoção de políticas públicas locais redistributivas.’ In: Anais do XIII Seminário sobre a Economia Mineira. Universidade Federal de Minas Gerais, 2008.

Danielle Carvalho Ribeiro works as Public Administrator in the State Government of Minas Gerais, Brazil. She works on structuring public-private partnership projects for investments in infrastructure. She holds a Bachelor’s degree in Public Administration from the João Pinheiro Foundation (2014) – with a period at the economics faculty of the Université Picardie Jules Vernes (2012) – and a Master’s degree in Business Administration (with an emphasis in finance) from the Federal University of Minas Gerais (2017). She is interested in themes related to infrastructure, public budget and public finance. 36 High impact procurement

Health sector public procurers as SDG pioneers

By Lorea Coronado-Garcia, Rosemary Kumwenda and Mirjana Milic, UNDP

hile healthcare saves lives percent of GDP on average. Thus by W immediately, it can also harm integrating sustainability considerations the environment and threaten our into health procurement, countries ability to guarantee good health for can support the development of more future generations. That is one of the environmentally sustainable health reasons sustainability is so important. systems,3 enabling governments and international organizations to progress Public procurement, which traditionally towards achieving SDG 3 national connects the private and public sectors, targets. Advances in climate-smart is increasingly seen as a way to help healthcare4 can also strengthen the advance the Sustainable Development health sector, boosting access to clean Goals (SDGs). In 2012, recognizing the and independent energy,5 safe water, potential to accelerate development clean transport6 and cleaner through procurement, UN agencies waste disposal. 7 joined forces under the Sustainable Procurement in the Health Sector To support UN Member States in (SPHS)1 initiative to use their $5 billion this process, the SPHS task team in collective spending on healthcare also delivered the official UN related goods and services to review sustainable procurement training and change internal legislative and course – developed in partnership operational frameworks. The tools, with UN Environment, UNOPS and the guidance and network developed International Training Centre of the through these efforts focus on International Labour Organization – to sustainable health (SDG 3), sustainable a group of public procurement officials production and consumption (SDG 12), in 2016. Several modifications were and mobilizing partners around the made to the case studies and course SDGs (SDG 17). materials to tailor it to the health sector context. During the training Health sector spending is an important sessions, participants discovered portion of a country’s national gross methods for developing sustainable A 6-month-old child domestic product (GDP). On average, procurement policies, strategies, receives a vaccine at an total expenditure on health products integrating sustainable practices into Anganwadi centre, which and services is one of the highest line healthcare procurement processes provides basic health items in national budgets. In 2014, the and monitoring the implementation care in Indian villages. World Health Organization (WHO)2 of their work. ©UNDP India/Prashanth estimated this number to be 10 Vishwanathan High impact procurement 37 38 High impact procurement

To enable this game-changing process, from procurement of health sector SPHS has invested in its collaboration related goods while also supporting the with UN Member States, organizations development of a priority ban list of and businesses. It has developed a 200 chemicals that are known to have global platform comprised of more harmful impacts on human health than 3,800 experts who are leading and the environment. the agenda. In support of SDG 17, the network is encouraging members SPHS members recognize how to learn from one another and to important it is to lead by example. draw lessons on what works – or They have pledged to work what doesn’t – so they can be collaboratively with suppliers and adapted locally. manufacturers of health products.10 Successful responses hinge upon We have a mechanism for doing procurers’ relationships with suppliers this: the Saving Lives Sustainably and manufacturers and how these website.8 The website offers hundreds are managed, measured and grown.11 of examples of good practice on Growing interest in this area also sustainable health procurement. contributed to the development of the Through this network, new sustainable recently adopted Ostrava Declaration procurement criteria and tools have on Environment and Health.12 also been developed. In partnership with other non-governmental Creating partnerships in many organizations, the focus has been countries, at both the local and on developing practical guides for international levels, is enabling procurement officers to monitor health sector procurers to pioneer their partners against International new models of consumption, Environmental Conventions.9 The aim production and environmentally is to remove priority toxic chemicals sustainable health

1 UNDP (2017), ‘The SPHS Annual Report 2016,’ www.undp-globalfund-capacitydevelopment. https://issuu.com/informal_int_task_team_sphs/ Istanbul, Turkey. org/en/about-us/solar-for-health/. docs/compliance_with_int_conventions_on_. 2 World Health Organization (2014), ‘Global 6 UNDP (2015), ‘Carbon footprint of UNDP 10 WHO, UNICEF, UNDP, the Global Health Expenditure Database’: http://apps.who. Global Fund health initiatives in Montenegro Fund, UNOPS, UNFPA, UN Environment, int/nha/database/Select/Indicators/en. and Tajikistan,’ Istanbul, Turkey: http://www. Gavi, UNITAID (2016), ‘Joint Inter-Agency 3 World Health Organization (2017), eurasia.undp.org/content/rbec/en/home/ statement on engaging with suppliers and ‘Environmentally sustainable health systems: library/hiv_aids/Carbon_footprint_UNDP_ manufacturers to promote environmentally a strategic document,’ Copenhagen, Denmark: Global_Fund_health_initiatives_Montenegro_ and socially responsible procurement on health http://www.euro.who.int/__data/assets/ Tajikistan/. commodities,’ Geneva, Switzerland. pdf_file/0004/341239/ESHS_Revised_WHO_web. 7 UNDP (2015), ‘Environmental safeguarding and 11 UNDP (2016), ‘The SPHS engagement strategy pdf?ua=1. healthcare of Global Fund with suppliers and manufacturers on green 4 International Bank for Reconstruction and HIV, TB and malaria projects,’ Istanbul, Turkey: procurement in the health sector,’ Istanbul: Development/The World Bank (2017), ‘Climate- http://www.eurasia.undp.org/content/rbec/ https://issuu.com/informal_int_task_team_sphs/ smart healthcare: Low-carbon and resilience en/home/library/hiv_aids/rapid-assessment- docs/sphs_engagement_strategy. strategies for the health sector,’ Washington, healthcare-waste-global-fund/. 12 ‘Declaration of the Sixth Ministerial D.C., USA: http://documents.worldbank.org/ 8 www.savinglivesustainably.org Conference on Environment and Health’ (2017), curated/en/322251495434571418/Climate- 9 UNDP (2016), ‘A UNDP guide for procurement Ostrava, Czech Republic: http://www.euro. smart-healthcare-low-carbon-and-resilience- practitioners: Healthcare procurement and the who.int/__data/assets/pdf_file/0007/341944/ strategies-for-the-health-sector. compliance with international environmental OstravaDeclaration_SIGNED.pdf?ua=1. 5 UNDP (2015), Solar for Health initiative: http:// conventions on chemicals,’ Istanbul, Turkey: High impact procurement 39

Lorea Coronado- Rosemary Mirjana Milic Garcia (co-author) Kumwenda (lead (co-author) is a is a Sustainable author) is HIV, Health, SPHS Associate Procurement and Development Coordinator for Specialist for UNDP Team Leader for UNDP Istanbul Istanbul Regional Eastern Europe Regional Hub, where Hub’s HIV, Health, and Development and Central Asia region and the she provides management support Team, where she supports SPHS. SPHS Coordinator for UNDP Istanbul to SPHS. She is an international She has led the development of Regional Hub. She has more than development professional, with sustainable procurement tools, 15 years of health and HIV work public and private sector experience guidelines and collaborations across experience in UNDP at country and in resource mobilization, partnership the private and public sector, and regional levels, previously serving as and capacity building, as well as with experts from academic, scientific Assistant Resident Representative advocacy and lobbying for policy and civil society communities. Lorea in Zambia, UNDP Malawi Policy change, innovative management holds a Master’s degree in Forest Advisor and Senior Policy Advisor approaches and sustainable and Nature Management from the for Sustainable Responses for UNDP development in the healthcare University of Copenhagen (Denmark) Regional Service Centre for Africa. industry. She holds Master’s degrees and Bachelor’s degrees from the Rosemary has a Master’s degree in in Management and Economics of University of Michigan (United States) Public Health from the London School Innovation and Technology from in Material Science & Engineering and of Hygiene and Tropical Medicine Università Commerciale Luigi Organizational Studies. (United Kingdom). She is also a medical Bocconi (Italy) and Management of doctor, with ten years of experience in Innovation and Business Development clinical care and as Lusaka Director of from Copenhagen Business School Health (Zambia) before joining UNDP. (Denmark). 40 High impact procurement

Blockchain technology could be used to encourage sustainable development. ©Getty Images/monsitj High impact procurement 41

Blockchain: The missing piece?

By Harry John, Procurement Leaders

rocurement connects suppliers, What is blockchain? Supply chains’ best hope? P buyers, people, donors and recipient governments. It is a vital A blockchain is similar to a database, Blockchain also presents an link to achieving the Sustainable shared by a group. Like Wikipedia, alternative to the way transaction Development Goals. But, for this database allows all members data is currently managed in supply procurement to meaningfully of the group to view and make chains. The technology is expected to contribute to sustainable development entries to it, each one representing cut through complexity and improve it has to be both transparent and a ‘block’ of data. Unlike Wikipedia, tracking of goods on the move, efficient. With the multitude of though, there is no central mediator. although blockchain is not without stakeholders involved, how do we Governance is distributed among the its limitations. ensure this? The answer could lie participants who vote on which entries in blockchain technology. to verify as accurate. Once added “Data exists [in supply chains] in to the system, each block of data is paper form or in siloed systems, often As goods move through supply tied by cryptography to all previous within individual organizations, which chains, they are subject to thousands ones, forming an unalterable, chain- might not agree with suppliers’ and of lines of communication between like structure of records. In theory, customers’ systems,” says a researcher governments, organizations and anybody with access to a blockchain familiar with the technology. individuals. Records of contracts, is able see the entire history of invoices, orders and many other transactions recorded on it. Because of these inefficiencies, transactions create an imponderable the cost of processing bills of lading, number of data points. Although originally conceived as export declarations and other trade a means of allowing individuals to documents is estimated to be one- For years, attempts to harness this transact in bitcoin, blockchain can be fifth of the cost of physically moving data have seen companies experiment used to record and transfer ownership goods around the world, according to with sophisticated software and novel of anything that can be represented a joint statement released by two large governance structures. But now, a in computer code. multinationals who are partnering fundamental change is on the horizon. to develop blockchain for use in One that challenges the essential way In 2015, the European Commission commercial supply chains. in which information is administered, announced it was investing €5 million not just between companies, but in distributed ledger technology for By creating digital versions of trade potentially right across societies. decentralized management of data on documents and uploading them to European citizens. Greece, Honduras a blockchain, companies in the supply That change comes in the form and Sweden are all reportedly using chain with access to the ledger could of blockchain, the distributed this technology for management of view the status of goods in transit on- ledger technology behind virtual land registries. demand – from the beginning of the currency bitcoin. supply chain to the end. 42 High impact procurement

“We envisage a situation where, say, It is the ‘permissionless’ blockchains Security Agency (ENISA) believes that a farmer in Mombasa can upload “where [in the eyes of regulators] the may undermine blockchains’ safety. documents or sign off on a shipment risk lies,” says a senior policy advisor at As authors of a 2016 ENISA report using a simple mobile application that one law firm. That is because anybody write: “All problems that had required connects to our blockchain,” says a vice can theoretically access and make hijacking of the majority consensus, a president at one company developing entries to these blockchains. task that was potentially significant in the technology for commercial use. undertaking, are now replaced by the From a technical and a security hijacking of a single entity.” perspective, the permissioned Stumbling blocks alternative is fundamentally different – As blockchain becomes more widely Yet there are reasons to be sceptical. but not infallible. As the policy advisor adopted, enthusiasts say it will become The willingness of the imaginary farmer points out, these systems offer greater more powerful, while critics reckon in Mombasa, who the researcher privacy than their permissionless its flaws will be exposed. “I always tell notes has probably never heard the counterparts. But because all people that blockchain is here and now; word ‘blockchain,’ to buy the hardware participants to a permissioned the technology is ready,” argues the and software required to connect blockchain must be known, those vice president. That may be so, but the to a blockchain cannot be taken for participants’ identities must be people, organizations and lawmakers granted. What is the use of a database managed centrally by somebody. who will ultimately oversee use of the that promises full visibility of a supply The European Network and Information technology are not chain, if all parties in that supply chain don’t contribute to it? The answer: Not much.

Then there is the question of reliability. By creating databases with no single governing authority, such as an organization or a government agency, legal questions relating to ownership and accountability of the information contained within those databases arise. Harry John is a Who, for instance, is to stop somebody features writer with access to a blockchain feeding at Procurement it bogus information? This question Leaders. He draws makes lawyers nervous. on more than four years’ of experience In an interview, one lawyer points out researching and writing about that the “practical side” of recording procurement, and has written the physical world on a blockchain extensively about purchasing in the “remains uncertain.” If human financial services sector, as well as intervention is required in that process, indirect categories of spend, including there will always be a risk of error or travel, IT, and maintenance, repair malpractice. and overhaul . His most recent articles have covered future trends that are No technology can be expected to shaping the procurement function, eradicate crooked behaviour. But the such as blockchain technology and hope is that ‘permissioned’ blockchains supply chain digitalization. He has – the kind the corporate world is interviewed some of the world’s currently most attracted to – assuage leading procurement chiefs and has such concerns by making the identities been part of a team that has won of individuals who can access the awards for its coverage of issues system known to all others. affecting procurement professionals. High impact procurement 43

A blockchain is a decentralized digital ledger of transactions that can be programmed to record almost anything of value with no intermediaries. Once information is entered, it’s locked in – it can’t be changed. ©Getty Images/Bannosuk

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