EV0476 Defra Social and Ethical Sourcing Criteria For

ID: EV0476

Defra Social and Ethical Sourcing Criteria for Key Product Groups

Assessment of Costs and Benefits

The

AMEC Environment & Infrastructure UK Limited

July 2013

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Document Revisions

No. Details Date

1 Draft Report 30/10/2012

2 Draft Final Report 05/07/2013

Report for Defra Maya de Souza Head Of Sustainable Procurement And Operations Social and Ethical

Main Contributors Sourcing Criteria for Key Susannah McLaren Ilona Kirhensteine Product Groups

Issued by Assessment of Costs and Benefits

………………………………………………………… AMEC Environment & Infrastructure Susannah McLaren UK Limited

Approved by July 2013

………………………………………………………… Pete Davis Draft Report Disclaimer This report has been prepared in a working draft form and has not been finalised or formally reviewed. As such it should be taken as an indication only of the material and conclusions that will form the final report. Any calculations or findings presented AMEC Environment & Infrastructure here may be changed or altered and should not be taken to reflect AMEC’s opinions UK Limited or conclusions. 17 Angel Gate, City Road, London EC1V 2SH, United Kingdom Tel +44 (0) 207 843 1400 Fax +44 (0) 207 843 1410

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Executive Summary

Purpose

The purpose of this study is to develop an assessment of the environmental, financial and social costs and benefits of the wider public sector adopting social and ethical criteria in key product groups within public sector procurement. As such, the proposed social and ethical criteria are not intended to be mandatory to the wider public sector and are intended as a pilot exercise to raise the profile of, and start to embed, social and ethical criteria in key product groups within public procurement. The assessment of costs and benefits, therefore, is carried out at the scale of a single procuring authority (e.g. local authority) and of a single first tier supplier (i.e. individual company). No aggregate assessment of costs and benefits was intended across all product groups for England, Wales and Northern Ireland.

Scope

The scope of the assessment is limited to the implementation of social and ethical procurement for key product groups by the wider public sector:

 Textiles;

 Buildings and construction;

 Furniture;

 Food and catering; and

 ICT.

The choice of categories for the development of the social and ethical criteria, and this assessment of impacts, was made by Defra and its consultants, BMT Isis after a prioritisation exercise utilising Defra’s own Sustainable Procurement Prioritisation Tool.

The assessment considers, for each product group, the social and ethical criteria for the issues set out in Table 1.1.

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Table 1 Key social and ethical issues

Theme Issues

Labour Standards Working conditions Child labour Conflict minerals

Workforce Employment Skills & Training Apprenticeships Diversity and inclusion

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Materials sourcing Animal welfare Nutritional, religious and culturally appropriate food Provision of information

For further background and detail on the selection of key product groups and development of the social and ethical sourcing criteria, readers are advised to refer to the Main Report1 prepared by BMT Isis which is widely referenced throughout this report.

Approach

The approach followed has been to undertake a separate assessment of the costs and benefits to a procuring organisation of implementing processes for ethical and social procurement on the assumption that it had no such processes in place. For the purposes of the study, the costs and benefits have been modelled on a large local authority; a large unitary council that is actively engaged with the sustainable procurement agenda helped inform the findings in this study.

The assessment of costs and benefits to a procuring authority is supplemented with a product specific assessment of impacts, which distinguishes between the costs and benefits of implementing criteria relating to labour standards, workforce, supply chain and materials sourcing criteria independently. The assumptions made and findings in this area are based on desk-based research, engagement with key stakeholders and representatives of data sharing platforms, as well as our technical expertise in this area.

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Summary of Monetised Costs and Benefits

The monetised costs and benefits to procurers and suppliers across different product groups are summarised in the tables below. The Net Present Value (NPV) is calculated using a 10-year assessment period and a 3.5% discount rate.

A summary of the costs to the procuring authority are summarised in Table 2. The table presents the estimated costs per supplier to comply with the proposed criteria.

Table 2 Summary of costs to procuring authority

Procurement Actions Hours NPV (2013- process step 2022) (£)

Commitment Social and ethical procurement policy (overarching):

Background research, development, drafting, organizational feedback loops and 165 1,848 final issue

Annual review 20 1,704

Advocate and adversarial (positioning) 60 672

Product specific policies & alignment: 0

Background research and benchmarking activity 37.5 420

Policy and Strategy alignment and annual review 20 1,704

Advocate and adversarial (positioning) 60 672

Total costs: per product group 3,641

Total costs: all product groups 18,205

Communication Website 7.5 £723

Supplier workshops 15.5 1,494

Total costs: per product group 1,022

Total costs: all product groups 5,110

Assessment & Assessment& prioritisation: per product group 35 1,716 prioritisation Total costs: all product groups 8,581

Collaboration Supplier engagement workshops (covers all products/ contracts and provides 35 3,374 feedback/ discussion on improvements): all product groups

Monitoring Day-to-day contract management (social and ethical aspects): per product group 7.5 723

Total costs: all product groups 3,615

Total costs: per product group 227 7,777

Total costs: all product groups 1,133 £38,884

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One-off costs to a local authority associated with setting up a process of embedding social and ethical criteria in procurement are estimated to be £1.6k per product group, or £8k for all five key product groups. In addition, local authority would incur £0.8k in annual costs per product group, or £3.7k for all product groups per year.

The NPV of one-off and annual costs over ten years assessment period would be £7.8k per product group, or £38.9k for all five key product.

The costs to a supplier associated with specific product groups are presented in Table 3 (please refer to the Appendix A for a detailed breakdown of costs). When considered on a per supplier basis, costs of compliance with the proposed social and ethical criteria would be most expensive in the ICT sector and associated, in particular, with the costs of participation in an industry collaborative initiative such as the EICC.

Table 3 Summary of costs per supplier per product group

Textiles Food Building & ICT Furniture construction

Costs to respond to PQQ on labour practices in 2,508 2,508 2,508 2,508 2,508 supply chain

Set up, monitoring, reporting and verification 88,093 88,093 88,093 256,265 88,093 costs

Auditing costs (3rd party independent audit)

Cost of remediation measures (if required)

Total costs: labour standards assurance 90,601 90,601 90,601 258,773 90,601 Labour Standards assurance Standards Labour Costs to respond to PQQ on skills and training 2,608 2,608 2,608 2,608 2,608

Administrative costs to supplier 5,505 5,505 5,505 5,505 5,505

Ongoing apprenticeship costs 2,815 2,815 2,815 2,815 2,815

Total costs: workforce 10,927 10,927 10,927 10,927 10,927 Workforce Costs to respond to PQQ on SMEs/ social 2,028 2,028 2,028 2,028 enterprises 2,028

Administrative costs to supplier 14,240 14,240 14,240 14,240 14,240

Ongoing costs 17,353 17,353 17,353 17,353 17,353

Total costs: SMEs 33,621 33,621 33,621 33,621 33,621

SMEs/ social social SMEs/ enterprises

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Costs to respond to PQQ on material sourcing 2,028 2,028 2,028 2,028

Administrative costs to supplier 1,891 1,891 13,955 13,955

Ongoing costs 4,338 4,338 4,338 6,766

Auditing costs (3rd party independent audit)

Cost of remediation measures (if required)

Total costs: material sourcing 8,257 8,257 197,42 0 22,169 Material sourcing Material

TOTAL (3) 143,406 143,406 154,891 303,321 157,318

The estimated total costs of compliance with the proposed criteria per supplier across four product groups would be between £143.4 thousand (textiles and food products), £154.9 thousand (building& construction) and £157.3 thousand (furniture). In the ICT sector these costs have been estimated at £303.3 thousand (of which £256.3 thousand are associated with the EICC membership).

Summary of Non-Monetised Costs and Benefits

In addition, proposed social and ethical criteria are likely to be associated with further costs and benefits that could not be quantified and monetised, including, in particular:

 Financial costs to suppliers associated with a) remediation measures potentially required in the case of discovered non-compliance; b) an independent third party auditing; and c) establishing monitoring system where no external monitoring/ reporting systems exists (e.g. Sedex etc.)

 Financial costs to suppliers associated with specific product groups, including:

o Food product group: suppliers could incur additional cost of providing information and labelling to consumers and potentially, cost of gaining accreditation to labels such as Fairtrade, Soil Association, Farm Assured etc. Where sugar-containing drinks, confectionery and non-baked savoury products have to be made available only in smaller portion sizes, or where a portion of fruit has to be made available at a lower price than a nonfruit hot/cold dessert, revenues are likely to be lower for catering service providers. Finally, supplier could suffer from a lost revenue and additional costs due to the required changes to their food offering for provision of nutritionally, religious and culturally appropriate food.

o Building and construction and furniture product group: suppliers could incur costs of accreditation to FSC, PEFC or FLEGT (or equivalent) or of ensuring that sub-contractors provide evidence of accreditation to approved certification schemes (e.g. chain of custody certificates). In instances when no sustainable source is available, there are likely to be additional costs of voluntary legality verification to ensure legality and ensuring compliance with the UK government’s timber procurement policy

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 Financial savings to suppliers as a result of collaborative actions. Collaboration can increase the impact and overall efficiency of an organisation’s supply chain sustainability efforts by extending its reach, pooling resources and knowledge, reducing duplication and avoiding conflicting messages.15 Many leading companies have also come to see collaboration as an important element of addressing the root causes of sustainability issues. In addition, collaborative efforts represent a way for smaller companies with fewer resources to take action and contribute to further supply chain sustainability. The Global Compact has grouped these collaborative initiatives into two primary types: 15

o Best Practice Sharing. These collaborations, which can be focused in one industry or across sectors, focus on sharing knowledge about approaches and tools that companies have found to be successful in their individual supply chain sustainability programmes. These groups often also create tools together that reflect the direction of their programmes, although typically participants to this type of collaboration are not required to use the tools or to meet any other standards for participation.

o Joint Standards and Implementation. These collaborations are typically focused within one sector and aim to create consistency among companies’ expectations and supply chain sustainability programmes. For suppliers that work with multiple customers that each have their own code, and approach for monitoring and remediation, unaligned supply chain sustainability programmes can create a significant burden and divert resources from compliance and continuous improvement efforts. For this reason, many groups have come together to create shared codes of conduct, which participating companies may or may not be required to adopt, and they work to engage suppliers on the shared code together through joint assessments and auditing. Many of these groups also conduct joint capability building for suppliers.

Benefits to procuring authority, supplier and wider society have not been monetised (with an exception of funding support available to suppliers) and are presented in the report along with selected illustrations and case studies.

Risks and Uncertainties

Key uncertainties and risk associated with the cost assessment for procuring organisation and supplier are:

 Quantification and monetisation of costs was based on a single entity basis, i.e. a procuring authority (large local authority) and supplier basis;

 Monetisation of costs to procurers and suppliers was based on assumptions in relation to manpower needs associated with implementation of specific requirements;

 The assessment used a “building block” approach and set out costs per supplier per product group and per requirement. This would allow procuring authorities to consider likely impacts of inclusion or exclusion of specific themes in the social and ethical procurement; and

 No quantitative and monetary assessment of benefits to procuring authority and supplier (except for NAS funding support to apprenticeships) was carried out. Instead benefits assessment is qualitative and supplemented with case studies and illustrations.

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Sensitivity Analysis of Costs and Benefits

Sensitivity analysis on the monetised costs and benefits is provided in the report. The Net Present Value (NPV) is calculated using 10 year assessment period and a 3.5% discount rate.

Sensitivity scenarios considered the following variables:

 Costs to suppliers: manpower costs required to comply with specific requirements including manpower required and hourly pay; and

 Costs to procuring authority: manpower costs associated with setting up social and ethical procurement process including manpower required and hourly pay.

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Contents

1. Introduction 14 1.1 Purpose 14 1.2 Scope 14 1.3 Approach 15 1.4 Background 16 1.5 Rationale for Intervention 18 1.5.1 Rationale for proposed social and ethical criteria 18 1.5.2 Policy objective 20

2. General Principles of the Procurement Process 21 2.1 Public Procurement Procedure 21 2.2 Process for Implementing Social and Ethical Procurement 21 2.3 Assessment of Costs and Benefits to Procuring Authority 22 2.3.1 Costs 22 2.3.2 Benefits 27 2.3.3 Summary of costs and benefits 28

3. Assessment of Social and Ethical Criteria: Textiles 1 3.1 Background and Rationale for Intervention: Textiles1 1 3.2 Proposed Social and Ethical Criteria: Textiles 2 3.3 Baseline 2 3.3.1 Existing and forthcoming policies, legislation and voluntary initiatives- 2 3.3.2 Current market 4 3.3.3 Current practices in UK public procurement 6 3.4 Assessment of Market Implementation of Criteria: Textiles 8

4. Assessment of Social and Ethical Criteria: Food and Catering 10 4.1 Background and Rationale for Intervention: Food and Catering 10 4.2 Proposed Social and Ethical Criteria: Food and Catering 11 4.3 Baseline: Food and Catering 12 4.3.1 Existing and forthcoming policies, legislation and voluntary initiatives 12 4.3.2 Current market 13 4.3.3 Current practices in UK public procurement 14

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4.4 Assessment of Market Implementation of Criteria: Food and Catering 16

5. Assessment of Social and Ethical Criteria: Buildings and Construction 18 5.1 Background and Rationale for Intervention: Buildings and Construction 18 5.2 Proposed Social and Ethical Criteria: Buildings and Construction 19 5.3 Baseline: Construction 19 5.3.1 Existing and forthcoming policies, legislation and voluntary initiatives 19 5.3.2 Current market 21 5.3.3 Current practices in UK public procurement 22 5.4 Assessment of Market Implementation of Criteria: Buildings and Construction 25

6. Assessment of Social and Ethical Criteria: ICT 27 6.1 Background and Rationale for Intervention: ICT 27 6.2 Proposed Social and Ethical Criteria: ICT 28 6.3 Baseline 28 6.3.1 Existing and forthcoming policies, legislation and voluntary initiatives 28 6.3.2 Current market 30 6.3.3 Current practices in UK public procurement 31 6.4 Assessment of Market Implementation of Criteria: ICT 34

7. Assessment of Social and Ethical Criteria: Furniture 36 7.1 Background and Rationale for Intervention: Furniture1 36 7.2 Proposed Social and Ethical Criteria: Furniture 37 7.3 Baseline: Furniture 37 7.3.1 Existing and forthcoming policies, legislation and voluntary initiatives 37 7.3.2 Current market 39 7.3.3 Current practices in UK public procurement 39 7.4 Assessment of Market Implementation of Criteria: Furniture 41

8. Assessment of Costs and Benefits by Social and Ethical Criteria Themes and Product Groups 44 8.1 Costs of Adopting Proposed Social and Ethical Criteria 44 8.1.1 Labour standards assurance costs 44 8.1.2 Costs associated with workforce 50 8.1.3 Supply chain costs 53 8.1.4 Material sourcing costs 55 8.2 Benefits of Adopting Proposed Social and Ethical Criteria 59

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9. Specific Impact Tests 65 9.1 Competition Assessment 65 9.2 Small Firms Assessment 65 9.3 Social Impact Assessment 66

10. Summary of Costs and Benefits 67 10.1 Summary of Monetised Costs and Benefits 67 10.2 Summary of Non-Monetised Costs and Benefits 69 10.3 Risks and Uncertainties 70 10.4 Sensitivity Analysis of Costs and Benefits 70

Table 1.1 Key social and ethical issues 15 Table 2.1 Summary of benefits 27 Table 2.2 Summary of costs to procuring authority 29 Table 3.1 Key social and ethical issues: textiles 2 Table 3.2 Public sector suppliers: textiles 7 Table 4.1 Key social and ethical issues: food & catering 11 Table 4.2 Public sector suppliers: food & catering 15 Table 5.1 Key social and ethical issues: buildings & construction 19 Table 5.2 Public sector suppliers: buildings & construction 23 Table 6.1 Key social and ethical issues: ICT 28 Table 6.2 Public sector suppliers: ICT 32 Table 7.1 Key social and ethical issues: furniture 37 Table 7.2 Public sector suppliers: furniture 40 Table 8.1 Labour standards assurance costs to a supplier 44 Table 8.2 Costs associated with labour standards assurance criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022) 49 Table 8.3 Workforce related costs to a supplier 50 Table 8.4 Costs associated with workforce criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022) 52 Table 8.5 Supply chain related costs to a supplier 53 Table 8.6 Costs associated with SMEs and social enterprise criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022) 55 Table 8.7 Material sourcing costs to a supplier 56 Table 8.8 Costs associated with material sourcing criteria per supplier (Net Present Value of one-off and ongoing costs 2013- 2022) 58 Table 8.9 Summary of benefits to suppliers 59 Table 8.10 Summary of product group related benefits to procuring organisations and suppliers 60 Table 9.1 Competition assessment filter questions 3 65 Table 10.1 Summary of costs to procuring authority 67 Table 10.2 Summary of costs per supplier per product group 68 Table 10.3 Summary of costs per supplier per product group 72

Figure 2.1 Process for implementing social and ethical procurement 22 Figure 2.2 Elements of internal responsibility for ethical procurement 24

Appendix A Cost Assessment

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1. Introduction

1.1 Purpose

1.2 Scope

The scope of the assessment is limited to the implementation of social and ethical procurement for key product groups by the wider public sector:

 Textiles;

 Buildings and construction;

 Furniture;

 Food and catering; and

 ICT.

The assessment considers, for each product group, the social and ethical criteria for the issues set out in Table 1.1.

1 Social and Ethical Sourcing Criteria for Key Product Groups, June 2013, BMT Isis

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Table 1.1 Key social and ethical issues

Theme Issues

Labour Standards Working conditions Child labour Conflict minerals

Workforce Employment Skills & Training Apprenticeships Diversity and inclusion

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Materials sourcing Animal welfare Nutritional, religious and culturally appropriate food Provision of information

1.3 Approach

This document sets out background and rationale for developing social and ethical procurement criteria, policy options considered and an assessment of associated costs and benefits of implementation to local authority and individual first tier suppliers. As the proposed social and ethical criteria are not mandatory for the public sector to adopt, this assessment of costs and benefits has not been prepared in line with the BIS Better Regulation Executive guidance for Impact Assessments.

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1.4 Background

Social and ethical considerations are an essential ingredient of sustainable procurement. Many genuine positives and opportunities for the UK public sector can be realised as a result of improving social and ethical performance within procurement.1 These include:

 Enhanced economy as a result of driving efficiencies and innovation through supply chains;

 Meeting policy commitments and targets of UK Government;

 Reduced risk (legal, security of supply, reputation, financial liabilities);

 Enhancing UK international development priorities (direct correlation with Department for International Development key issues); and

 Enhancing the UK employment market (for example, moving from procurement of products to procurement of services that may contain the provision of products and creating market opportunities at end of life).

Case studies outlining such benefits and detailing examples of positive and proactive social and ethical practice within UK public sector procurement are contained in the BMT Isis report.2

The current public policy position reflects the range of international, EU and UK policies and legislation, including voluntary and sector initiatives, that exists to apply social and ethical considerations to the key product groups under consideration. These include, amongst others:

 The International Labour Organisation (ILO) has identified eight conventions as "fundamental", covering subjects that are considered as fundamental principles and rights at work: freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour; and the elimination of discrimination in respect of employment and occupation.3 The conventions are international treaties, and have been ratified by all 27 EU Member States including the UK;

 The EU procurement framework has achieved much greater clarity with the consolidation of the procurement rules for works, services and goods. The recitals to the "Consolidated Directive" make it clear that social requirements can be fully embraced in procurement practice (see in particular recitals 1, 33 and 46). This is reflected in specific terms in the context of contract conditions in Regulation 39 of the Public Contracts Regulations 2006;1

2 Annex A of the Main Report1 provides a selection of existing public sector case studies and examples.

3 http://www.ilo.org/global/standards/introduction-to-international-labour-standards/conventions-and-recommendations/lang-- en/index.htm

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 The EU Buying Social4 guide was published in 2010 to help public authorities buy goods and services in a socially responsible way in line with EU rules and also to highlight the contribution public procurement can make to stimulate greater social inclusion;

 The Public Services (Social Value) Act 2012, passed on 28th February 2012 and is due to be implemented from January 2013, requires all public bodies in England and Wales who are contracting authorities to consider how they build greater consideration for economic, social or environmental wellbeing into procurement processes for public services during the pre-procurement stage. The Act requires the procuring authority to consider how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and how, in conducting the process of procurement, it might act with a view to securing that improvement. It does not apply to public work contracts or public supply (goods) contracts.5 In debates on the Bill, the Government has made it clear that public services were chosen because that is where the Government believes the greatest positive impact can be made.1 For further details on the UK legal framework, please refer to the Main Report; 1

 The UK Human Rights Act 1998, Working Time Regulations 1998 and other regulations require public authorities to uphold fundamental rights, such as working hours, safe and hygienic working conditions, living wage, regular employment and preventing harsh and inhumane treatment, effectively making them mandatory in public sector procurement; 1

 The UK Government’s Big Society6 agenda brings together initiatives for community empowerment, public service reforms and social action to help people to come together to improve the quality of their own lives. The public service reforms aim to enable charities, social enterprises, private companies and employee-owned mutuals to compete to offer people high quality services. The welfare to work programme, led by the Department for Work and Pensions will enable a wide range of organisations to help get Britain off welfare and into work;

 The Greening Government Commitments were launched in March 2011 to ensure that by 2015 the UK government will have made substantial reductions in waste generation, water use and greenhouse gas emissions. Under the commitments, Ministers agreed an approach which will embed sustainable development in the procurement and operation of all central government departments and related organisations. Amongst these is the commitments government will engage with its suppliers to reduce the impact of supply chains and will strive to purchase sustainable, efficient products and services;

 The Government Buying Standards are mandatory for all central government departments, their executive agencies, Non Departmental Public Bodies (NDPBs) and Non-Ministerial Departments (NMDs). They currently cover a range of products and services in ten priority product groups;

 A range of policies related to apprenticeships have been introduced since the Coalition Government came to power. Some of these intend to encourage more people to do apprenticeships, some encourage

4 Buying Social. A Guide to Taking Account of Social Considerations in Public Procurement, October 2010, European Commission

5 Public Services (Social Value Act) 2012. A brief guide, 2012, Social Enterprise UK

6 http://www.cabinetoffice.gov.uk/content/big-society-overview

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more businesses to offer apprenticeship and some- intend to raise the standard of apprenticeships.7 These include, amongst others: the Education Act 2011; Further Education loans for apprentices; Apprenticeship Grant for Employers of 16 to 24 year olds;

 There are a number of international high level business principles and codes that have been created that organisations can sign up to demonstrate their commitment to responsible business practices, which are endorsed by the UK Government. The OECD Guidelines for Multinational Enterprises are a series of principles and standards which adhering states, including the UK, undertake to promote to their businesses. They are the “only multilaterally endorsed and comprehensive code that Governments are committed to promoting”. The Guidelines set voluntary standards for business conduct, including in employment and industrial relations, human rights and the environment. The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption. With over 8700 corporate participants and other stakeholders from over 130 countries, it is the largest voluntary corporate responsibility initiative in the world8; and

 Various voluntary standards, accreditation / assurance / verification schemes and reporting tools exist that can assist with implementing an approach to social and ethical considerations within procurement exercises, including: Ethical Trading Initiative; Global Action Network for Transparency in the Supply Chain (GANTSCh); SA8000; BS 8903:2010 Principles and framework for procuring sustainably; Sedex; and Corporate Assessment of Environmental, Social and Economic Responsibility (CAESER). The International Trade Centre Standards Map9 enables analysis and comparison of more than 70 voluntary standards operating in over 200 countries, and certifying products and services in more than 80 economic sectors.

1.5 Rationale for Intervention

1.5.1 Rationale for proposed social and ethical criteria

The public sector buys approximately £220b of goods and services each year, which accounts for proximately one third of all Exchequer expenditure and 15% of GDP10. As public sector commissioning and procurement of goods and services is of such importance to the UK, the way in which the public sector commissions and procures these goods and services can have significant leverage and influence on practices in the supply chain. Policy instruments such as the Public Services (Social Value) Act 2012, provides public bodies in England and Wales (who are contracting authorities) with further impetus to build greater consideration for economic, social or environmental wellbeing into procurement processes.

7 Apprenticeships policy (SN/3052), February 2012, House of Commons

8 http://www.unglobalcompact.org/AboutTheGC/index.html

9 http://www.standardsmap.org/

10 Public Expenditure Statistical Analyses (PESA), 2009, HM Treasury/Office of National Statistics

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As a major procurer, the UK public sector has a responsibility to bring more inclusivity and equality of opportunity into procurement practices that can generate economic as well as social benefits. For instance, the ethnic minority population in the UK equates to more than 10% of Britain and 19% of all SMEs are owned by ethnic minorities contributing over £40b to the UK economy. Minority based businesses can bring innovation, flexibility and a high level of customer service that larger suppliers may be unable to provide11.

Social enterprises deliver essential, cost-effective public services, helping local government improve the quality of services, support community development and address social exclusion. They are part of a rapidly growing sector - there are over 62,000 social enterprises in the UK, contributing £24 billion to the economy and employing almost one million people. Their approach can empower staff, make sure customers are more involved in their services, and offer the freedom to innovate and be more flexible in the way services are run12.

Market forces can be used to improve issues and are important where societal constructs are weak. Large procurers have an ability to influence and shape their supply chains for a better tomorrow particularly where they form a significant proportion of the marketplace. UK public sector is no exception and can be considered a significant and potentially influential customer in many categories of products and services. Procuring authorities can do much to assist contractors achieve social outcomes and community benefits in procurement so that local policy aims are achieved. For example, neutral clauses about jobs and skills can be drafted that are non-discriminatory for any contractor to fulfil, but the procuring authority can assist the contractor to identify local unemployed or young people to be drawn upon in meeting those neutrally drafted requirements.1

The business case for the private sector to consider social and ethical issues in its supply chain is well documented; in particular, around management of reputational risk relating to human rights and labour issues. By mitigating and responding to such risks in the supply chain, business can control costs, protect market share and reduce risk premiums. Business can also mitigate against potential supply chain interruptions or delays associated, for instance, with suppliers’ labour challenges, especially where they only have a single source for key inputs. However, although many similar risks and opportunities also relate to the public sector, to date there have been unclear signals to procurers in the public sector on whether they should incorporate ethical and social criteria in their procurement and what the business case for doing so is. There is also a lack of transparency as to whether supplier practices are social and ethical without public procurers explicitly making such demands of them in their procurement requirements. 1 A number of authorities in the UK public sector have embraced social and ethical sourcing in select product groups (as documented in Annex A of the Main Report1); however, this practice is not necessarily widespread across all public sector procurement. The introduction of social and ethical sourcing criteria can help further clarity and impetus to public sector bodies to adopt these in their procurement processes.

11 http://www.msduk.org.uk/CorporateBenefits.aspx

12 http://www.socialenterprise.org.uk/advice-support/how-we-support-public-bodies#why work with us

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1.5.2 Policy objective

The objective is to introduce credible and practical social and ethical sourcing criteria that are voluntary for the wider public sector to adopt and are intended as a pilot exercise to raise the profile of, and start to embed, social and ethical criteria in key product groups within public procurement.

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2. General Principles of the Procurement Process

2.1 Public Procurement Procedure

In planning for social and ethical procurement, procuring authorities need to consider all stages of a procurement procedure and examine where it is most appropriate to insert such considerations – each case is specific. Examples of what is possible for public procurers to do at each stage are given below:13

 Pre-procurement. Market dialogue may assist in identifying solutions with the potential to meet social and ethical objectives, prior to commencing the procurement;

 Subject matter. Defining the subject matter of the contract and choosing a title provides an opportunity to inform the market of the authority’s objectives (e.g. promoting employment);

 Selection criteria. It is based on the capacity / ability of the bidders to perform the contract. Assists in the identification of appropriate suppliers, for example to ensure adequately trained personnel or relevant ethical policies and procedures are in place;

 Technical specifications. Provides a clear, accurate and full description of the requirement and standard to which goods, works or services should conform. Will include a description of the minimal technical specifications which all bids need to comply with and can set specific social and ethical criteria, including requirements and thresholds that need to be met for specific products;

 Award criteria. The award criteria are the basis of which the contracting authority will compare the offers and base its award. Award criteria are not pass/fall criteria, meaning that offers of products that do not comply with the criteria may still be considered for the final decision, depending on their score on the other award criteria. They must be linked to the subject matter of the contract, expressly mentioned in the contract documents or tender notice, comply with the general Treaty14 principles and cannot give unrestricted freedom of choice to the contracting authority; and

 Contract performance clauses. Public authorities are specifically empowered to include environmental and social requirements in their conditions for the performance of contracts (see Article 26 of Directive 2004/18/EC). Contract performance clauses should be clearly related to the contract’s execution and made known to tenderers during the procurement process.

2.2 Process for Implementing Social and Ethical Procurement

The Main Report1 identified general principles (outlined in Figure 2.1), common to all key product groups that enable procurement organisations to successfully incorporate social and ethical considerations within procurement.

13 Amended from http://ec.europa.eu/environment/gpp/faq_en.htm#criteria4

14 The Treaty on the Functioning of the European Union, the Treaty on the European Union and, formerly, the Treaty establishing the European Community.

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The principles are adapted, where applicable, to meet specific category considerations; however, the themes are common to all groups.

Figure 2.1 Process for implementing social and ethical procurement

1. COMMIT  Ensure organisational social objectives are in place  Have you adopted a policy of incorporating social considerations into procurement?  Ensure legal requirements regarding social issues are clear  Ensure business case and VFM reflects social considerations  Focus on opportunities as well as risk management

6. MONITOR  Monitor effectiveness of collaboration, 2. COMMUNICATE delivery of contract management  Communicate social objectives to requirements, achievement of social suppliers objectives  Encourage cascade of information  Use assurance schemes if relevant throughout supply chain, especially with  Monitor improvement in supply chain global supply chains  Discuss potential for improvement with supplier  Review organisational policy and objectives 3. ASSESS  Supply chain mapping o Market capacity to deliver 5. COLLABORATE objectives  Collaborate with potential or incumbent  Market understanding suppliers to encourage improvement  Assess risks  Collaborate with other procurers to share  Assess opportunities good practice

4. PRIORITISE  Prioritise procurement requirements according to: o Relevance, proportionality, risk and opportunity o Costs and benefits - for procurer, suppliers and workforce o Market capacity

Source: Social and Ethical Sourcing for Key Product Groups, August 2012, BMT Isis Ltd

2.3 Assessment of Costs and Benefits to Procuring Authority

2.3.1 Costs

The costs have been modelled on a large local authority scale and assume that there are currently no processes in place for the authority to undertake social and ethical procurement and would therefore need to be put in place. In

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practice some local authorities would already benefit from having relevant policies and processes established fully or partially. The cost assessment, however, is aimed at estimating the total maximum costs to a procuring authority in a situation where such policies would need to be established and processes be put in place. Furthermore, while recognising that actual costs would vary between different procuring organisations depending on staff numbers, employee costs, overhead costs etc, cost estimate is using national average statistics (e.g. in the case of average hourly wage).

The costs of establishing the procurement process in the procuring organisation are expected to be generic (rather than product specific); any variations in terms of lower / higher costs are discussed in the product specific chapters. The costs are driven by the steps that a procuring authority will need to take to put in place to undertake social and ethical sourcing in procurement.

Commitment

The procuring authority will need to start by setting overall objectives of social and ethical procurement to reflect the authority’s priorities, explicitly recognising the role that procurement plays in contributing to achieving them and giving regard to the public procurement regulatory framework. This may well be as a specific policy concerning sustainable procurement or as an extension to current procurement policy.

The contracting authority will require high-level political commitment and leadership from the top of the authority through to the management structures and resourcing (human; financial) that are put in place to implement social and ethical procurement. A business case will need to be developed by understanding the external landscape and business drivers which will need to be put forward to help secure buy-in. It is recognised that the local authority funding environment is increasingly difficult and any proposals that can be interpreted as an increase in spend for outputs will need explicit and robust justification. This will include an emphasis on local community benefits arising from local sourcing including the stimulus of local SMEs, securing local employment, the multipliers arising from the local spend as well as reputational benefits from ensuring responsible procurement. Such proposals for a social and ethical purchasing policy will not normally require any substantive structural changes on the part of the contracting authority.

Ongoing commitment can be achieved by ensuring social and ethical procurement is always on the agenda. For instance, management is briefed regularly on how work is progressing and social and ethical procurement is a standing agenda item at procurement team meetings.

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Figure 2.2 Elements of internal responsibility for ethical procurement

Executive Leadership:

Commitment, Oversight & Support

Supply Management Business Managers: Support: Cross-Functional Coordination Implementation

Source: Supply Chain Sustainability. A Practical Guide for Continuous Improvement, 2010, UN Global Compact Office

Communication

The social and ethical procurement objectives set by the procuring authority can only be achieved if these are communicated to suppliers, importers and agents and they take responsibility for helping to deliver them. An authority can take a variety of approaches to communicating its objectives to suppliers, which include: direct communication (email, letter or one-to-one meeting); newsletters; websites; and supplier meetings and workshops. The approach used will most likely depend on type and importance of supplier, and the scale of effort and resources required will vary according to the method chosen. It will also depend on whether communication is stand-alone or integrated into existing customer-supplier communications.

A common way for organisations to inform suppliers of their expectations is through a code of conduct that includes goals in the area of ethical procurement and makes reference to international standards (including UN Declaration of Human Rights and the ILO Core Conventions and Recommendations). It could also include a requirement that suppliers cascade these expectations to their supply base. The simplest way to inform suppliers about the code is to send it to them with a covering letter asking them provide written confirmation that they have read and understood it.

Any new code that is developed will require resources to research and draft the document, as well as to consult with external (e.g. suppliers; NGOs) and internal stakeholders (e.g. cross-functional teams). It will also require supply chain management professionals to gain familiarity with it in order to be able to communicate it to existing and new suppliers and to explain how the authority intends to work with suppliers to ensure compliance and continuous improvement. Possible mechanisms include internal websites, recurrent trainings particularly for new staff and regular communications from senior management to reinforce the importance of the code. Also, depending on how large and complicated an authority’s structure is, it may need to establish internal policies and procedures to explain how the code should be implemented by staff.

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Assessment and Prioritisation

A contracting authority will need to develop an understanding of the relevant markets, assess the market capacity to deliver the set social and ethical objectives as well as assess the social risks and impact of their procurement activity. This will help to focus procurement efforts on the most important product groups and on those themes/criteria which can contribute to them achieving their social objectives.

The first step in this exercise would be to understand the market and map the supply chain to help trace the key activities of organisations and people involved in bringing a product or service from raw material to market. As the supply chain of individual products and services can look substantially different, supply chain mapping needs to be conducted on a product or service category basis. The authority will also need to gather information not only on the supply chain but also on the human rights, labour, environmental and corruption issues at every step of the supply chain to identify where there are potential risks and opportunities associated with these issues. It can be very useful to discuss with peer companies, suppliers, industry bodies, civil society organisations, and activists, as well as government representatives to identify issues.15 The next step would involve an assessment of market and suppliers ability to comply with the criteria that are being considered. Such assessment can be carried out using in-house resources and expertise and using an external consultant.

A contracting authority will be in a position to identify priorities and focus its procurement efforts on most relevant product groups and themes having regard to the results of the analysis performed on key risks, opportunities, market capacity to comply with the requirements, associated costs and benefits to procurer and suppliers as well as authority’s internal objectives and performance targets.

Collaboration

For a social and ethical procurement programme to be successful, the procuring authority must ensure that the supplier has the necessary resources and competence to meet the commitments or make any necessary improvements. It will require investment in suppliers’ management capabilities; for instance, through development of guidance documents and toolkits, holding supplier training workshops, and creating supplier learning networks.

This approach should include remediation of instances of non-compliance through a number of activities, which must be clearly communicated to suppliers15:

 Working with suppliers to create a corrective action plan for achieving compliance in a clearly defined and reasonable time frame;

 Encouraging improvements through regular communications with non-compliant suppliers;

 Defining a roadmap for gradually increasing standards and expectations; and

 Terminating supplier relationships when serious shortcomings on “zero-tolerance” issues are not remedied in spite of repeated notifications to the supplier. Procuring organisations should identify

15 Supply Chain Sustainability. A Practical Guide for Continuous Improvement, 2010, UN Global Compact Office

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zero-tolerance issues and explain their selection and consequences to suppliers in advance. They should also explain in advance the process for remediation and at what point continued non- compliance may result in termination.

Improving working conditions and remediation usually comes at a cost; as a general rule, the supplier must bear the costs of bringing their own operations up to an acceptable standard but this is often depends on context;16 for instance, certain issues can be tackled through issue-specific programmes as part of a collaborative initiative such as the ETI.

Monitoring

The procurement authority will need to put a monitoring system in place if it wants to understand whether suppliers are complying with its social and ethical requirements. Many organisations invite suppliers or agents to self-assess their sustainability performance using self-assessment questionnaires (SAQs) as an initial screen in selecting new suppliers or as part of a risk assessment for identifying which suppliers may require closer monitoring. SAQs are a good starting point to cover a significant portion of the supplier base in a relatively short time frame and at relatively lower cost than audits. Reliable self-assessments depend on trust, a suppliers’ competency to gather information from disparate parts of their organisations, and clear communications so that suppliers understand what is being asked and how their information will be used.

There are a number of data sharing platforms (e.g. Sedex; CEASER) that can help the procuring authority, or indeed the first tier supplier, collect and manage most of the supplier information about social and ethical performance without the need for setting up systems from scratch. A procuring authority can ask its first tier suppliers to register with such schemes and manage the data from their supply chain using these tools. Costs for registering and use of such tools are usually calculated based on the spend that the supplier has with the procuring authority.

Another common monitoring tool is the use of compliance-based approaches to monitoring (e.g. site audits). However, these approaches have resulted in concerns about costs, disruptions to production of suppliers, and doubts about the accuracy of the information collected15. For instance, auditors tend to focus on visible ‘working conditions’ rather than the broader ‘employment conditions’ (contract status, performance targets, and assumptions on overtime), which often matter more to workers. Furthermore, many workers may not be covered by audits as they are not formal employees. Finally, audits may not provide assurance even against the worst forms of exploitation because of poor audit skills and methodology and increasing levels of audit fraud. The procuring authority will have to evaluate what approach to demand of its first tier suppliers, in order to get reliable information collected and avoid over reliance on compliance audits. It will also need to consider how suppliers will perceive and be affected by audits, how critical they are to the business and how much control the procurer needs to have over the process and results. For instance, typically 80 per cent of corrective actions relate to health and safety concerns while very few relate to issues such as freedom of association, a living wage, discrimination or harsh treatment, despite the importance of these to workers.

16 A practitioner’s guide to ethical trade, Ethical Trading Initiative Norway

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Box 1 Department of Health: responding to exposure of poor international labour practices

Over the past years, the Department of Health and the NHS have had to respond to international labour reports exposing poor working conditions from suppliers in developing countries in the manufacture of several medical products. These have included:17  An estimated 10 million surgical instruments used in the UK each year are manufactured in northern Pakistan. Most of the 50,000 manual labourers in this industry are paid less than US$1 per day for 12 hours of work (well below the living wage), with little job security and risk of serious injury from machinery. Poor remuneration contributes to the proliferation of child labour, and several thousand children are employed full-time in this industry, some as young as seven.  An investigation in Malaysia of one of the largest global manufacturers of medical gloves reported that many employees were migrant workers who worked over 80 hours a week, and risked sexual and physical harassment.  A study of south Asian healthcare uniform manufacturers documented illegal working hours and a ban on unionisation.  A manufacturer of surgical masks in Mexico has sought cost reductions through the use of hundreds of home workers, but such workers received no employee benefits and only an insecure income. The Department of Health estimates that expenditure on mitigating actions against these findings (e.g. research, producing guidance, awareness raising and training materials), plus cost of time input from officials within the Department, its agencies, NHS Supply Chain and the NHS, has been in the region of £400,000-£500,000 over the past five years. It estimates that 80% of this cost is associated with proactive mitigating activity (and therefore discretional).

Source: Provided by Department of Health

2.3.2 Benefits

There are numerous benefits that UK Government and the procuring authority can derive from incorporating social and ethical considerations into procurement, at both a domestic and an international level. A list of the main benefits that cut across all key product groups are set out in Table 2.1.

Table 2.1 Summary of benefits

Beneficiary Scope of benefits

UK Procuring Domestic International Government authority

Assists compliance with social and labour law, including related     national and international policy commitments/agendas.18

Helps Government to translate the Big Society agenda into   practical policies and supports voluntary and community organisations.

Can help contribute to a contracting authority’s strategic objectives   (e.g. addressing inequalities by supporting local SMEs and social enterprises to increase employment and raise incomes).

Can contribute to developing a market in socially beneficial   products by expanding existing markets or creating new markets for goods and services that support achievement of social objectives.18

18 Buying Social. A Guide to Taking Account of Social Considerations in Public Procurement, 2010, European Commission

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Beneficiary Scope of benefits

UK Procuring Domestic International Government authority

Encourages integration of significant groups in society in key   market activities (e.g. people with disabilities, small businesses, women or minorities) in order for effective markets to develop.18

Can lead to improved labour market integration and reduced   alienation and crime.19

Uses local spend to encourage local involvement in contracts,   increase local skills and jobs, and recirculate money within the local economy.19

Can help reduce the care and benefits burden on Government   through employment of marginalised job seekers.19

Risks are better anticipated and managed (risk is spread out   across different players).

Helps build trust and credibility with external stakeholders,   including governments, non governmental organisations, activist groups and funding bodies.

2.3.3 Summary of costs and benefits

Costs to the procuring organisation, i.e. the illustrative example local authority were estimated based on the understanding of the likely actions that would need to be taken to incorporate social and ethical criteria in procurement process and associated manpower needs. In particular, the following activities were assessed:

 Commitment: costs of developing an overarching social and ethical procurement policy (with a subsequent annual review); costs of product specific background research, benchmarking and aligning of relevant policies and strategies accordingly; costs of advocating the change within the organisation;

 Communication: costs of making the relevant documents available online; costs of organising annual workshops for potential and existing suppliers;

 Assessment and prioritisation: costs of carrying out background research on relevant product markets and prioritising product groups and social and ethical criteria to be included in the procurement (in- house);

 Collaboration: costs of annual supplier engagement workshops aimed at providing a feedback and discussing issues and challenges of ongoing contracts; and

 Monitoring: costs of in-house day-to-day contract management (focusing on social and ethical criteria).

19 Buying a better world: sustainable public procurement, December 2007, Forum for the Future

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The estimated manpower needs per contracting authority per product group are 143h one-off and 67h annual. For all five product groups the estimated manpower requirements would be 713h one-off and 333h annually.

A summary of the costs to the procuring authority are summarised in Table 2.2.

Table 2.2 Summary of costs to procuring authority

Procurement Actions Hours Net Present Value (NPV), process step 2013-2022

Commitment Social and ethical procurement policy (overarching):

Background research, development, drafting, One-off 165 £1,848 organizational feedback loops and final issue

Annual review Ongoing 20 £1,704

Advocate and adversarial (positioning) One-off 60 £672

Product specific policies & alignment:

Background research and benchmarking activity One-off 37.5 £420

Policy and Strategy alignment and annual review Ongoing 20 £1,704

Advocate and adversarial (positioning) One-off 60 £672

Total costs: per product group £3,641

Total costs: all product groups £18,205

Communication Website Ongoing 7.5 £723

Supplier workshops Ongoing 15.5 £1,494

Total costs: per product group £1,022

Total costs: all product groups £5,110

Assessment & Assessment& prioritisation: per product group Ongoing 35 £1,716 prioritisation Total costs: all product groups £8,581

Collaboration Supplier engagement workshops (covers all Ongoing 35 £3,374 products/ contracts and provides feedback/ discussion on improvements): all product groups

Monitoring Day-to-day contract management (social and ethical Ongoing 7.5 £723 aspects): per product group

Total costs: all product groups £3,615

Total costs: per product group £7,777

Total costs: all product groups £38,884

Notes: Labour cost estimates are based on the average hourly wage in the UK in 2011 (£11.20) without taking into account potential involvement of staff with different grades. Manpower needs throughout different steps of the procurement process are likely to be generic and are assumed to be the same across different product groups.

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The NPV of one-off and annual costs over ten years assessment period would be £7.8k per product group or £38.9k for all five key product groups.

Inclusion of social and ethical criteria in public sector procurement has a potential to result in a range of benefits domestically and internationally. While the total benefits to a procuring authority cannot be estimated quantitatively and in monetary terms, case studies can be used to illustrate potential magnitude of benefits in financial terms.

Department of Health while responding to exposure of poor international labour practices in the manufacture of several medical products (please refer to the Box 1) estimated that the costs of discretional mitigation actions taken were £400k-£500k over the past five years. These costs, however, helped avoid much greater costs that would have been incurred by a more reactive approach. For instance, it estimates that £500k incurred with proactive mitigation in place would potentially increase to £900k if a strategy had been adopted only in reaction to a crisis being uncovered. This does not, however, take account of the less tangible and quantifiable impacts on reputation.

Other more intangible and hard to quantify benefits include contribution to a contracting authority’s strategic objectives (e.g. supporting local SMEs and social enterprises to increase employment and raise incomes) and building of trust and with external stakeholders, including non governmental organisations and activist groups. Inclusion of social and ethical criteria in the public procurement can also contribute to expanding existing markets or creating new markets for goods and services that support achievement of social objectives18.

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3. Assessment of Social and Ethical Criteria: Textiles

1 3.1 Background and Rationale for Intervention: Textiles

Social concern has been a feature of the textiles sector for many years, with particular emphasis on the retail sector, partly resulting from negative press relating to labour standards among global retailers. Campaigns for improved social conditions for low paid workers in developing countries have largely been effective and continue. UK-based retailers are, for example, increasingly specifying codes of good practice in labour standards to their suppliers. There do, however, remain difficulties in imposing these throughout the supply chain, leading to concerns about working hours, safety and use of child labour.

Most countries in the textiles supply chain have a legal minimum wage, but in some cases this is lower than a realistic minimum living wage – so while the sector offers an opportunity for development by creating many relatively low skilled jobs, some workers may be unable to escape from a cycle of poverty. In some countries, the right of workers in the sector to form associations (unions) to represent their concerns in collective bargaining has been suppressed.

With the Far East dominating supply, concerns regarding Corporate Social Responsibility prevail. Of course, this is not an issue that is exclusive to textiles procurement, but applies to any supply originating from countries where concerns exist regarding labour standards. Seeking assurance from suppliers in a pragmatic, robust and cost effective manner remains a clear requirement.

As a commodity where major social issues relate to international labour standards, procurers need to be mindful of the balance to be struck between prohibition of certain practices and encouragement and working with suppliers to improve. Textiles supply provides significant employment within developing countries and, in the absence of the UK demand, there is the danger that already vulnerable international communities will suffer, while cultural issues should also be considered. Public sector procurers should use their influence as an opportunity to work with suppliers to improve working conditions.

Another serious ethical issue that arises in the textiles sector is the issue of animal welfare. Farming and handling of animals is an integral part of the production process of materials such as wool, leather and fur. Poor farming practice can lead to neglect or mistreatment of animals, resulting in malnutrition, infections and illness. The source of such products can often be other countries where the welfare of animals is not always as certain as that of UK sourced products, with concerns particularly in respect of transportation, slaughter and processes such as ‘tooth- grinding’ and ‘mulesing’.

The end of life phase of textiles presents opportunities to the sector to consider relevant social considerations, according to a procuring organisation’s objectives. This could include creating skills and training opportunities (e.g. apprenticeships or on the job training), creating employment opportunities for the long-term unemployed, NEETs (Not in Employment, Education or Training), supporting SME and social enterprises.

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While public sector procurers have historically procured textiles as a commodity, there are an increasing range of textiles services procured. For example, this may include work wear and associated laundry services provided by facilities management service providers. As such, the service procured may extend the range of sustainability issues beyond those applying to the manufacture of the textiles product. It also offers an opportunity to deliver social benefits through the delivery of the service, according to relevant social objectives and criteria.

3.2 Proposed Social and Ethical Criteria: Textiles

The scope of the potential contracts within the textiles product group covers procurement of textiles products (such as uniforms and linen), and their use and end of life. Some textiles contracts may involve service delivery, which includes the use of a textiles product.

The key social and ethical issues identified for the textiles product group are set out in Table 3.1.

Table 3.1 Key social and ethical issues: textiles

Theme Issues

Labour Standards Working conditions Child labour

Workforce Skills & training Apprenticeships

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Animal welfare

The social and ethical sourcing criteria for textiles can be found in Annex B of the BMT Isis Main Report1.

3.3 Baseline

3.3.1 Existing and forthcoming policies, legislation and voluntary initiatives-

A range of policies and legislation, including voluntary and sector initiatives, are in place relevant to the social and ethical considerations of textiles. These include, among others:

 The recent EU Regulation (EU 1007/2011) on textile fibre names and related labelling and marking of the fibre composition of textile products is directly applicable in the UK and all Member States. The Regulation introduces a new requirement to clearly label the non-textile parts of animal origin in textile products. The textile parts of footwear are no longer within the scope of the EU Regulation and are now dealt with by the Footwear (Indication of Composition) Labelling Regulations 1995.

 The overall framework for EU action on animal welfare is set out in the EU Animal Welfare Strategy 2012-2015. Harmonised EU rules are in place covering a range of animal species and

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welfare-affecting issues. Council Directive 98/58/EC lays down the minimum standards for the protection of all farmed animals, while other EU legislation sets welfare standards for farmed animals during transport and at the time of stunning and slaughter. Specific Directives cover the protection of individual animal categories such as calves, pigs and laying hens. In addition to farmed animals, animals used in laboratory tests and wild animals kept in zoos are also protected by harmonised EU standards. Other international organisations have also issued recommendations and guidelines concerning animal welfare, such as the World Organisation for Animal Health (OIE) and the Council of Europe. The EU is a signatory to the European Convention for the protection of animals kept for farming purposes, adopted by the Council of Europe.20

 The RESPIRO Guide on Socially Responsible Procurement of Textiles and Clothing21 provides guidance for public authority procurers in the EU wishing to procure textiles and clothing in a socially responsible way;

 ‘Procuring the Future, Sustainable Procurement National Action Plan: The Sustainable Procurement Task Force’ in 2006 recommended that the UK public sector urgently examine its supply chain for uniforms, clothing and other textiles as it is a category of spend representing a ‘major source of social concern’; 1

 The Defra Sustainable Clothing Road Map22 has been developed to focus on priority actions which will help embed sustainable practices into the UK Clothing sector. The Road Map largely focuses on reducing the environmental impact of textiles and in particular the end of life impacts. It also considers social issues to some extent, mainly focusing on international supply chains. While the Road Map includes a large focus on the retail sector, common issues regarding textiles apply to other sectors and it emphasises the importance of considering relevant social issues, which must include a focus on the full life cycle of textiles, in particular manufacturing and end of life;1

 Textiles have been identified as a priority sustainability area for the UK public sector, resulting in the development of the Government Buying Standard for Textiles. This covers uniforms, merchandise and textiles used in cleaning and catering and textile use for interior products such as chairs; wall and floor coverings are excluded. The GBS addresses some social issues, in particular protecting workers’ rights throughout the supply chain and the steps procurers take to ensure suppliers of goods and services respect workers’ rights; 1

 The Animal Welfare Act 2006 contains the general laws relating to animal welfare and makes clear that it is an offence to cause unnecessary suffering to any animal. The Act applies to all animals on common land. The Act contains a Duty of Care to animals, which means that anyone responsible for an animal must take reasonable steps to make sure the animal’s needs are met. In addition, the welfare of farmed animals is protected by the Welfare of Farmed Animals (England) Regulations 2007 as amended (S.I. 2007 No.2078), which are made under the Animal Welfare Act;

 A prominent initiative in the UK is the Ethical Trading Initiative (ETI)23, whose collaborative, member-driven programmes include apparel and textiles. The ETI works in collaboration with its

20 http://www.efsa.europa.eu/en/topics/topic/animalwelfare.htm

21 http://www.respiro-project.eu/fileadmin/template/projects/respiro/files/RESPIRO_Guides/RESPIRO-Textiles-final- www.pdf

22 http://www.defra.gov.uk/publications/files/pb13461-clothing-actionplan-110518.pdf

23 http://www.ethicaltrade.org

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member companies, trade unions and NGOs to build a full picture of the labour environment within specific supply chains and their local contexts, then find ways to tackle the root causes of workers' rights problems within them. Corporate members are required to adopt the ETI Base Code (a model code of labour practice, and is derived from the ILO Conventions) and must also sign up to ETI's Principles of Implementation, which set out the approaches to ethical trade that member companies should follow; and

 Other sector specific ethical and fair trade initiatives or voluntary codes also exist that are promoted in the UK, including Better Cotton Initiative, Oxfam Make Trade Fair, Clean Clothes Campaign, Global Organic Textiles Standard (GOTS), Sedex and SA8000. Key issues include introducing a system that monitors labour standards in a practical and robust manner, given inevitable concerns about audit assurance and costs for products supplied from such a great geographical distance away.

3.3.2 Current market

About £38 billion are spent on clothing in the UK, which constitutes about 6% of the total worldwide spent on clothing (£650 billion)24.

Annually the UK consumes 2.16 million tonnes of clothing and textile products. About one fifth of the UK’s consumption is manufactured in the UK25.

According to Eurostat, the turnover of textiles and textile products industry comprises more than 186 billion Euros with the UK accounting for about 8% or 15 billion Euros. France, Germany and Italy jointly account for almost 60% of the industry’s turnover. In line with the turnover, the total production value of textiles and textile products industry is more than 175 billion Euros of which the UK accounts for about 8% or 14 billion Euros. Almost 70% of total production in the EU-27 is concentrated in France, Italy, Germany and Spain26.

There are more than 228,350 enterprises that manufacture textiles and textile products in the European Union27. The UK hosts about 4% or 9,068 manufacturers, with Italy, Spain, Poland and Portugal accounting for more than half of all EU-27 manufacturers, e.g. 56%.

In the supply chain for all textiles and textiles products, the UK employs 182,000 people with the majority in the retail and associated sectors and manufacturers making specialist products.

The average size of an enterprise in the textiles and textile products industry in theEU-27 is about 0.8 million Euros, which according to the definition of Small and Medium Enterprises28 falls under the category of micro

24 ERM, Defra. Mapping of Evidence on Sustainable Development Impacts that Occur in the Life Cycles of Clothing. 2007

25 ERM, Defra. Mapping of Evidence on Sustainable Development Impacts that Occur in the Life Cycles of Clothing. 2007

26 Source: Eurostat, accessed October 2008, data for EU 27, 2005 NACE: DB - Manufacture of textiles and textile products: INDIC_SB: V12120 - Production value and V12110 - Turnover or gross premiums written; Please note that due to confidentiality issues information for some countries and/or categories was not available.

27 Source: Eurostat, accessed October 2008, data for EU 27, 2005; NACE: DB

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enterprise. However, significant variations are observed among different EU-27 countries; the average size range from 0.2 million Euros in Bulgaria up to 3.7 million Euros in Germany.

The average size of enterprises in the textiles and textile products industry in the UK falls under the category of micro-sized enterprises; according to the Eurostat the average turnover per enterprise in the UK is about 1.7 million Euros, which is higher than the average size in the EU-2729.

About 74 million tonnes of fibre was produced in 2007 worldwide with synthetic fibre accounting for 57% and raw cotton accounting for 36%. Worldwide fibre production has increased by 38% since 2000 with cotton and synthetic experiencing rapid growth30.

The UK imports about 80% of clothing and textile products consumed (or 90% of the clothing consumed). Hong Kong, China, Turkey jointly contribute to the 60% of the 1.70 million tonnes of clothing and textile products imported in the UK, followed by Italy, India, Bangladesh and Sri Lanka31.

Manmade fibres, yarns and fabrics for clothing and textile industry constitute significant share in the UK imports, i.e. 60%, followed by natural fibres – 29%, of which cotton accounts for 15%. Globally, cotton is the largest single fibre in production with global demand driving large scale production32.

The UK import of textiles and textile products amounts to about £16 billion, while export is about £5 billion. According to the UK Trade info, import of the textiles and textile products have experienced significant growth in the last decade (about 48% 1996 to 2006), while export has experienced a decline of 16%.

Articles of apparel and clothing accessories33 account for significant share in imported and exported goods. In particular apparel and clothing accessories account for about half of all exported textiles and textile products and more than 85% of the imports.

28 Small enterprise if turnover is less or equal 10 million Euros; Medium enterprise if turnover is less or equal to 50 million Euros; Micro enterprise if turnover is less than 2 million Euros. Source: http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm

29 Source: developed based on Eurostat data for 2005; developed based on Eurostat data for 2005; NACE: DB - Manufacture of textiles and textile products: INDIC_SB: V11110 - Number of enterprises

30 International Rayon and Synthetic Fibres Committee (CIRFS), 2008: http://www.cirfs.org/

31 ERM, Defra. Mapping of Evidence on Sustainable Development Impacts that Occur in the Life Cycles of Clothing. 2007.

32 Defra, Sustainable Clothing Roadmap: Briefing note – Sustainability Impacts of Clothing and Current Interventions, 2007

33 UK Trade Info: Articles of apparel and clothing accessories knitted or crocheted (61) and Articles of apparel and clothing accessories not knitted or crocheted (62)

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3.3.3 Current practices in UK public procurement

UK public sector expenditure on textiles is significant. The UK government market (government departments) for textiles, in 2008, was estimated to be worth £1.1b (Government Buying Standard), with additional significant expenditure by NHS Trusts, NHS Supply Chain, Higher and Further Education Institutions and Local Authorities. The total UK textiles market is worth approximately £23b (2010), with the majority relating to the retail sector1.

To date procurement for textiles has not tended to be centralised or secured collaboratively1 and there are only a limited number of frameworks. These include:

 NHS Supply Chain Direct Textiles Framework Contract34 is in place until March 2015 for the provision of uniforms and workwear; bedding, linen and towels; flame retardant fabrics curtains and blinds; personal protective equipment. NHS Supply Chain examined the suppliers’ stance on environmental and sustainability issues, which included pesticide residues, end of life disposal and clean clothes;

 The Government Procurement Service Laundry & Linen Services (RM849) Framework35 is in place until December 2013 and offers a service, delivered to NHS Laundry Standards (currently under review), for NHS trusts and other public sector organisations throughout England, Wales, Scotland and Northern Ireland;

 The Crescent Purchasing Consortium (CPC)36 has its CPC PPE Agreement in place until August 2014 for the provision of: PPE (Personal Protective Equipment); first aid; corporate wear and staff uniforms; food industry clothing; sports clothing; personalised clothing; and medical clothing;

 Sunderland City Council has a Framework for the Supply and Delivery of Uniforms and Work Wear in place until April 2014;37 and

 Procure North Yorkshire, together with Hambleton and Richmondshire District Councils, awarded a framework contract for the supply of work wear, corporate uniforms and PPE in 2012 which will run for a period of 4 years.38

34 http://www.supplychain.nhs.uk/product-news/contract-launch-briefs/2013/march/direct-textiles/

35 http://gps.cabinetoffice.gov.uk/contracts/rm849

36 CPC is owned by and run in the main on behalf of the Further Education Sector. See: http://www.thecpc.ac.uk/

37 http://www.government-online.net/framework-for-the-supply-and-delivery-of-uniforms-and-work-wear/

38 http://www.procurenorthyorkshire.com/Latest-News/Latest-News-Item-1.aspx

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Box 2 Ministry of Justice: supply chain labour assurance processes1

The Ministry of Justice (MoJ) has sought to utilise an assurance process which focuses on transparency in the textiles supply chain with a requirement on the Tier 1 supplier to update all supplier details regularly. This includes a dossier of Corporate Social Responsibility (CSR) documentation, i.e. a self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. This is developed through a tender competition, agreed through contract mobilisation and maintained and version controlled in 'real-time' as a contract management function. In practice, the CSR control processes employed by the MoJ varies according to the nature of the procurement, but is based on common principles and procedures. It is the responsibility of the Tier 1 Supplier to control CSR and the MoJ Procurement Directorate will continue to obligate the supplier to commission 3rd party audits on MoJ’s behalf. The supplier shall submit annually an Internal Audit Report and Corrective Action Plan evidencing that the Supplier’s whole supply chain is operating according to the internationally accepted standard set out in the ETI Base Code, Sedex, the Worldwide Responsible Apparel Production (WRAP) or equivalent.

A list of key textiles suppliers to the public sector are presented in Table 3.2.

Table 3.2 Public sector suppliers: textiles

Framework Suppliers

NHS Supply Chain Direct Textiles Framework; CPC PPE Agreement Arco Brady Downland EOS Francis Price Gailarde Global Textiles Grahame Gardner Grosvenor Interweave J & M Medical James Walker Kikks L Whitaker Logistik Unicorps Meltemi Murray MWUK Nurse Care P L S Plane Talking Portwest Rizues Group Screwfix Skopos Toffeln Ward Walkers Work In Style S M D

Service Laundry & Linen Services Central Laundry

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Framework Suppliers

East Lancashire Hospital Trust East Sussex Hospital NHS Trust Express Linen Services Grosvenor Contracts (London) Maidstone and Tunbridge Wells NHS Trust Nottingham University Hospitals Royal Devon & Exeter Hospital Salisbury NHS Foundation Trust Synergy Health The Pennine Acute Hospital NHS Trust The Sunlight Service Group

Sources: NHS Supply Chain Direct Textiles Framework; CPC PPE Agreement; Government Procurement Service

3.4 Assessment of Market Implementation of Criteria: Textiles

Whilst the focus on retailers has resulted in a number of authorities in the UK public sector embracing certain social issues for textiles, this is not necessarily widespread across all the public sector.1 Examples exist of public sector procurers with significant leverage who require suppliers to adhere to requirements around ethical standards. For instance, NHS Supply Chains’, which delivers an end to end logistics and supply service to the English NHS and manages over 600 suppliers, approach to ethical procurement is around labour assurance. Ensuring basic human and labour rights, and that employers provide safe and decent working conditions, are principles outlined in its Supplier Code of Conduct. All contracts are evaluated by the Sustainable Procurement Risk and Opportunity User Tool (SPROUT) to ensure that sustainability (including ethics) is at the centre of procurement decisions. NHS Supply Chain reports that its Labour Standards Assurance System (LSAS) is currently being piloted.39 Annex A of the Main Report1 provides a selection of existing public sector case studies and examples for textiles.

Although there is a significant difference between the textiles retail / fashion sector and UK textiles public sector, it is likely that procurers share suppliers in their respective supply chains. The retail sector has been engaging in ethical procurement with their key supply chains for some years as they increasingly recognise it is crucial to risk management, a key generator of business value and an important element of responsible practice. They also recognise that by investing in building social and ethical issues into procurement, they can engender strong supplier relationships and enhance their social responsibility overall. Given the focus of retailers on ethical issues within their supply chain, and reputational and other concerns, public sector procurers may find that suppliers are already addressing labour standard issues as well as animal welfare standards.

Many companies, in particular large consumer-facing brands, are involved in industry or issue-specific initiatives to collaborate (such as the ETI) with others in finding solutions to some of the tough challenges and increase the effectiveness of their ethical trade strategies. The focus has been very much on ethical procurement, and to a lesser degree on social procurement such as promoting apprenticeships. However, the ETI believes that it would still be risky for public sector bodies to assume that because of this, manufacturers are definitely compliant in the

39 Sustainability Report 2011, NHS Supply Chain

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production of goods and services for the public sector without any form of vetting.40 As such, the UK public sector spend does not represent the majority of the customer base. However, as public sector individual contracts with suppliers may be large and of a relatively long duration (often around three years), public procurers may have an unexpectedly high potential to influence working conditions in the factories their suppliers are using. 1

As far as the end of life is concerned, recovery of corporate wear in the UK is currently operating on a relatively small scale, at less than 5%. The main barriers to reuse and recycling include heterogeneous fibre composition, construction and garment designs which inhibit disassembly, and the strong individual identity of corporate uniforms - which can often pose a security issue if they are not removed. As such, corporate wear from high level security sectors (such as transport and public services) is often security-shredded and disposed of to landfill.

With secondary markets available in many countries, including nations in Africa and across Eastern Europe, end- of-life clothing is a valuable commodity. There are plenty of organisations collecting EoL clothing in the UK, and many offer significant financial incentives. Higher quality clothes, and those with little wear, command the highest prices, but even soiled or ripped and torn clothing can be sold on for use as low value wipers, or recycled into fibres for applications such as fillings for the automotive, audio and mattress industries. ‘Charity rag’ is clothing not sold in charity shops for reuse as garment, but sold on to textile reprocessors, often for export overseas. There has been a sharp increase in rag value over the last couple of years41.

Due to the high number of suppliers to the public sector, and as this is a high level assessment, it was not feasible to evaluate current performance against each social and ethical criteria proposed for the textiles sector as part of this study. Further engagement with suppliers would be required at the tendering or renewal stage of a framework agreement or individual contract to be able to assess the ability of bidding suppliers to meet these criteria and whether it would exclude any suppliers from being able to participate. This would also allow the procuring authority to understand what support suppliers may require to be able to increase their ability to satisfy social and ethical related tender criteria.

40 Comments captured in a telephone interview with Martin Cooke at the ETI.

41 See: http://www.uniformreuse.co.uk/corporatewear-policies.html

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4. Assessment of Social and Ethical Criteria: Food and Catering

4.1 Background and Rationale for Intervention: Food and Catering

The agriculture sector plays an important role in the global economy and world food supply. Worldwide, millions of people work on an estimated 450 million farms, which indicates the importance of human rights in the agriculture food sector. Work in the agriculture sector is labour intensive and employees are often uneducated, which makes the employees vulnerable for human rights abuses such as discrimination, systematic denial of women's rights, low payment, violations of the freedom of expression and unfavourable working conditions42.

Violations against human rights and labour standards have also been found to be prevalent in the UK agriculture and food supply chain. Research by the Joseph Rowntree Foundation43 uncovered 14 practices of forced labour and exploitation in the UK food industry, drawing on in-depth interviews with 62 migrant workers (mainly Polish, Chinese, Latvian and Lithuanian) across five locations (London, Liverpool, South-West England, Lincolnshire and East-Central Scotland) working on farms (many as fruit or vegetable pickers), in food processing and packing, or in ‘minority ethnic catering'. The most notable and unexpected forced labour practice uncovered was the ‘underwork scam’ – recruiting too many workers and then giving them just enough employment to meet their debt to the gangmaster. Furthermore, a significant proportion of interviewees paid fees to come to the UK and secure work, creating indebtedness and dependence. The intensity of work in the food industry, driven by economic pressures throughout the supply chain, has contributed to such exploitation.

The welfare of animals is also important within the context of food production. Whilst the welfare of pigs, cattle, poultry, sheep and other species is governed by law within the UK, the source of animal food products can often be other countries where the welfare of animals is not always as certain as that of UK sourced products with concerns around rearing, housing, transportation (including trans-frontier) and slaughter.

Nearly a quarter of children enter primary school in England are overweight or obese, rising to one-third by the time they get to secondary school. Research shows that when children eat better, they do better as they are more likely to concentrate in the classroom in the afternoon after eating a healthy school lunch in a pleasant environment. This also improves their health and their ability to make better food choices. According to The Children’s Food Trust, national standards for school food have transformed the way children eat in school, but as the current statistics demonstrate, supporting healthy eating can never begin too early44.

42 http://www.humanrightsimpact.org/themes/business-centre/sector-information/

43 Forced labour in the UK food industry, May 2012, Joseph Rowntree Foundation

44 Impact Report 2012, 2012, Children’s Food Trust

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Eating is a behaviour that can also be greatly influenced by the workplace. Many workers spend at least a third of their day or half of their waking hours at work and food and snacks are usually consumed during this time. Food available in employee cafeterias, vending machines, and at work-sponsored events frequently determines what people eat throughout the day. Many times, food provided by the workplace is not highly nutritious or is high in fat or sugar. Furthermore, workers on special diets for health or religious reasons often are faced with a limited selection of food options at work. Employers need to understand the dietary needs of the employees, whether these workers refrain from meat products, pork, foods high in salt, fat or cholesterol, or foods that might cause an allergic reaction. Culture often dictates when one can eat as well as what one can eat; for instance, Muslim workers during the period of Ramadan. Understanding these needs will help employers with food provision, labelling and timing.45

As a significant procurer of food and catering services, particularly relating to education provision (e.g. school meals), as well as a leading employer in the UK, the public sector has a particularly important role in promoting healthy and culturally sensitive eating. The public sector also has a responsibility to ensure that the food it provides through its institutions, is prepared with due consideration to social and ethical concerns.

4.2 Proposed Social and Ethical Criteria: Food and Catering

The scope of the potential contracts within the food and catering product group covers food provision, which is most often procured as a catering service.

The key social and ethical issues identified for the food and catering product group are set out in Table 4.1.

Table 4.1 Key social and ethical issues: food & catering

Theme Issues

Labour Standards Working conditions Child labour

Workforce Skills & training Apprenticeships

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Animal welfare Nutritional, religious and culturally appropriate food Provision of information

The social and ethical sourcing criteria for food and catering can be found in in Annex B of the BMT Isis Main Report1.

45 Food at work: Workplace solutions for malnutrition, obesity and chronic diseases, 2005, ILO

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4.3 Baseline: Food and Catering

4.3.1 Existing and forthcoming policies, legislation and voluntary initiatives

A range of policies and legislation, including voluntary and sector initiatives, are in place relevant to sustainability in the food and catering sector. These include, among others:

 The overall framework for EU action on animal welfare is set out in the EU Animal Welfare Strategy 2012-2015. Harmonised EU rules are in place covering a range of animal species and welfare-affecting issues. Council Directive 98/58/EC lays down the minimum standards for the protection of all farmed animals, while other EU legislation sets welfare standards for farmed animals during transport and at the time of stunning and slaughter. Specific Directives cover the protection of individual animal categories such as calves, pigs and laying hens. In addition to farmed animals, animals used in laboratory tests and wild animals kept in zoos are also protected by harmonised EU standards. Other international organisations have also issued recommendations and guidelines concerning animal welfare, such as the World Organisation for Animal Health (OIE) and the Council of Europe. The EU is a signatory to the European Convention for the protection of animals kept for farming purposes, adopted by the Council of Europe.20

 The Gangmasters (Licensing) Act 2004 created the offences of acting as an unlicensed gangmaster and entering into arrangements with an unlicensed gangmaster. It applies to labour providers who supply people to undertake work to which the Act applies anywhere in the UK, on any portion of the shore or bed of the sea, or of any estuary or tidal river, adjacent to the UK, whether above or below the low water mark (or in UK coastal waters). This includes businesses registered as employment agencies or employment businesses. The Act also applies to people using others to gather shellfish. The Act 2004 established the Gangmasters Licensing Authority to set up and operate the licensing scheme that regulates businesses who provide workers to the fresh produce, supply chain and horticulture industry, to make sure they meet the employment standards required by law;

 Forced labour recently became a criminal offence via the 2009 Coroners and Justice Act (Section 71) in England, Wales and Northern Ireland, and the 2010 Criminal Justice and Licensing Act (Section 47) in Scotland;

 The Department of Health announced in October 2012 proposals for front-of-pack nutrition labelling that clearly displays: how much fat, saturated fat, salt and sugar and how many calories food products contain. The new proposed system includes using: colour coding; guideline daily amounts (%GDA); and high/medium/low text. The new label is expected to be in use by summer 2013. Many retailers already use variants of a hybrid system; however, they each display the information with different visuals, colour and content making it hard for consumers to compare foods;46

 All local authority maintained primary, secondary, special schools and pupil referral units in England are required to meet national school food standards as set out in the Education (Nutritional Standards and Requirements for School Food) (England) Regulations 2007 (as amended). The standards were introduced to ensure that food provided to pupils is nutritious and of high quality; to promote good nutritional health in all pupils; protect those who are nutritionally vulnerable and promote good eating behaviour;

46 http://www.dh.gov.uk/health/2012/10/nutrition-labelling/

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 The Greening Government Commitments make a commitment to procurement of food and catering services, including action taken within the context of overarching priorities of value for money and streamlining procurement, to encourage the procurement of food that meets British or equivalent production standards where this does not lead to an overall increase in costs; and to reduce the environmental impacts of food and catering services and support a healthy balanced diet;

 The Government Buying Standards for Food and Catering Services Foods covers issues such as sourcing fish from sustainable sources, animal welfare and ethical trading considerations, as well as foods procured and served to higher nutritional standards;

 Business in the Community has developed the Voluntary Code of Practice on Employing Migrant Workers / Overseas Staff in Great Britain47 to better inform employers about how they can make migrant workers feel welcome and help them settle into their new environment. It also sets out what employers can do on a longer-term basis to help migrant workers integrate more effectively into their workplace and the community;

 A prominent initiative in the UK is the Ethical Trading Initiative (ETI)23, whose collaborative, member-driven programmes include food and farming. The ETI works in collaboration with its member companies, trade unions and NGOs to build a full picture of the labour environment within specific supply chains and their local contexts, then find ways to tackle the root causes of workers' rights problems within them. Corporate members are required to adopt the ETI Base Code (a model code of labour practice, and is derived from the ILO Conventions) and must also sign up to ETI's Principles of Implementation, which set out the approaches to ethical trade that member companies should follow; and

 Other sector specific voluntary standards and initiatives which include: Fairtrade; Soil Association; LEAF Marque; Red Tractor; RSPCA Freedom Foods; Farm Assured; Marine Stewardship Council; Roundtable for Sustainable Palm Oil; and Rain Forest Alliance. Whilst it would be unlawful to request any of these standards within public sector procurement, these standards can be useful in understanding what is possible as it is the principles that underpin them that are important.1

4.3.2 Current market

The food and drink manufacturing industry is the single largest manufacturing sector in the UK, with a turnover of £76.7bn, with a gross value added of £20.4 billion, accounting for 16% of the total manufacturing sector48.

The industry employs up to 400,000 workers representing 15% of the overall manufacturing workforce in the UK. The industry is also a key partner for British farmers: buying two thirds of all the UK's agricultural produce. All

47 http://www.bitc.org.uk/resources/publications/migrant_workers_1.html

48 Food and Drink Federation; http://www.fdf.org.uk/

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this economic activity is carried out by over 6,000 food and drink enterprises – many of which are small companies employing less than 10 people49.

The sector is an important trading partner with Europe: exporting over £12bn of food and non-alcoholic drink products a year, 77% of which go the EU.50

The hospitality industry’s turnover in 2010 was £90 bn along with Gross Value Added of £46bn. The sector directly employs 2.44 million people with 0.8 million people being employed in the catering sector. The hospitality sector represents around 8% of total employment and this makes the sector the UK’s fifth biggest industry in employment terms51.

In the UK, there are over 180,000 hospitality and leisure establishments. The sector is characterised by employing a young workforce with over a third of staff being under 25. However, in the service sector, most workers are aged 35 to 5552.

4.3.3 Current practices in UK public procurement

The public sector procures around £2bn of food per year. Annual estimated spend on food and food services:53

 Schools: £1 billion (£350 million on ingredients);

 Higher education and further education: between £350m and £500m on food ingredients;

 National Health Service: £300 million on food ingredients and £500 million on catering overall;

 Armed Forces: £135 million on food and food delivery;

 National Offender Management Service: covering 128 public sector prisons: £54 million on food.

Food and catering services are currently not centralised and there are a limited number of frameworks. These include:

 Pro5 Group54 run a number of national food and catering related framework agreements. For instance, the Catering Services Framework is an agreement, which expires in 2015, for the provision of

49 Food and Drink Federation; http://www.fdf.org.uk/

50 Food and Drink Federation; http://www.fdf.org.uk/

51 Oxford Economics (2010). Economic Contribution of UK Hospitality Industry. Final report. September 2010

52 The UK Hospitality Sector.

53 http://www.defra.gov.uk/food-farm/food/public-sector/

54 The Pro5 membership consists of 5 buying organisations: ESPO Eastern Shires Purchasing Organisation (ESPO); Central Buying Consortium (CBC); North Eastern Purchasing Organisation (NEPO); Yorkshire Purchasing Organisation (YPO).

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managed catering services for schools and other public sector clients, such as community meals services, tourist venues, colleges and universities, hospitals, defence establishments, and staff restaurants (including civic catering); and

 ESPO, acting on behalf of public sector bodies, negotiates a range of EU compliant contract arrangements food and catering services open for participation by public bodies and UK registered charities. For instance, the Ready Meals – Frozen and Ambient Framework was launched in August 2012 and is available for use by any local authority or public sector body in the UK, including educational establishments and Academies. The Groceries and Provisions Framework is a national framework in place until 2014 that provides a range of delivered goods for use by all public sector establishments and registered charities.

A list of food and catering suppliers that are appointed to the framework agreements described above is presented in Table 4.2.

Table 4.2 Public sector suppliers: food & catering

Framework Suppliers

Catering Services Agincare Cuisine Alfresco Services Apetito, Aramark Avenance Catering Academy Caterlink Churchill Catering Class Catering Compass Contract Services County Enterprise Foods Crown Holding Cygnet Foods Food for Thought Educational Catering Harrison Catering Services Hertfordshire Catering Icare (GB) Initial (Eden Foodservice) ISS Facility Services Lindley Group OCS Group UK Pride Catering Partnership Sheffield International Venues Shire Services Sodexo WRVS Food Services

Ready Meals – Frozen and Ambient Apetito Tillery Valley Foods

Groceries and Provisions BFS Group Blakemore Foodservice

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Framework Suppliers

Brake Bros

Sources: Pro5 Group; ESPO Dealing Direct

4.4 Assessment of Market Implementation of Criteria: Food and Catering

The food industry has been engaged with social and ethical issues for a number of years. The May 2007 Food Industry Sustainability Strategy Champions Group on Ethical Trade55 identified three key areas to focus on to establish sustainable sourcing, which included “respect human rights and reduce poverty by creating profitable trading”.

The food industry is also increasingly responding to pressure from big companies and consumers to respond to ever growing demands around social and ethical standards:

 The proliferation of sustainability initiatives targeted at the food industry (including Fairtrade; Soil Association; LEAF Marque; Red Tractor; RSPCA Freedom Foods; Farm Assured; Marine Stewardship Council; Roundtable for Sustainable Palm Oil; and Rain Forest Alliance) demonstrates that buyers are “switched on” to this agenda and are seeking reassurance that they are making informed purchasing decisions via these labels. For instance, estimated UK retail sales by value in 2011 for Fairtrade certified products in the UK was £1,319.3m and the Fairtrade Foundation has licensed over 3,000 Fairtrade certified products for sale through retail and catering outlets in the UK;56

 Leading supermarkets in the UK (Tesco, Sainsbury’s, ASDA, Waitrose, Morrisons, M&S) all have some form of responsible sourcing programmes in place which address human rights, labour standards and animal welfare, requiring suppliers to “up their game” if they want to continue to supply these customers. Many of these companies are also active members of the ETI and have ongoing partnerships with the organisation to address social and ethical issues in their supply chains; and

 Some leading organisations are taking this one step further and building their core business strategy around sustainability and are including their supply chains as part of their delivery plan. Unilever’s Sustainable Living Plan57 commits the company to source sustainably all its agricultural raw materials by 2020. Indicators for sustainable sourcing include: social and human capital: ensuring the capacity of people to earn and sustain their livelihoods as well as enhancing farmers’ knowledge, training and confidence; local economy: helping sustain local communities; and animal welfare: ensuring animal standards are based on the ‘five freedoms’ defined by the Farm Animal Welfare Council. Unilever uses a variety of ways to ensure that supplies of raw materials meet its sustainable sourcing requirements; either through third-party certification, or through a combination of self-verification and performance reporting. In 2010, Unilever reported that 14% of all its agricultural raw materials

55 http://www.igd.com/index.asp?id=1&fid=1&sid=5&tid=155&foid=135

56 http://www.fairtrade.org.uk

57 http://www.unilever.com/sustainable-living/uslp/

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were sourced sustainably and that this increased to 24% at end 2011. Unilever’s strategy has significant impacts on the global agricultural supply chain as the company purchases from a network of around 160,000 suppliers worldwide.

The London Olympics 2012 demonstrates that food suppliers in the UK are able to meet social and ethical considerations on a large scale. LOCOG published a Food Vision58 for Games-time catering, which set baseline standards for food sourcing that required producers and suppliers to adhere to a number of food-related standards (including Fairtrade, Marine Stewardship Council certified fish and Farm Assured Red Tractor) that cover issues such as animal welfare, healthy food, training, living wage and labour standards. The programme applied to food arranged by LOCOG, which covered most of the food that was served during the games. An additional 10- 20% was served by sponsors like McDonald's, Coca-Cola and Cadbury, who voluntarily applied some of the standards. Following on from the successful implementation of the Food Vision programme, the Food Legacy programme59 was set up with the aim to inspire, inform and provide practical assistance, to help more caterers and food suppliers achieve the ambitions of the London 2012 Food Vision. The programme specifically encourages food suppliers in the public sector to participate. Public sector Organisations that have already committed to healthy and sustainable food, inspired by the London 2012 Food Vision, include the Greater London Authority Group (which includes City Hall, the London Metropolitan Police, Transport for London and the London Fire Brigade).

Box 3 Apprenticeships in the Food and Drink Sector

The Food and Drink Federation (FDF) has called on all UK food and drink manufacturers to sign up to its apprenticeship pledge and help contribute to UK Government’s goal of delivering an extra 250,000 apprenticeship places by 2015. FDF has pledged to double the number of apprenticeships available in the food and drink manufacturing sector in England and Scotland by the end of 2012. The pledge will also contribute towards Feed Your Ambition: Skills Action Plan for the UK Food Supply Chain, which announced an industry commitment to create 50,000 apprenticeship training opportunities throughout the UK food supply chain, from farming to manufacturing to retail. FDF believes that 30% of the current workforce will need to be replaced by 2017 due to employees entering retirement or leaving the industry. The sector is currently relying on an ageing workforce to support growth and does not currently have a sufficient pipeline of young people that could potentially be engineers, team leaders or managers for the future. The collective action of food and drink manufacturers will help build a pool of talented apprentices that can be developed and deployed across the UK food and drink manufacturing industry, building skills for the future. Source: Food and Drink Federation

Due to the high number of suppliers to the public sector, and as this is a high level assessment, it was not feasible to evaluate current performance against each social and ethical criteria proposed for the food and catering sector as part of this study. Further engagement with suppliers would be required at the tendering or renewal stage of a framework agreement or individual contract to be able to assess the ability of bidding suppliers to meet these criteria and whether it would exclude any suppliers from being able to participate. This would also allow the procuring authority to understand what support suppliers may require to be able to increase their ability to satisfy social and ethical related tender criteria.

58 http://www.london2012.com/about-us/sustainability/food-vision/

59 http://www.sustainweb.org/foodlegacy/

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5. Assessment of Social and Ethical Criteria: Buildings and Construction

5.1 Background and Rationale for Intervention: Buildings and Construction

The buildings and construction industry is a major consumer of resources and has a large impact on the sustainability of the UK and the wider world. It is an extremely diverse sector and the ethical and social issues of concern are similarly diverse and can be seen to cover a range from the legislative and regulatory (health and safety; equality and diversity; accessibility), to those governed by codes of good practice, to those driven by organisational priorities and supported by specific organisational policies. It also reveals ethical sourcing issues associated with the materials used to make a product, through the product’s use in a building, all the way to the impact of the building project on the local economy and its skills base.1

Illegal and unsustainable logging threatens to deplete and severely degrade vital forest resources which are of enormous importance to biodiversity, indigenous communities and national economies. As the world’s fourth largest importer of timber products, the UK has the responsibility to ensure that the timber it uses comes from legal and sustainable sources. With the UK public sector accounting for about 30% of all timber consumption in the UK, public procurement policies play a central role in incentivising changes in practice and management at the forest source.60 It is important that contractors, architects and builders of public sector contracts source timber from environmentally and socially responsible sources from certified sources. Instances of exploitation and forced labour have been found in the UK construction sector. For example, a study found evidence of violence being used against Polish workers in the North East of England who were demanding wages that were owed to them. Migrants have also been found to be actively encouraged and in some cases compelled by employers and agencies to falsely register as self-employed. Such workers have experienced a loss of their employment rights and in some cases have been severely exploited61.

Construction can help stimulate employment. The employment that construction provides benefits lower skilled and young workers who have relatively few alternative opportunities and who are typically most vulnerable at times of recession. Many regions are heavily dependent on construction jobs; a report by the UK Contractors Group found that 60% of the GB construction workforce is in regions where unemployment is higher than average or would be in the absence of construction62.

As the construction sector is a major part of the UK economy, the UK public sector has a responsibility to protect the human and labour rights of workers in this sector. It also has a responsibility to ensure that the products and

60 http://www.cpet.org.uk/files/CPET%20article%20timber%20in%20construction.pdf

61 Forced Labour in the UK: The Business Angle, 2012, Joseph Rowntree Foundation

62 Construction in the UK Economy. The Benefits of Investment, May 2012, UK Contractors Group

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materials that are used in the construction contracts it procures are responsibly produced without detriment to society and the environment.

5.2 Proposed Social and Ethical Criteria: Buildings and Construction

The scope of the potential contracts within the buildings and construction product group covers works contracts, their product, use and end of life. Some works contracts may involve service delivery, which includes the use of a product of the works.

The key social and ethical issues identified for the building and construction product group are set out in Table 5.1.

Table 5.1 Key social and ethical issues: buildings & construction

Theme Issues

Labour Standards Working conditions

Workforce Employment Skills & Training Apprenticeships Diversity & Inclusion

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Material sourcing

The social and ethical sourcing criteria for buildings and construction can be found in Annex B of the BMT Isis Main Report1.

5.3 Baseline: Construction

5.3.1 Existing and forthcoming policies, legislation and voluntary initiatives

A range of policies and legislation, including voluntary and sector initiatives, are in place relevant to sustainability in buildings and construction. These include, among others:

 FLEGT (Forest Law Enforcement, Governance and Trade) is an EU initiative to support countries to address illegal logging. The FLEGT Regulation makes it illegal to import certain types of timber and timber products into the EU from Voluntary Partnership Agreement (VPA)63 partner countries

63 A Voluntary Partnership Agreement (VPA) is a bilateral agreement negotiated between the EU and timber producing countries and is a key part of the FLEGT action plan. Under the terms of a VPA a partner country agrees with the EU to

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unless that timber has been licensed by the exporting country as being legally harvested. The UK government will implement existing FLEGT legislation early to mid-2013, which will require importers of timber from countries with whom the EU has signed a VPA to obtain a FLEGT license to import timber into the UK;

 The UK Government Timber Procurement Policy64 requires that only timber and wood-derived products originating either from independently verifiable legal and sustainable sources or from a licensed FLEGT partner will be demanded for use on the Government estate – appropriate documentation will be required to prove it. From 1 April 2015, only legal and sustainable timber will be demanded. The policy applies to all timber and wood-derived products used on the Government estate including temporary site works and material supplied by contractors. The policy is mandatory for all Central Government Departments, Executive Agencies and NDPBs. Local authorities, other public bodies and the private sector are also encouraged to adopt sustainable timber procurement policies;

 The Central Point of Expertise on Timber (CPET)65 is Defra’s technical advisory body, which provides free advice and guidance to all public sector buyers and their suppliers;

 The Greening Government Commitments make a commitment to sustainable construction, including the management of construction waste to best practice standards, the application of BRE’s Environmental Assessment Methodology, and the extent to which standards used at the London 2012 Games are being applied/exceeded;

 The Government Buying Standard for Construction Projects and Buildings includes a requirement for all timber to be purchased in accordance with UK timber procurement policy;

 The WRAP Construction Procurement Guidance66 was produced to help the construction sector achieve good practice in the procurement process with a focus on waste reduction, recovery and greater use of recovered materials at all stages of a project;

 The Considerate Constructors Scheme67 is the national initiative set up by the construction industry to improve its image. Sites and companies that register with the Scheme are monitored against a Code of Considerate Practice, designed to encourage best practice beyond statutory requirements. The Scheme is concerned about any area of construction activity that may have a direct or indirect impact on the image of the industry as a whole. The main areas of concern fall into three categories: the general public, the workforce and the environment;

implement a timber licensing system. From that partner country, the EU will only accept licensed timber products which are included in the scope of the VPA once the country has fully implemented a timber licensing scheme.

64 http://www.cpet.org.uk/uk-government-timber-procurement-policy

65 http://www.cpet.org.uk

66 http://www.wrap.org.uk/content/procurement-guidance

67 http://www.ccscheme.org.uk/

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 BREEAM and the Code for Sustainable Homes contain sections concerning responsible sourcing of materials;

 BS 8902:2009 Responsible sourcing sector certification schemes for construction products provides a framework for the development of sector certification schemes for responsible sourcing of construction products. It gives requirements for the management, development, content and operation of sector certification schemes for responsible sourcing and supply of construction products;

 BRE Global has published a Framework Standard for the Responsible Sourcing of Construction Products (BES6001) to enable construction product manufacturers to prove that their products have been made with constituent materials that have been responsibly sourced. The standard describes a framework for the organisational governance, supply chain management and environmental and social aspects that must be addressed in order to ensure the responsible sourcing of construction products;

 In 2008, the UK concrete industry published the Concrete Industry Sustainable Construction Strategy, which was pledge to sustainability objectives (including responsible sourcing) and was signed by trade associations and companies and included the commitment to publish an annual report on the sustainability performance of the industry. In 2011, the Sustainable Concrete Forum reported that 88% of concrete production was responsibly sourced to BES6001 making concrete the leading construction material for responsible sourcing;68



 There are a number of funding sources available for apprenticeships. CITB-Construction Skills Grants exist to ensure the long term growth and developments of the industry, by means of a dedicated scheme that helps to contribute towards the costs of training, recognised qualifications and development. It offers grants to support business in a wide range of training and qualifications, from apprenticeship support to training and development plans; and

 Sustainable Timber Action (STA)69 aims to assist European public authorities in making sure the wood/timber products they buy are produced and traded in a sustainable and fair way. The project aims to inform public authorities in Europe about the human and environmental impacts of the timber trade, and how they can contribute by purchasing timber responsibly.

5.3.2 Current market

According to the Government Construction Strategy70, the construction sector represents some 7% of GDP or £110 bn per annum of expenditure; more if the whole-life contribution through planning, design, construction, maintenance, decommissioning and reuse, is taken into account. About 40% of this expenditure is in the public sector, with central Government being the industry’s biggest customer.

The sector comprises three main sub-sectors:

68 The Fourth Concrete Industry Sustainability Performance Report, 2011, The Concrete Centre, part of the Mineral Products Association

69 http://www.sustainable-timber-action.org

70 Government Construction Strategy, May 2011, Cabinet Office

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 commercial and social, £49 billion (£20bn public, £29bn private);

 residential, £42 billion (£14bn public, £28bn private); and

 infrastructure, £18 billion (£7bn public, £11bn private).

Refurbishing and improving the existing built stock accounts for about half of this total.

There are significant differences between sectors: 70

 for commercial and social infrastructure, projects are typically traditional construction with a mix of new build and refurbishment, with most of the public sector spend (on schools, for example) being funded through central Government departments although delivered locally;

 in residential, the public sector has a relatively small new build programme (£4bn) compared to repairs and maintenance (£10bn) – the residential construction markets have different dynamics to other construction markets and most of the public sector delivery is through local authorities; and

 infrastructure is typified by civil engineering works, long overall project durations and major programmes of renewal/maintenance – with 60% commissioned by the private sector and a large proportion of the public sector spending being through central Government departments.

The construction industry value chain is highly fragmented and consists of c.350,000 firms, including many small- and medium-sized family and local businesses:1

 the sector employs c.3.1 million people in a multitude of roles representing 10.5% of UK employment; and

 a significant proportion of construction employees (almost 60%) are low-skilled labourers with relatively limited alternative employment opportunities.

5.3.3 Current practices in UK public procurement

Ethical sourcing criteria are already adopted by many procuring organisations in the ‘wider public sector’ e.g. Durham County Council’s Sustainable Timber Procurement Policy.1 In some parts of the UK, guidance has already been developed to assist public sector organisations to capture aspects of the social agenda such as community benefits. This is particularly relevant to the building and construction sector since it offers opportunities for local authorities and others to focus on issues of relevance to their communities – job creation, skills, apprenticeships, participation of local businesses in public sector contracts, etc.

A range of public sector framework agreements exist in the buildings and constraction sector. These include:

 The Government Procurement Service has a Property Solutions category which includes frameworks and agreements that covers a wide range of products and services including facilities management, estates professional services, modular buildings, building materials, signage etc. For instance, the Building Materials and Associated Managed Services framework, which expires in 2013, gives access to a range of products and services to meet all building needs across six lots including: bathrooms; decorative products; doors; windows; drainage; civils; electrical products; fixings, flooring; glass; heating; insulation; ironmongery; janitorial supplies; kitchens; landscaping; masonry;

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paint; personal protective equipment (PPE); plumbing; plant hire; salt; roofing; tiles; timber; sheet materials; tool and equipment hire;

 The Homes and Communities Agency (HCA) Delivery Partner Panel 2 (DPP2)71 will run until 31 March 2017 and allows local authorities and Registered Providers to procure services for every stage of the development process from soft market testing to physical construction. The value of business procured through DPP2 is projected to be in the region of £4bn. DPP2 covers the whole of England, excluding London; the Greater London Authority (GLA) has procured a similar, but separate panel that will cover London.. DPP2 is available to a wide range of public sector bodies who may own land that they wish to dispose of for housing;

 ESPO and Pro5 Group72 run the Timber - Building / Engineers Framework73 until September 2013, which is a national framework agreement for use by all local authorities and public sector bodies. It includes the supply and delivery of a wide range of timber products including planed & rough sawn timber, boards, flooring, mouldings, chipboard, hardboard and MDF; and

 Scape System Build Ltd is a local authority controlled company wholly owned by Derby City, Derbyshire County, Gateshead, Nottingham City, Nottinghamshire County and Warwickshire County Councils in equal shares. Scape acts as a Contracting Authority and Central Purchasing Body as defined in the EU Procurement Directives. Scape Procure offers a range of OJEU tendered National and Regional Frameworks across the full range of public building. This includes, for instance, the National Contractor Framework worth up to £350m. This single supplier framework is now in its tenth year (third generation) and was re-procured in April 2010 to run for four years; the successful contractor was Willmott Dixon Captial Projects Ltd. It also includes the Minor Works Framework, which went live in 2011 for four years and is available nationally through a network of 65 locally managed offices provided by Kier. Projects valued between £25,000 and £2m can be procured through this framework, which and is valued between £750m and £1bn for public sector projects. Kier uses locally based SMEs to deliver minor works trade packages, ensuring the project funding is recycled within the local community.74

A list of buildings and construction suppliers that are appointed to the framework agreements described above is presented in Table 5.2.

Table 5.2 Public sector suppliers: buildings & construction

Framework Suppliers

Building Materials and Associated Managed Services Burdens Ltd Grafton Merchanting GB Ltd Jewson Ltd

71 http://www.homesandcommunities.co.uk/dpp

72 The Pro5 membership consists of 5 buying organisations: ESPO Eastern Shires Purchasing Organisation (ESPO); Central Buying Consortium (CBC); North Eastern Purchasing Organisation (NEPO); Yorkshire Purchasing Organisation (YPO).

73 http://www.espodealingdirect.org/show-contract.aspx?id=64896

74 http://www.scapebuild.co.uk/

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Framework Suppliers

Travis Perkins Trading Co Ltd Wolseley UK Ltd

HCA Delivery Partner Panel Affinity Sutton Homes Ltd BDW Trading Ltd Bellway Homes Limited Bloor Holdings Limited Bouygues Thomas Vale Consortium Bovis Homes Limited Bromford Housing Group Ltd Catalyst Housing Limited Carillion-Igloo Limited Countryside Properties (UK) Limited Crest Nicholson PLC Durkan Limited Fairview Estates (Housing) Ltd Galliford Try Plc Genesis Housing Association Gentoo Group Ltd Great Places Housing Group Higgins Group PLC Hill Partnerships Ltd Ignite Homes Ltd Keepmoat Ltd Kier Limited Logic Homes Ltd Lovell Partnerships Limited Mansell Construction Services Ltd Mar City Developments Ltd Miller Homes Ltd Mi-space (UK) Limited Morris Homes Ltd Mulalley and Company Ltd Ocean Housing Group Ltd P.E. Jones (Contractors) Ltd Persimmon Homes Ltd Places for People Homes Limited Redrow Homes Ltd Rydon Construction Limited Seddon Group Limited Story Homes Ltd Taylor Wimpey UK Ltd Wates Construction Ltd trading as Wates Living Space Westleigh Developments Ltd William Davis Limited Willmott Dixon Holdings Limited Your Housing Group / Eric Wright Group ZeroC Acheson Consortium Ltd

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Framework Suppliers

Timber - Building / Engineers Framework Avon Timber Merchants B.G.N. Boards Grafton Merchanting Ridgeons Travis Perkins

Sources: Government Procurement Service; HCA

5.4 Assessment of Market Implementation of Criteria: Buildings and Construction

As a result of regulations such as the Code for Sustainable Homes, many construction companies have begun to recognise the need to prove that their buildings are built with sustainability in mind. One element of this is in the responsible sourcing of products used in their construction and the onus of proof is increasingly being passed down to the manufacturers of those construction products75.

Government had set a 2012 for at least 25% of products used in construction projects to be from schemes recognised for responsible sourcing. The UK Contractors Group is putting even greater demands on its members' supply chain, requiring that 70% of products be responsibly sourced by 2015. To assist with the compliance, there are a number of funding sources available for apprenticeships. For instance, CITB-ConstructionSkills Grants exist to ensure the long term growth and developments of the industry, by means of a dedicated scheme that helps to contribute towards the costs of training, recognised qualifications and development. It offers grants to support business in a wide range of training and qualifications, from apprenticeship support, to Training and development plans.

According to WWF, the ability of the market to meet the Government’s Timber Procurement Policy (TPP) requirements in most cases (widespread availability of FSC, PEFC or recycled timber products in common categories) combined with the services provided by CPET (assessment of certification schemes and free training and advice on implementation), mean that the Government’s TPP policy is achievable where the motivation exists; implementation of the policy by some leading organisations has effectively demonstrated this76. There are some excellent examples of good practice within organisations (e.g. Buying Solutions, CLM on behalf of Olympic Delivery Authority) and key achievements; for example, in 2008 the largest estates PFI contract ever awarded by the MoD, Allenby-Connaught, which comprises a 10-year construction programme reported that “all timber is certified to the FSC or PEFC schemes” 110.

75 http://www.bsigroup.co.uk/en/Assessment-and-Certification-services/Management-systems/Standards-and-Schemes/BES- 6001/

76 See: http://assets.wwf.org.uk/downloads/wwf_timber_report.pdf

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policy is seen as the cost of doing business and some respondents claiming that it is relatively easy to meet the UK Government’s timber procurement policy, by supplying FSC and PEFC. There has been growth in the development and implementation of private sector procurement policies and the UK Timber Trade Federation’s responsible purchasing policy became mandatory in 2010. There is an undeniable shift in the behaviour of the timber trade, in particular the leading more progressive companies, and the UK Government’s timber procurement policy has had a significant impact and been one of the drivers for this change, along with NGO pressure and Corporate Social Responsibility (CSR) policies aimed at managing risk110.

Box 4 Responsible Sourcing of Concrete

With over 88% of concrete independently certified to BES 6001 Standard for the Responsible Sourcing of Construction Products, the concrete industry leads other construction materials in demonstrating responsible sourcing throughout the supply chain. Within just over 12 months of the standard becoming available (in October 2008), 81.0% of the production of concrete was certified to the BRE responsible sourcing standard BES 6001. Concrete is a locally sourced material so its constituents are both traceable and subject to the comprehensive EU regulatory framework. Reinforcement supplied by BAR members can also be certified to responsible sourcing standards. In 2010, 55% of the reinforcement from fabricators was certified to BES 6001 through the Eco-Reinforcement sector scheme. The concrete industry is committed to extending leadership in this area. This supports the Government’s Sustainable Construction Strategy target for 2012, which requires that “at least 25% of construction materials should be supplied from suppliers with responsible sourcing certification by 2012” and provides customers with the certified responsibly sourced products that are being increasingly specified. BES 6001 provides a common benchmark for all construction products to demonstrate their responsible sourcing credentials. The concrete industry supports the BES 6001 responsible sourcing standard as it currently represents the most comprehensive standard available. This has been recognised in the comparative scoring of the different schemes in BREEAM 2011. In this scheme the highest level of performance currently achievable, can only be gained through certification to the BES 6001 standard. The concrete industry was the first industry to link its sustainable construction strategy to BES 6001 and has produced a guidance document that supports the implementation of the standard. Designers can now easily source certified materials to help gain maximum credits in sustainability assessment tools such as the Code for Sustainable Homes and BREEAM. The ability to specify products certified to a responsible sourcing scheme is also an increasingly important aspect of CEEQUAL, the assessment and award scheme for improving sustainability in civil engineering and the public realm. Source: Concrete Industry Sustainability Performance Report. 4th report: 2010 performance data, 2010, Sustainable Concrete Forum

Due to the high number of suppliers to the public sector, and as this is a high level assessment, it was not feasible to evaluate current performance against each social and ethical criteria proposed for the building and construction sector as part of this study. Further engagement with suppliers would be required at the tendering or renewal stage of a framework agreement or individual contract to be able to assess the ability of bidding suppliers to meet these criteria and whether it would exclude any suppliers from being able to participate. This would also allow the procuring authority to understand what support suppliers may require to be able to increase their ability to satisfy social and ethical related tender criteria.

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6. Assessment of Social and Ethical Criteria: ICT

6.1 Background and Rationale for Intervention: ICT

ICT companies that source raw materials globally are often exposed to a wide range of human rights challenges. The production of IT hardware and telecommunications is labour intensive, which resulted in many companies outsourcing their production to low wage countries. ICT producing companies are often associated with child labour, poor working conditions, health and safety violations and other challenges through their supply chain.77

The production of ICT requires large amounts of resources as metal, tin, copper and coltan. These metals are used for the production of mobile phones, computer hardware, circuit boards etc. Companies – whether at the upstream stage of the supply chain (i.e. from mine to smelter) or at the downstream stage (i.e. from smelter to end user) – can, either knowingly or unknowingly, be affected by the risk of supply chain contamination with conflict minerals78. The Democratic Republic of Congo (DRC) is a difficult business environment and in the conflict affected parts of eastern DRC, some mines are exclusively accessed by artisanal miners, state services, state security forces and/or armed groups. Production from these sites passes through various intermediaries prior to export. Predation on the trade in minerals by armed groups may happen along the entire value chain.79

Recent legislative and regulatory initiatives seek to keep conflict minerals out of the industry supply chain by requiring companies to prove that minerals used in their supply chain are either not from conflict affected areas (proof of origin) or that their production and trade have not contributed to conflict financing and human rights abuses (due diligence and certification). These initiatives follow moves in other industries towards improved due diligence and ‘know-your-customer’ requirements, that companies domiciled in Western countries, or selling to Western consumers, increasingly have to comply with.79

ICT has a number of issues associated at end of life, for instance dumping of e-waste in developing countries has environmental and health ramifications as many of the materials used to produce a computer are toxic, such as lead. Security issues at disposal are also a concern as personal and potentially strategically important data can appear on the black market as a result of unsecure data holding devices falling into the wrong hands. However, end of life also presents opportunities. For instance, ICT equipment can be re-purposed in social/community programmes at end of business life.

77 http://www.humanrightsimpact.org/themes/business-centre/sector-information/

78 ‘Conflict minerals’ as defined in recent US legislation and international guidance currently being piloted in the DRC currently applies to cassiterite, coltan, wolframite and gold, or derivatives of these minerals. Sometimes these minerals are referred to as the ‘three Ts’ (tin, tantalum and tungsten) + gold. 1. Cassiterite, which is raw tin ore, used for solder and can coating, in many alloys and to prevent corrosion; 2. Columbite-tantalite or coltan, from which tantalum is extracted and being used primarily in the fabrication of electronic capacitators used in consumer electronic products such as mobile phones; 3. Wolframite, which is the source of tungsten, a strong and dense metal with many military and industry uses; and 4. Gold. 79 http://www.fco.gov.uk/en/global-issues/conflict-minerals/the-supply-chain/

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The use of SMEs, social enterprises, the third sector and civil society can also be encouraged through the supply chain and enacted at manufacture and refurbishment through to the provision of support services such as call centres and technical support. This will also provide an opportunity to develop skills and training, including apprenticeships. Support services for ICT commonly include call centres and technical support.1

Public sector ICT infrastructure is considerable, consisting of hundreds of data centres, thousands of applications and many end user devices. Such a large ICT estate offers great potential to contribute to the social and ethical agenda; it is essential, therefore, that the public sector ICT infrastructure is operated in a cost effective manner, but also that it is designed, procured, and reused in a way that embeds environmental, social and ethical ICT considerations across the lifecycle.

6.2 Proposed Social and Ethical Criteria: ICT

The scope of the potential contracts within the ICT product group covers procurement of ICT equipment, as well as ICT service provision (e.g. helpdesks) and disposal services.

The key social and ethical issues identified for the ICT product group are set out in Table 5.1.

Table 6.1 Key social and ethical issues: ICT

Theme Issues

Labour Standards Working conditions Conflict minerals Child labour

Workforce Skills & Training Apprenticeships

Supply Chain SME and social enterprise engagement Civil society involvement

The social and ethical sourcing criteria for ICT can be found in Annex B of the BMT Isis Main Report1.

6.3 Baseline

6.3.1 Existing and forthcoming policies, legislation and voluntary initiatives

A range of policies and legislation, including voluntary and sector initiatives, are in place relevant to sustainability in ICT. These include, among others:

 The UK Government encourages British companies trading in natural resources from the DRC to do so in a way which is socially, economically and environmentally responsible, including adhering to the voluntary OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from

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Conflict-Affected and High-Risk Areas80. The UK Government fed into, supported and promoted the OECD’s guidance and are providing funding to the OECD for a feasibility study on an institutionalised mechanism to monitor due diligence. It has also sought to ensure that UN guidance for individuals and entities trading, processing and consuming minerals from eastern DRC is complementary;81

 The UK Bribery Act82 which came into force July 2011 holds UK firms accountable for bribery, whether committed directly and on their behalf, in the UK or overseas;

 The Dodd Frank Wall Street Reform and Consumer Protection Act, passed by the US Congress in July 2010, includes a provision (section 1502) aimed at stopping the national army and rebel groups in the DRC from illegally using profits from the minerals trade to fund their fight. Section 1502 is a disclosure requirement that calls on companies to determine whether their products contain conflict minerals – by carrying out supply chain due diligence – and to report this to the Securities and Exchange Commission. 1 While the UK supports an international approach to achieving greater transparency in the trade in minerals, it is monitoring closely the implementation of the Dodd-Frank legislation;81

 The UK Greening Government ICT Strategy83 sets out how ICT can be exploited to assist government in achieving the Greening Government Commitments, in a set of Green ICT commitments. Amongst these, is Government’s commitment for all redundant ICT to be recycled in whole or component parts or materials, or donated to charities and voluntary organisations as part of the Big Society;

 The Government Buying Standards for Office ICT Equipment84 considers environmental issues such as energy performance and chemicals, but does not address social issues. However, the Government Buying Standard for Mobile Phones addresses social and ethical issues relating to conflict minerals;

 The Electronics Industry Code of Conduct (EICC)85 is a voluntary coalition of the world’s leading electronics companies working together to improve efficiency and social, ethical, and environmental responsibility in the global supply chain. The EICC Code of Conduct provides guidelines for performance and compliance with five critical areas of CSR performance: labour; health and safety; environment; management system; and ethics. EICC also provides tools to audit compliance with the code, and helps companies report progress;

 Global e-Sustainability Initiative (GeSI)86 brings together leading ICT companies – including telecommunications service providers and manufacturers as well as industry associations and non-

80 http://www.oecd.org/daf/internationalinvestment/guidelinesformultinationalenterprises/mining.htm

81 http://www.fco.gov.uk/en/global-issues/conflict-minerals/intro-to-conflict-minerals/

82 http://www.legislation.gov.uk/ukpga/2010/23/contents

83 Greening Government: ICT Strategy, 2011, Cabinet Office

84 http://sd.defra.gov.uk/advice/public/buying/products/office/

85 http://www.eicc.info

86 http://gesi.org/

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governmental organisations – committed to achieving sustainability objectives through innovative technology. GeSI’s work focuses on several key areas: supply chain; climate change; e-waste; standardisation; and public policy;

 GeSI and EICC launched the Conflict-Free Smelter (CFS) Program87 in 2010 to provide information about smelters and refiners in the metals supply chain to enable ICT companies to source responsibly and reduce the risk of conflict minerals ending up in their products. A Conflict Minerals Reporting Template and associated summary dashboard were also produced. These tools enable more efficient transfer of information through the supply chain regarding country of origin and smelters and refiners being utilised by ICT companies and their suppliers. This has allowed companies to identify smelters to include in the CFS Program and in their supply chain. GeSI and EICC also developed a consolidation process for the smelter and refinery names to aid in unique identification of these companies;

 E-TASC88 is a web based system that enables participating companies to collect, manage, analyse and exchange data relating to aspects of ethics, labour standards, environmental impacts and health and safety, relevant to their business. The objective is to have a common set of expectations across the ICT sector and a tool that will help drive efficiency, reduce duplicated effort, and provide a platform for sustainable improvements. Initially developed for the ICT sector, E-TASC has already included indirect suppliers to that industry and could easily be extended into other industries; and

 A number of charities in the UK-registered charities have been set up to help reduce poverty through ICT solutions. This includes Computer Aid International89 which collects IT equipment for distribution in hospitals, universities, schools and not for profit organisations in over 100 different countries. Before redistributing ICT equipment, the organisation 100% data wipes the hard-drive to US military standards, covers all legal liabilities, refurbishes the laptop to a high standard and barcodes the machines so they can be tracked.

6.3.2 Current market

The UK ICT market has the largest consumer expenditure per head in the EU and an overall spend of £140 bn per annum of which the UK public sector contributes £18 bn. About 46% of UK ICT spend is on telecommunications (including associated equipment manufacture and software), 11% on software, 15% on IT hardware and 28% on IT services90.

The sector contributes 12% of the country’s GDP, but contribution of IT-intensive sectors to the national economy is even larger (in 2004 IT-intensive sectors contributed 55% of the UK’s total Gross Value Added)91.

87 http://www.conflictfreesmelter.org

88 http://e-tasc.achilles.com

89 http://www.computeraid.org/default.asp

90 Technology Strategy Board (2008). Information and Communication Technology. Key Technology Area 2008-2011

91 Technology Strategy Board (2008). Information and Communication Technology. Key Technology Area 2008-2011

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The sector employs directly 600,000 people1 and there are more than 1.4 million ICT professionals in the UK across sectors92.

There were over 107,000 firms in the UK IT and Telecoms industry in 2007, corresponding to approximately 5% of the UK’s total industry. The vast majority (93%) of these were computer services firms while the remainder were telecommunications firms. About 92% of these companies were micro enterprises employing less than 10 people93.

The UK is the fifth largest ICT market behind the US, Japan, China and Germany. There are many large global markets for ICT that represent significant opportunities for the UK including those in financial services, retail, e- Government, healthcare, transport, manufacturing, creative industries, construction and education. Government is one of the top three sectors globally in terms of ICT spending (along with Consumer and Financial Services sectors). The use of ICT within these sectors is extremely diverse ranging from geographic information systems to defence and public administration. For instance, numerous software-intensive capabilities are needed to meet the UK’s defence requirements including signal and data processing, secure and robust communications, information management and exploitation, and modelling and simulation94.

6.3.3 Current practices in UK public procurement

There is currently no definitive or audited record of ICT spend in Central Government (for the period 2009/10); however, the best estimates suggest this to be around £6.5bn in central government (and £16-17 bn in the wider public sector including local government, Devolved Administrations and the NHS) 95.

Government is committed to becoming a single and effective ICT customer, leveraging buying power whilst remaining flexible on how it procures. Amongst Government Procurement’s strategic goals, is the goal to formalise agreements between GPS and all departments to deliver centralised procurement and to improve capability within the ICT spend category95.

The Government Procurement Service has a number of framework agreements within the ICT category which provide the public sector access to ICT commodities and supporting services in hardware, software, telecoms and networks. Key framework agreements include:

 The PSN Connectivity Framework launched in April 2012 to help deliver the UK Government’s ICT Strategy and is estimated to be worth up to £2 bn. Twelve suppliers have been appointed framework and include SMEs as well as major industry names. Other recent framework agreements relating to PSN-transitions include a GSi Convergence Framework to provide continuity for the transition of the Government Secure Intranet (GSi) and the PSN Connectivity Framework for the provision of PSN connectivity services;

92 Technology Strategy Board (2008). Information and Communication Technology. Key Technology Area 2008-2011

93 Technology Strategy Board (2008). Information and Communication Technology. Key Technology Area 2008-2011

94 Technology Strategy Board (2008). Information and Communication Technology. Key Technology Area 2008-2011

95 Government ICT Strategy - Strategic Implementation Plan, 2011, Cabinet Office

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 The IT Hardware & Solutions (ITHS) Framework Agreement launched in July 2012 has been jointly established by Government Procurement Service and the Pro5 Group96 and is available for use by all local authorities and wider public sector bodies. The framework provides a range of IT products, services and solutions across a range of lots including: standard IT desktop/infrastructure hardware and commoditised services; non standard IT desktop/infrastructure hardware and solutions;

 Local Government Software Application Solutions provides an efficient and cost effective route to purchase software that supports the activities of local government such as planning or social care. There are 39 suppliers in total ranging from multi-national to SME organisations; and

 The Supported Factories and Businesses (RM722) Framework97, which ends in December 2013, includes separate lots on ICT Secure Disposal Services and Non-Secure ICT Disposal Services. A supported factory/business is a service/establishment where more than 50% of the workers are disabled persons who by reason of the nature or severity of their disability are unable to take up work in the open labour market. As supported factories and businesses sometimes find it difficult to access and obtain public contracting opportunities, the Public Sector Procurement Directive permits contracting authorities to reserve procurement competitions for supported factories and businesses. This framework was developed to develop a route to market for third sector organisations.

A list of ICT suppliers that are appointed to the framework agreements described above is presented in Table 6.2.

Table 6.2 Public sector suppliers: ICT

Framework Suppliers

PSN Connectivity Virgin Media Business Limited Logicalis UK Limited British Telecommunications Cable & Wireless Worldwide Level 3 (formerly Global Crossing) Capita Business Services Limited Updata Infrastructure UK Limited Fujitsu MDNX Enterprise Services Limited eircom UK Limited KCOM Group Thales UK Limited

ITHS Academia Akhter Centerprise International Computacenter (UK) Dell Corporation Ergo Computing UK

96 The Pro5 membership consists of 5 buying organisations: ESPO Eastern Shires Purchasing Organisation (ESPO); Central Buying Consortium (CBC); North Eastern Purchasing Organisation (NEPO); Yorkshire Purchasing Organisation (YPO).

97 http://gps.cabinetoffice.gov.uk/contracts/rm722

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Framework Suppliers

Fujitsu Services Hewlett-Packard Insight Direct (UK) Kelway International Lenovo Technology (UK) Misco UK Softcat Specialist Computer Centres Stone Computers Viglen XMA

LGSAS Aareon UK AMTEC Consulting plc (Keane) Asidua Atkins Atos IT Solutions & Services Azeus Systems Bramble.cc CACI Capita Business Services Civica UK Clarity Information Solutions Compass Informatics Computer Aided Development Corporation Corelogic Hitachi Consulting HTK IDOX Innogistic Ipswich Software Lagan Technologies Liberata UK Liquidlogic Logica UK Manage My Complaints.com Methods Consulting Mott MacDonald Mouchel Northgate Information Solutions (UK) OPT2VOTE Oxford Computer Consultants Pitney Bowes Software RSK Business Solutions Siemens Mobility, Traffic Solutions (a division of Siemens plc) Sirsi Limited (T/A ‘SirsiDynix’) Swift DataPro Software System Associates Valueworks

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Framework Suppliers

Whitespace Work Software Zipporah

Supported Factories and Businesses Redrock Document Processing Services Ltd Remploy

Sources: Government Procurement Service; ESPO Dealing Direct

6.4 Assessment of Market Implementation of Criteria: ICT

Publically available information at a sector level relating to compliance against the social and ethical sourcing in the ICT supply chain is sparse. For instance, Intellect UK does not publically report progress of its members against this issue. Much of the focus to date has been on environmental sustainability within the sector and its move towards a low carbon economy. However, leading ICT brands (e.g. BT, Hewlett-Packard) report at a company level on their procurement and supply chain practices and performance and involvement with industry groups on their corporate websites and in their corporate responsibility reports.

A key way of measuring the level of engagement of the ICT sector is through participation in leading sector initiatives such as EICC and GeSI. At the end of 2011, the EICC included 66 manufacturers, software firms, electronics retailers, telecommunications companies, raw material providers, and manufacturing service providers. However, the EICC has come under criticism for not requiring members to disclose findings and for lacking enforcement powers on ethics, worker safety and labour. Apple is the only ICT sector participant to join the Fair Labor Association (FLA) following investigations highlighting Foxconn’s labour conditions. FLA member companies must agree to disclose their suppliers and to submit to unannounced visits from the FLA or third-party auditors. The FLA also posts results of all audits on its website.98

With respect to conflict minerals, the Impact Assessment for the GBS for mobile phones found that nine out of the top ten mobile manufacturers currently publish information on their conflict-free minerals policy and supply chain management. These manufacturers cover 98.1% of all handsets procured by Defra or 86.8% of the handset models available from the MSII catalogue. The same is true for information provision on supply chain engagement. Nine out of the top ten manufacturers have been identified as already publishing information on their conflict-free minerals sourcing and supply chain management. All top ten manufacturers worldwide provided information on engagement with EICC, GeSI, etc. or on their supply chain management.

In February 2012, nine of the UK’s largest IT consulting and business services organisations (Accenture, Atos, Capgemini, CSC, Fujitsu, HP, Logica, Siemens and Steria) supported by the Ministry of Justice representing the Apprenticeships workstream of the Government ICT Capability Strategy, agreed to sign up to a new charter for the

98 http://www.fairlabor.org/

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employment of apprentices.99 This initiative indicates a level of willingness within the sector to support the apprenticeships agenda.

Due to the high number of suppliers to the public sector, and as this is a high level assessment, it was not feasible to evaluate current performance against each social and ethical criteria proposed for the ICT sector as part of this study. Further engagement with suppliers would be required at the tendering or renewal stage of a framework agreement or individual contract to be able to assess the ability of bidding suppliers to meet these criteria and whether it would exclude any suppliers from being able to participate. This would also allow the procuring authority to understand what support suppliers may require to be able to increase their ability to satisfy social and ethical related tender criteria.

99 http://www.uk.capgemini.com/news-centre/news/uk-it-industry-widens-apprenticeship-recruitment-pool-and-signs-up-to-it- services-apprentices-charter/

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7. Assessment of Social and Ethical Criteria: Furniture

1 7.1 Background and Rationale for Intervention: Furniture

Rationalisation of public sector estates, services and functions, hot desking, changes in ICT requirements have implications on furniture requirements. Disposal of furniture remains a significant issue in the public sector, with specific contracts for disposal and in some cases reuse/remanufacture. This includes potentially innovative ways of broadening the utility of the unit of furniture, whether as parts or as the whole, and thereby improving its resource efficiency. For instance, instead of being recycled or taken out of use at the end of its commercially viable life, it could be passed to the third sector for redeployment in environments where the commercial pressures for aesthetically pleasing furniture are less of a priority. Government policy, supported by the introduction of the proposed social and ethical criteria, is to re-use and remanufacture existing furniture before buying which creates potential opportunities for SME remanufacturing companies, apprenticeships and training in furniture repair.

Specialist furniture, such as hospital beds, will usually be retained until its practical life in use has been reached. However, office furniture has in the past been replaced purely for aesthetic reasons or because of changing organisational needs, long before it has ceased to meet the practical needs for which it was provided. This encourages short-termism in design and the construction standards of the furniture. There is therefore a significant opportunity for the UK public sector to encourage a reduction in- the resource load of the provision of office furniture, in particular by finding ways to extend its period of utility for primary users and to encourage its reuse thereafter by secondary and later users.

Service-based furniture procurement may involve the provider offering the user a choice of furniture solutions that the user can draw on as their needs arise and change. The ownership of the furniture may lie with the provider (or their subcontractor). This allows the provider to redeploy unused items of furniture elsewhere. Redeployment may be to the client’s other facilities, to other clients or to others for whom aesthetics are less important than continued utility. Under this model, there is also greater incentive for providers to provide more durable furniture capable of reconditioning and redeployment in higher value uses. Procurement of a furniture service, which may include end of life management, therefore offers an opportunity to consider relevant social issues given the role of SMEs, apprenticeships and training. Social issues within ‘furniture’ contracts do not necessarily just focus on the manufacturing element of furniture, but wider service elements, particularly as the supplier may be responsible for end of life issues.

Furniture includes a range of materials, a significant one of which is timber1 According to the FAO and the World Bank, more than 20% of the world’s population relies on forest resources for its livelihood. Illegal and unsustainable logging threatens to deplete and severely degrade vital forest resources which are of enormous importance to biodiversity, indigenous communities and national economies. As the world’s fourth largest importer of timber products, the UK has the responsibility to ensure that the timber it uses comes from legal and sustainable

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sources. With the UK public sector accounting for about 30% of all timber consumption in the UK, public procurement policies play a central role in incentivising changes in practice and management at the forest source100.

7.2 Proposed Social and Ethical Criteria: Furniture

The scope of the potential contracts within the furniture product group covers procurement of furniture products (such as office and specialist furniture) and their use and end of life. Some furniture contracts may involve service delivery, which includes the use of a furniture product.

The key social and ethical issues identified for the furniture product group are set out in Table 7.1.

Table 7.1 Key social and ethical issues: furniture

Theme Issues

Labour Standards Working conditions Child labour

Workforce Skills & Training Apprenticeships

Supply Chain SME and social enterprise engagement Civil society involvement

Materials Material sourcing

The social and ethical sourcing criteria for furniture can be found in Annex B of the BMT Isis Main Report1.

7.3 Baseline: Furniture

7.3.1 Existing and forthcoming policies, legislation and voluntary initiatives

A range of policies and legislation, including voluntary and sector initiatives, are in place relevant to sustainability in the furniture sector. These include, among others:

100 http://www.cpet.org.uk/files/CPET%20article%20timber%20in%20construction.pdf

101 A Voluntary Partnership Agreement (VPA) is a bilateral agreement negotiated between the EU and timber producing countries and is a key part of the FLEGT action plan. Under the terms of a VPA a partner country agrees with the EU to implement a timber licensing system. From that partner country, the EU will only accept licensed timber products which are included in the scope of the VPA once the country has fully implemented a timber licensing scheme.

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government will implement existing FLEGT legislation early to mid-2013, which will require importers of timber from countries with whom the EU has signed a VPA to obtain a FLEGT license to import timber into the UK;

 The UK Government Timber Procurement Policy64 requires that only timber and wood-derived products originating either from independently verifiable legal and sustainable sources or from a licensed FLEGT partner will be demanded for use on the Government estate – appropriate documentation will be required to prove it. From 1 April 2015 only legal and sustainable timber would be demanded. The policy applies to all timber and wood-derived products used on the government estate including temporary site works and material supplied by contractors. The policy is mandatory for all Central Government Departments, Executive Agencies and Non Departmental Public Bodies. Local authorities, other public bodies and the private sector are also encouraged to adopt sustainable timber procurement policies;

 The Central Point of Expertise on Timber (CPET)65 is Defra’s technical advisory body, which provides free advice and guidance to all public sector buyers and their suppliers;

 The Government Buying Standard for Furniture includes a requirement for all timber for wood and wood based products to be purchased in accordance with UK timber procurement policy;

 The Furniture Industry Research Association (FIRA), in conjunction with partners from across the furniture industry, established the Furniture Industry Sustainability Programme (FISP)102 in 2006 to support and improve the furniture industry's sustainability credentials. FISP currently has over 70 members and has rapidly become established as the industry forum on all environmental and sustainable issues. These issues relate to all aspects of the industry’s business from purchasing and procurement right through to end of product life, including social, ethical and employment concerns;

 The British Contract Furnishing Association (BCFA) Code of Best Practice, published in 2008, includes a section on ‘sourcing’ which states: “Sourcing of materials and components from suppliers should include a commitment to responsibility. Commercial terms should not supersede the need to ensure a chain of custody is established for wooden components and materials. Also a policy on ethical sourcing should be established”;103

 The Local Governments for Sustainability (ICLEI) produced ‘Sustainable procurement guidelines for office furniture’104 for the United Nations Environment Programme - Division of Technology, Industry and Economics, which include social considerations; and

102 http://www.fira.co.uk/consultancy/fisp

103 http://www.thebcfa.com/hres/greenflash.pdf

104 Sustainable procurement guidelines for office furniture, 2008, ICLEI - Local Governments for Sustainability (ICLEI)

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7.3.2 Current market

The furniture production sector offers a significant contribution to the national economy with over £8.3 bn turnover constituting 1.7% of total UK manufacturing output105. The industry directly employs around 124,000 people within 7,500 companies and makes a significant contribution to the UK economy. In addition, the industry supports and is supported by, a large supplier pool comprised of materials suppliers, component manufacturers, designers, contractors and retailers106. The industry is divided between small companies and relatively large concerns. It is estimated that 67% of all furniture manufacturing enterprises employ less than 9 people and that the largest 3000 companies account for 45% of the total employment.

The EU furniture industry accounts for about half of the world’s furniture production with a production value of 82 billion Euro. It accounts for 8,800 enterprises with over 20 employees and more than 80,000 enterprises with under 20 employees107.

The UK is a net importer of furniture by value. In particular, about 49% of imports come from the EU and about 40% from countries in Asia and Oceania.

Wood and wood-based products are dominant in the furniture industry; after the construction sector, the furniture and paper industries are the main consumers of wood108. The UK consumed £6,000 million of wooden furniture and demand, with some exceptions, is increasing109. In addition to solid wood, wood-based products are widely used in furniture (e.g. panels)

7.3.3 Current practices in UK public procurement

Whilst furniture procurement within the UK public sector can potentially comprise a large range (including residential furniture and schools furniture), office furniture makes up the majority of that procured. Available data for office furniture expenditure is estimated. For example, the office furniture industry in the UK is valued at approximately £680m per year (between 165,000 and 200,000 tonnes) and central government procurement accounts for 9.6% of this market (£65m). Additional procurement by higher education institutions, NHS Trusts and NHS Supply Chain, local authorities and other public sector procurers means that the public sector represents a significant customer, although the accuracy of actual spend is uncertain because both the procurers’ definition of ‘furniture’, and which levels of Government are included within procurement details, vary widely. Defra for example estimated the value of Government spend on all furniture across departments to be £1.2b at the last audit in 2004, while the NHS accounts for 2009/10 suggest ‘furniture and fittings’ assets were valued at £269m, with

105 FIRA (2010). Competitiveness of the UK furniture manufacturing industry

106 British Furniture Confederation (www.bfm.org.uk)

107 European Commission: http://ec.europa.eu/enterprise/furniture/index_en.htm

108 European Commission (2008) “Furniture Background Product Report”

109 Eurostat

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additions of £17.4m in the year. It is also estimated that around 500,000 tonnes of furniture goes to landfill each year. 1

Unfortunately, there are also no accurate figures to assess Government spend on timber and wood derived products. This is due to an overall lack of comprehensive data on public sector procurement spend combined with the difficulty in extracting timber products from generic spend categories such as furniture, stationary or catering consumables. Estimates of the proportion of spend attributed to central Government or central Government plus local authorities range from 10-40% of total UK timber consumption. UK public sector demand is believed to account for between 30-50% of the UK office furniture market110.

A range of public sector framework agreements exist in the furniture sector. These include:

 The GPS Supported Factories and Businesses (RM722) Framework, which ends in December 2013, includes a lot for furniture and associated products. The framework also enables services to cover ‘sustainable timber sourcing, installation, space planning, quality assurance, sampling, packaging, waste management and environmental requirements, along with Bespoke Furniture to meet individual Customer needs’.1 A supported factory/business is a service/establishment where more than 50% of the workers are disabled persons who by reason of the nature or severity of their disability are unable to take up work in the open labour market. As supported factories and businesses sometimes find it difficult to access and obtain public contracting opportunities, the Public Sector Procurement Directive permits contracting authorities to reserve procurement competitions for supported factories and businesses. This framework was developed to develop a route to market for third sector organisations; and

 Pro5 Group111 runs the Kitchen Units, Worktops & Sink Tops Framework which is a national framework agreement for use by all local authorities and public sector bodies.

A list of furniture suppliers that are appointed to the framework agreements described above is presented in Table 7.2.

Table 7.2 Public sector suppliers: furniture

Framework Suppliers

Supported Factories and Businesses Redrock Document Processing Services Ltd REMPLOY LTD

Kitchen Units, Worktops & Sink Tops Bilbeck (Merchants) Grafton Merchanting (T/A Jackson Building Centres) JTC Furniture Group Moores Furniture Group Raventree (T/A Premiere Kitchens)

110 An assessment of the impacts of the UK Government’s timber procurement policy, November 2010, Efeca

111 The Pro5 membership consists of 5 buying organisations: ESPO Eastern Shires Purchasing Organisation (ESPO); Central Buying Consortium (CBC); North Eastern Purchasing Organisation (NEPO); Yorkshire Purchasing Organisation (YPO).

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Framework Suppliers

Rixonway Kitchens Travis Perkins

Sources: Government Procurement Service

7.4 Assessment of Market Implementation of Criteria: Furniture

The provision of furniture as a service is currently not commonplace and no standard contractual terms or practices have yet achieved common acceptance in the market place. At present, the majority of furniture is procured and owned by the user, often as part of a fit out contract for newly occupied or refurbished premises. 1 However, there are a few examples of organisations providing a managed furniture service, with indications that this may become more prevalent among UK public sector procurers. Examples include the service provided by Amaryllis Environmental for the Department of Work and Pensions, in conjunction with Land Securities Trillium. Procurement of a furniture service, which may include end of life management, therefore offers an opportunity to consider relevant social issues given the role of SMEs, apprenticeships and training.

Social issues within ‘furniture’ contracts do not necessarily just focus on the manufacturing element of furniture, but wider service elements, particularly as the supplier may be responsible for end of life issues. A focus on reuse or remanufacture has therefore become increasingly important. While UK manufacturers have largely addressed environmental issues through the widespread take up of lean manufacturing processes and ISO14001 Environmental Management System, research has suggested that UK manufacturers at present are not geared up for widespread hiring options or reuse/remanufacture storage and logistics.1 As the Centre for Reuse and Remanufacturing stated in 2011, there is a ‘dormant market for remanufactured office furniture, with lack of demand suppressing development’. There are several voluntary and commercial organisations dedicated to the refurbishment of office furniture, while the reuse of furniture has been partly driven by the third sector112 and as such could be seen as a means to encourage this activity. These include commercial organisations such as Amaryllis Environmental, as well as HM Prison Service. There are also a number of local organisations providing recycling/reuse and in some cases remanufacturing services, with some public sector organisations (such as the North East Improvement and Efficiency Partnership (NEIEP)) encouraging SMEs and third sector involvement in re-manufacturing.1

As far as sustainable sourcing of materials is concerned113, the ability of the market to meet the Government’s Timber Procurement Policy (TPP) requirements in most cases (widespread availability of FSC, PEFC or recycled timber products in common categories) combined with the services provided by CPET (assessment of certification schemes and free training and advice on implementation), mean that the Government’s TPP policy is achievable

112 The “third” sector, comprises of those organisations that are neither state nor truly private sector - voluntary civic and social organisations and institutions including charities, voluntary organisations and social enterprises (i.e. businesses trading for social and/or environmental purposes). For more information, see the Cabinet Office’s Office of Civil Society: http://www.cabinetoffice.gov.uk/big-society/.

113 See: http://assets.wwf.org.uk/downloads/wwf_timber_report.pdf

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where the motivation exists. Implementation of the policy by some leading organisations has effectively demonstrated this. 110.

Over the past ten years there has been significant change in the response of the timber trade, from one of denial “It’s not our problem, it’s too costly, not enough supply” to one where costs of meeting the UK Government’s policy is seen as the cost of doing business and some respondents claiming that it is relatively easy to meet the UK Government’s timber procurement policy, by supplying FSC and PEFC. There has been growth in the development and implementation of private sector procurement policies and the UK Timber Trade Federation’s responsible purchasing policy became mandatory in 2010. There is an undeniable shift in the behaviour of the timber trade, in particular the leading more progressive companies, and the UK Government’s timber procurement policy has had a significant impact and been one of the drivers for this change, along with NGO pressure and Corporate Social Responsibility (CSR) policies aimed at managing risk.110

An assessment made by FIRA of the social and ethical criteria and their impact on the furniture industry included the following comments: 114

 Whilst FIRA is confident that its members would be able to meet FSC and PEFC specifications, it expressed its members currently would not be able to meet FLEGT specifications as there is very little timber on the market at the present time that would meet this standard since the Regulation has only recently been introduced;

 The labour criteria are a major concern to FIRA as currently none of its members are signed up to SA8000 or equivalent standards and therefore this would be a significant cost (especially for SMEs). Most manufacturers have environmental policies and programmes in place and have ethical purchasing policies (e.g. FISP has a requirement for policies on sourcing and ethical employment), but this is not necessarily rigorously enforced down the supply chain. Assessments are mainly through supplier self-assessment which is currently mostly environmentally focused. FIRA therefore estimates that independent verification would be a significant cost to the industry;

 FIRA’s members are mostly opposed to the concept of end-of-life focus on reuse as they work on the principle of new products with good design; it would take a different mindset, although there are some companies that do this successfully (e.g. Amaryllis);

 FIRA appreciates the emphasis on SMEs, however notes that very few SMEs are currently on government frameworks;

 Sustainability reporting is done primarily at an industry level through FISP, although there is not a big amount of market penetration. Large companies have ISO14001 and some produce CSR reports, though this isn’t widespread; and

 There is a lot more pressure for companies supplying furniture to the private sector through demands by large companies such as Tesco, and this is only expected to increase. Private and public sector supply chains overlap to a certain extent; however, the market supplying prisons for instance, does not have the same pressures as in the private sector.

114 Comments captured in a telephone interview with Phil Reynolds at FIRA.

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Due to the high number of suppliers to the public sector, and as this is a high level assessment, it was not feasible to evaluate current performance against each social and ethical criteria proposed for the furniture sector as part of this study. Further engagement with suppliers would be required at the tendering or renewal stage of a framework agreement or individual contract to be able to assess the ability of bidding suppliers to meet these criteria and whether it would exclude any suppliers from being able to participate. This would also allow the procuring authority to understand what support suppliers may require to be able to increase their ability to satisfy social and ethical related tender criteria.

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8. Assessment of Costs and Benefits by Social and Ethical Criteria Themes and Product Groups

8.1 Costs of Adopting Proposed Social and Ethical Criteria

Adoption of the social and ethical criteria in procurement of key product groups could result in additional costs to suppliers and procurers115. In particular, the range of costs is likely to include:

 Costs to suppliers associated with compliance with the requirements and verification procedures (including supply chain monitoring);

 Costs to suppliers associated with improvements and corrections (where relevant); and

 Costs to procurers as a result of the products becoming more expensive.

Proposed social and ethical criteria cover four distinct themes including labour standards assurance, workforce, supply chain and materials (animal welfare or timber procurement).

Costs of adopting the proposed criteria per theme (labour standards, workforce, supply chain and materials), issue and product group are presented and discussed in the following sections.

8.1.1 Labour standards assurance costs

The proposed criteria stipulate that the contractor must deliver products produced under decent working conditions. As a result, bidders would incur a range of costs associated with responding to the PQQ, actual compliance with the stipulated requirements, verification and monitoring (including independent third party audit) and, potentially, mitigation actions. The majority of the costs are likely to be relevant to all products rather than be associated with specific product group. The likely costs largely include manpower costs (one-off and/or annual), membership fees (one-off and annual) as well as costs of specific actions. The costs to supplier associated with inclusion of labour standards assurance are summarised in Table 8.1.

Table 8.1 Labour standards assurance costs to a supplier

Cost element Costs Cost data Product Comments group

Set up, monitoring, Membership cost of a multi- £900 Textiles, Food, These are one-off costs of ETI reporting and stakeholder initiative (e.g. ETI) to Building & application verification costs demonstrate engagement with supply Construction, chain: one off application fee Furniture

115 Please note that the costs to procurers of establishing procurement process suitable for tackling social and ethical criteria (including product specific costs) are discussed in the Section 2 and are not covered repeatedly in this section.

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Cost element Costs Cost data Product Comments group

Membership cost of a multi- £2,500 Textiles, Food, Annual subscription costs (for stakeholder initiative (e.g. ETI): annual Building & companies with a turnover membership fee Construction, between £0-£25mln) Furniture

Membership cost of a multi- £3,112 ICT These are one-off costs of EICC stakeholder initiative (e.g. Electronic application (companies with a Industry Citizenship Coalition (EICC)) turnover less than $9 bn) to demonstrate engagement with supply chain: one off application fee

Membership cost of a multi- £21,781 ICT Annual subscription costs EICC stakeholder initiative (e.g. Electronic Industry Citizenship Coalition (EICC)): annual membership fee

Putting systems in place to collect £1,920 All SEDEX joining fee for companies performance data and report with a turnover less than £10mln performance (e.g. CAESAR or Sedex): joining fee

Putting systems in place to collect £1,320 All SEDEX membership fee for performance data and report companies with a turnover less performance (e.g. CAESAR or Sedex): than £10mln annual fee

Risk assessment of supply chain 75h All These are one-off costs (through tools such as Sedex, associated with risk assessment CAESAR etc.) required during tendering process. The assumption is that all contracts run on a 3-year basis (after which re-tendering takes place). This may also require external consultants to get involved to help with the interpretation of the data and develop a potential strategy

Data interpretation and reporting 45h All These are ongoing annual (through tools such as Sedex, monitoring and data interpretation CAESAR etc.) costs

Engagement with supply chain through £5000 All Annual costs of organising one face-to-face meetings, site visits, email supplier workshop per year bulletins, supplier forums

Training and capacity building of 75h/ 37.5h All Manpower requirements to supply chain (e.g. development of develop training materials, toolkits and guidance, training guidance and toolkits, followed by workshops) 37.5h annual manpower requirements to review and update the existing materials

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Cost element Costs Cost data Product Comments group

Costs to respond Develop code of practice of supply 37.5h All These costs are optional one-off to PQQ on labour chain policy (that incorporates labour costs that would occur if supplier

practices in supply standards or sign up to the ETI Base does not have a relevant policy in chain Code) if appropriate policy does not place. Cost assessment assumes exist that such policy would need to be

developed and reviewed annually. If the supplier has gaps in its practices or is inexperienced in ethical and social trading, it may need to seek the support of an external specialist consultancy (e.g. for the development of policy or code)

Annual review of the policy 7.5h All These would be annual costs of reviewing the policy (an existing or newly developed)

Compile data and relevant 15h All These are one-off costs documentation associated with tendering process. The assumption is that all Develop an approach to respond to 15h All contracts run on a 3-year basis tender (may include project meetings (after which re-tendering takes to develop approach) place).

Complete PQQ response 7.5h All If a template is prepared by a contracting authority, this may reduce the time required to complete PQQ response.

Remediation costs Costs of remediation measures All These costs have not been monetised as it is impossible to predict the extent of non- compliance and the need for such remediation actions

Auditing costs Costs of an independent 3rd party All These costs have not been audit (where required) monetised.

Set up, monitoring and verification costs would constitute the bulk of the likely costs to bidders. These, however, would offset or, at the very least reduce, the need for (an expensive) third party audits, which, in turn, are likely to be associated with significant direct and indirect costs to business; for instance, a corporate member of ETI estimated in 2006 that audits took up 80 per cent of the time of ethical trade personnel. Supply chain risk assessment and segmentation would also allow supplier to focus financial and manpower resources on most critical supply chain elements. Risk assessment carried out by bidders would facilitate a more complete understanding of supply chain allowing to segment its suppliers to determine how to commit resources to improve sustainability. Segmentation allows companies to focus on the most critical elements of the supply chain and is a balance between acknowledging that some risk will always exist but that specific risks need to be addressed to avoid negative impacts to business and to society.15 Cost estimates cover some of the tools available on the market that could assist in the process and manpower costs needed for continuous monitoring, assessment and interpretation. In particularly complex cases, input and expertise from specialist external consultants may be required to develop a tailored risk- based approach. The cost estimates also include a range of engagement and training activities that suppliers would need to carry out.

Industry collaboration (e.g. Furniture Industry Sustainability Programme) and multi-stakeholder initiatives (e.g. Ethical Trading Initiative) are useful tools for advancing an organisation’s supply chain sustainability objectives,

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particularly for issues that are too challenging and complex to tackle alone (e.g. poor working conditions in companies in developing countries). Estimation of the costs of monitoring, supply chain engagement and training assumed participation in the relevant collaborative activities (which usually entails a joining fee, membership fee, attendance at meetings and some level of participation on issue-specific task forces / committees).

In addition to the costs of responding to PQQ and costs of monitoring, engagement, verification and reporting, some costs elements would be relevant to specific product groups. These include costs associated with conflict minerals (ICT), that constitute a product specific area of interest. Achieving the objective of conflict-free products and minerals would require a combination of companies, governments, and consumers taking action to trace, audit, and certify their minerals supply chain:

 Trace: Companies must determine the precise sources of their minerals;

 Audit: Companies should have detailed examinations of their mineral supply chains conducted to ensure that a) minerals are not sourced from conflict mines; and b) no illegal taxes/bribes are paid to armed groups in Congo. Credible third parties should conduct or verify these audits; and

 Certify: For consumers to be able to purchase conflict-free electronics made with Congolese minerals, a certification scheme that builds upon the lessons of the Kimberley Process will be required.

Companies operating in the ICT product group can join the EICC to gain access to Conflict-Free Smelter (CFS) Assessment Program, which is a voluntary programme in which an independent third party evaluates smelter and refiner procurement activities and determines if the smelter or refiner demonstrated that all the materials they processed originated from conflict-free sources. Companies that want to source responsibly will be able to use the results of the smelter assessment in their own purchasing practices. The cost assessment for ICT product group covered the costs of joining EICC116.

Even if suppliers implement all the activities discussed, occasions still may occur when remediation measures would be required (please refer to Box 5).

Box 5 Remediation Measures

It is difficult to put an exact cost on remediation measures to a supplier; this will ultimately depend on the number of instances of non- compliance uncovered in the supply chain and the scale of the issue they relate to (e.g. children’s involvement in hazardous agricultural activities). The following example illustrates Impact’s117 recommended course of action that a company should take if child labour is discovered in a supplier site (e.g. factory). These procedures are based on Impactt’s experience of working extensively on child labour remediation and prevention programmes around the world, and in consultation with over 90 leading practitioners globally.

Phase One: immediate actions Key activities would include:  Removing the child from the factory immediately and ensure they are in a safe place until verifiable evidence to the contrary is provided. This would be followed by explaining to the child the possible remediation options and other measures to be put in place

116 Companies that are interested in accessing the information from the CFS program, may join a Work Group or Task Force for an annual fee, without the company becoming an EICC Applicant or Full member, at an annual fee of $5,000 USD

117 Operational Procedures for Remediation of Child Labour in Industrial Contexts, November 2008, Impactt

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and ensuring their agreement to participate in the remediation programme.  Meeting with top production site management to communicate the policies and basic positions regarding child labour and obtain their consensus on the interim arrangement for the child and their commitment for remediation.  Providing free food and free and safe accommodation to the child until a remediation programme is operational (this can be a relatively lengthy process).  Arranging payment of a stipend to the child, both during the exploratory phase and throughout the whole remediation programme. The stipend should be equivalent to the amount the child was earning whilst employed, or at least local minimum wage standard, whichever is higher.  Contacting the parents/guardians to ensure that they understand and agree with what is happening and to explain the ongoing provision of stipend, food and accommodation. If necessary, educate the parents about the benefits of schooling/vocational training.  Reviewing all the personnel records at the workplace to identify whether there are any other child workers.  Providing advice on improving age verification systems to ensure that no new child worker is hired.

Phase Two: Designing a remediation programme Key activities would include:  Identification of the remediation team, including local experts. These may include trade unions, local NGOs, government resources, health professionals or knowledgeable individuals.  Investigation into the specific circumstances of each child, including family background, education history and economic circumstances. This should also include discussions with each child about their ambitions and how education can help in achieving them and meetings with parents exploring why the child was not already placed in school. This understanding will enable the team to develop an educational solution which is more attractive to the child.  Evaluation of whether another adult family member could be employed by the factory in the child’s place to maintain the family’s income and continue the link between the factory and the family, making it more likely that remediation will be sustainable.  Identification of an appropriate school/training or tutoring facility that matches the needs and circumstances of each child. Besides basic literacy, the education should ideally involve learning skills which will be useful in gaining good employment as an adult. If the child is close to the legal working age, vocational training can be appropriate, particularly if it enhances the earning capacity of the child when they return to work legally. The school must not be on the same site as the factory. In the case of children who are away from home/have migrated for work, with or without their families, it is important to evaluate educational/training/tutoring facilities both in the child’s home town and in the host area.  Identification of an appropriate accommodation facility that is a safe place and matches the needs and circumstances of each child.  Agreement of who will fund the remediation costs, including education costs, any travel expenses and ongoing payment of a stipend not lower than the local minimum wage. This should continue at least until the child reaches the national minimum working age  Agreement on who will be responsible for monitoring the ongoing programme, how much this will cost and who will pay for this.  Commitment from the supplier/site to re-hire the child when he or she reaches legal working age, should the child and his/her parents wish it.  Consulting with the parent/guardian of each child in the design of the specific remediation programme for each child.  Obtaining signed agreements from the parent/guardian of each child and all parties to the remediation setting out the elements of each child’s remediation programme (remuneration, school etc) and the duties of each party in ensuring the success of the remediation.

Phase Three: ongoing support and monitoring Ongoing support and monitoring of the progress of the remediation programme to ensure that it continues to benefit the child until he or she reaches working age. This should be carried out by the purchasing company, local NGOs or trade unions or other experts and should not be carried out by the factory which employed the child(ren). Monitoring includes the following elements:  Monitoring of the child’s progress at school, exam results, school reports, discussions with teachers etc.  Home visits by an independent ‘friend’ to the child, checking in on a regular basis on their hopes, fears, and ambitions.  Regular payment of stipend, school fees and any other expenses. The monitoring findings should then be used to fine tune the remediation programme. Funding the remediation programme It is important to ensure that all phases of the remediation programme are properly funded. The employer should take primary responsibility for funding a stipend (which is at least equivalent to the average monthly salary including overtime paid to the child during their employment, or minimum wage, whichever is higher), any repatriation costs, school fees and expenses. It is important to understand the total cost implications of the programme and secure these monies from the employer preferably as a lump sum payment. This should then be entrusted to a third party to make the payments on a regular basis. In some cases, other actors in the supply chain may also take some responsibility for funding these costs.

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Ongoing monitoring Successful remediation is dependent on ongoing monitoring to ensure that the child remains in school and that the programme is adjusted to meet the child’s changing needs. Often the cost of monitoring is split between the factory, agent or intermediary and the purchaser. However, this needs to be negotiated on a case-by-case basis. Reporting It is good practice for a company to respond publicly to any non-compliance uncovered by third party organisations (e.g. NGO). Public reporting on a company’s response enables stakeholders to easily access information on how well a company has dealt with a particular issue. This level of transparency and openness can also prevent companies becoming the ‘target’ of stakeholders who want to know how companies are dealing with any problems found.

Table 8.2 summarises the results of the assessment of costs for a suppler associated with the labour standards assurance criteria across different product groups.

Cost estimates cover manpower needs to ensure compliance (these are calculated using the national average hourly gross wage of £11.20 (2011)) and membership fees (one-off and annual) associated with monitoring, verification and reporting systems. The costs are estimated per supplier and are presented as Net Present Value of one-off and ongoing costs over a ten-year assessment period. The differences in estimated costs for individual companies operating in different sectors are associated with product specific requirements or differences in membership fees (for instance, costs of joining EICC for the ICT sector are substantially higher than costs associated with SEDEX/ CAESER membership).

Table 8.2 Costs associated with labour standards assurance criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022)

Requirements Types of costs Textiles; Food; Building ICT & Construction; Furniture

Costs to respond to One-off: develop code of practice of supply chain policy. £2,508 £2,508 PQQ on labour Ongoing: annual review of the policy; compile data and relevant practices in supply documentation; develop an approach to respond to tender and chain complete PQQ response

Set up, monitoring, One-off: application cost of a multi-stakeholder initiative (e.g. £88,093 £256,265 reporting and ETI) to demonstrate engagement with supply chain; putting verification costs systems in place to collect performance data and report performance (e.g. joining fee CAESAR or Sedex); Ongoing: membership cost of a multi-stakeholder initiative (e.g. ETI); operating systems to collect performance data and report performance (e.g. CAESAR or Sedex); risk assessment of product supply chain (through tools such as Sedex and CAESAR); data interpretation and reporting; engagement with supply chain through face-to-face meetings, site visits, email bulletins, supplier forums; training and capacity building of supply chain (e.g. development of toolkits and guidance, training workshops)

Total costs: labour £90,601 £258,773 standards assurance Total costs are NPV 2013-2022, discount rate 3.5%

Overall, total costs associated with labour standards assurance criteria per supplier over a ten year assessment period would be £90.6 thousand for four out of five product groups. The costs to ICT products supplier would be much more significant (£258.8 thousand) due to high joining and membership fees of EICC (conflict minerals).

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8.1.2 Costs associated with workforce

The proposed criteria stipulate a range of requirements in relation to enhancement of skills, training and apprenticeships. As a result, bidders would incur a range of costs associated with responding to the PQQ, actual compliance with the stipulated requirements, verification and monitoring (including independent third party audit) and, potentially, mitigation actions. The likely costs largely include manpower costs (one-off and/or annual), membership fees (one-off and annual) as well as costs of specific actions. The costs to supplier associated with inclusion of workforce related requirements in social and ethical procurement are summarised in Table 8.3.

Table 8.3 Workforce related costs to a supplier

Cost element Costs Cost data Product Comments group

Administrative Develop apprentice work programme 15h All These are one-off costs costs (HR) associated with tendering process. The assumption is that all Identify and partner with a reputable 22.5h All contracts run on a 3-year basis learning provider to provide off-the-job (after which re-tendering takes training place).

Recruitment costs – advertising, 22.5h All The cost assessment is based on the assumption that in order to interview and selection comply with the proposed criteria Draw up an Apprenticeship Agreement 15h All individual supplier would need to (by law) establish and operate one apprenticeship running for 12 Training costs of up-skill and develop 22.5h All months over the contract period. line managers so they can coach their The cost estimate does not cover apprentice existing apprenticeships and recognizes that individual Cost of training and appointing an 22.5h All suppliers may choose to operate employee (in addition to line manager) more than one apprenticeship to act as a mentor or coach for the scheme. apprentice throughout their apprenticeship

Apprentice induction costs 22.5h All

Ongoing Cost of the supervision, support and 45h All Annual manpower needs for apprenticeship mentoring to support the apprentice supervision and performance costs review Cost of ongoing performance review of 22.5h All apprenticeship

Off-the-job training costs – in-house 280h All Minimum training hours training (depending on size of employer) or external recognised training provider

Off-the-job training costs – refund from 100% All If the apprentice is aged 16–18 NAS years old, the employer will receive 100% of the cost of the training; if they are 19-24 years old, they will receive up to 50%

Apprenticeship wage £8,840 All Based on the average weekly pay of £170 (£737 month per month)

Avoided employment costs £7,280 All One apprentice is assumed to have 1/3 productivity of a regular staff member.

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Cost element Costs Cost data Product Comments group

NAP funding -£1,500 All The National Apprenticeship Service will provide up to 40,000 Apprenticeship grants to employers with up to 1000 employees recruiting 16 to 24 year olds with a value of £1,500, to encourage employers to take on new apprentices. The £1,500 is in addition to the training costs of the Apprenticeship framework which are met in full for young people aged 16 to 18 and 50% for those aged 19 to 24. From a supplier point of view this constitutes a revenue (subsidy), which is offsetting costs.

Costs to respond Preliminary engagement with 15h All These are one-off costs to PQQ on organisations that facilitate associated with tendering process.

workforce criteria apprenticeship schemes (e.g. National The assumption is that all Apprenticeship Service) contracts run on a 3-year basis (after which re-tendering takes Compile data and relevant 15h All place). documentation If a template is prepared by a contracting authority, this may Develop an approach to respond to 15h All reduce the time required to tender (may include project meetings complete PQQ response. to develop approach)

Complete PQQ response 7.5h All

Reporting progress to procuring 15h All authority

Administrative costs to supplier associated with setting up apprenticeships, training and supervision costs would constitute the bulk of the likely costs. Ongoing apprenticeship costs would be partially offset by grants provided by NAS to cover training costs and establishment of apprenticeship schemes. Furthermore, employers would also benefit from apprentices as they would offset some of regular staff costs (depending on productivity).

A recent study carried out by the University of Warwick Institute for Employment Research (IER) found that:

 for the hospitality sector apprentices relatively productive during their training and employer’s costs are recouped relatively quickly;

 for the construction sector apprentices are relatively productive during their training but training tends to be highly structured and relatively costly compared to other sectors as employers train to meet their own skill needs and those of their sub-contractors. Overall, employers’ costs are recouped two years after completing the Apprenticeship.

 for the IT sector the largely workplace-based nature of training means productivity is relatively high and the costs to employers are comparatively low. The costs are typically recouped in a short space of time – on average around six months

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An SME might find it more difficult to recruit an apprentice and may not have the structures to develop a full apprenticeship programme. In England, there are group training associations (GTAs) established that can provide shared training resources for employers, many of whom are SMEs. GTAs are established by smaller employers in order to share the costs and administration of apprentice employment and training, helping with training assessments, skills needs analysis, health and safety training guidance and management training. In England, some employers, especially smaller organisations, may also turn to apprenticeship training agencies (ATAs) to access apprentices. These ATAs employ the apprentice directly and hire them out to employers, effectively operating as an employment agency. The ATA outsources the training activity for the apprenticeship to training providers. The crucial difference is that an ATA employs the apprentice, whereas a GTA just offers training to apprentices who are employed directly by an employer.

Table 8.4 summarises the results of the assessment of costs for a suppler associated with the workforce criteria across different product groups.

Cost estimates cover manpower needs to ensure compliance (these are calculated using the national average hourly gross wage of £11.20 (2011)), apprentice wage and training costs. Some of these costs are offset by training subsidies, apprenticeship grants and avoided staff costs (as a result of apprentice productivity). The costs are estimated per supplier per product group and are presented as Net Present Value of one-off and ongoing costs over a ten-year assessment period. There are no product specific differences in cost estimates as these are based on the national average hourly wage and there are no differences in criteria requirements across different product groups.

Table 8.4 Costs associated with workforce criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022)

Requirements Types of costs Per product group (All product groups)

Costs to respond to Ongoing: compile data and relevant documentation; preliminary engagement with £2,608 PQQ on skills and organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship training and report Service); develop an approach to respond to tender; complete PQQ response; progress costs of reporting.

Administrative costs to Ongoing: develop apprentice work programme (HR); identify and partner with a £5,505 supplier reputable learning provider to provide off-the-job training; recruitment costs – advertising, interview and selection; draw up an Apprenticeship Agreement; training costs of up-skill and develop line managers so they can coach their apprentice; cost of training and appointing an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship; apprentice induction costs

Ongoing Ongoing: cost of the supervision, support and mentoring to support the apprentice; £2,815 apprenticeship costs ongoing performance review of apprenticeship; off-the-job training costs – in-house training or external recognised training provider (offset by NAS funding); apprenticeship wage (offset by avoided employment costs of a regular staff); NAP funding

Total costs: work force £10,927 Total costs are NPV 2013-2022, discount rate 3.5%

Total net costs per supplier per product group are estimated at £10.9 thousand over the assessment period or £54.6 thousand for all five product groups.

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8.1.3 Supply chain costs

The proposed criteria stipulate that the contractor must engage with its supply chain in order to engage with SMEs and social enterprises. As a result, bidders would incur a range of costs associated with responding to the PQQ, actual compliance with the stipulated requirements, verification and monitoring (including independent third party audit). All the costs are likely to be generic rather than be associated with specific product group. The likely costs largely include manpower costs (one-off and/or annual), membership fees (one-off and annual) as well as costs of specific actions (e.g. training and engagement events). The costs to supplier associated with inclusion of supply chain related criteria are summarised in Table 8.5.

Table 8.5 Supply chain related costs to a supplier

Cost element Costs Cost data Product Comments group

Administrative Review and update all sub-contracting 37.5h All Manpower requirements to costs to supplier policies and practices, to identify and develop policies and practices understand any barriers which are preventing SMEs etc. from becoming suppliers

Annual review of the policy 7.5h All Annual manpower requirements to review and update existing policies

Training programme for procurement £500 All Costs of a training course teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework design tailored to 22.5h All These are one-off costs facilitate easier access of SMEs etc. associated with tendering process. (more lots; more detailed information) The assumption is that all contracts run on a 3-year basis Administrative costs associated with 22.5h All (after which re-tendering takes breaking down tenders into smaller place). lots to facilitate easier access of SMEs etc. (i.e. not necessarily opting for a single general contractor)

Advertising costs of tenders to target 15h All SME markets (i.e. beyond the ones usually used by larger companies). This can include advertising in the local press and circulating information on contracts through ethnic media and community organisations, as well as mainstream business support organisations and through seminars, meet the buyer and other local business events

Ongoing dialogue during tender phase 22.5h All (email, bulletins, helpdesk, face-to- face meetings) (would require considerable time and financial inputs)

Debriefing costs (i.e. providing 7.5h All feedback to unsuccessful tenderers)

Post contract award meeting with 7.5h All supplier to discuss management and monitoring of the contract

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Cost element Costs Cost data Product Comments group

Training activities, including briefing 37.5h All sessions on how to do business with the procurer, workshops on successful bid writing or on specific topics (would require considerable time and financial inputs)

Designing support tools offered to help 15h All bid writing, such as forms, templates and checklists (would require considerable time and financial inputs)

Partnership building costs with £800 Annual membership fee of Social organisations that broker SME, social Enterprise UK enterprise and civil society involvement

Ongoing costs Management costs of managing 90h Annual manpower requirements to several contractors (i.e. rather than manage, mentor and monitor managing a single general contractor) several contractors

Mentoring costs 45h

Monitoring and reviewing supplier 45h performance (e.g. through CAESAR, Sedex or Achilles)

Costs to respond Compile data and relevant 15h All These are one-off costs to PQQ on SMEs documentation associated with tendering process. and social The assumption is that all enterprises Preliminary engagement with 15h All contracts run on a 3-year basis organisations that broker SME, social (after which re-tendering takes enterprise and civil society place). involvement (e.g. Remploy, Social If a template is prepared by a Enterprise UK, Minority Supplier contracting authority, this may Development UK (MSDUK)) reduce the time required to Develop an approach to respond to 15h All complete PQQ response. tender (may include project meetings to develop approach)

Complete PQQ response 7.5h All

Administrative and ongoing costs to supplier associated with engagement activities with SMEs and social enterprises would constitute the bulk of the likely costs.

Table 8.6 summarises the results of the assessment of costs for a suppler associated with the SMEs and social enterprise criteria across different product groups.

Cost estimates cover manpower needs to ensure compliance (these are calculated using the national average hourly gross wage of £11.20 (2011)), membership fees associated with monitoring, verification and reporting systems and training costs. The costs are estimated per supplier per product group and are presented as Net Present Value of one-off and ongoing costs over a ten-year assessment period. There are no product specific differences in cost estimates as these are based on the national average hourly wage and there are no differences in criteria requirements across different product groups.

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Table 8.6 Costs associated with SMEs and social enterprise criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022)

Requirements Types of costs Per product group (All product groups)

Costs to respond to Ongoing: compile data and relevant documentation; preliminary engagement with PQQ on SMEs/ organisations that broker SME, social enterprise and civil society involvement (e.g. social enterprises Remploy, Social Enterprise UK, Minority Supplier Development UK (MSDUK)); develop an approach to respond to tender and complete PQQ response £2,028

Administrative costs One-off: review and update all sub-contracting policies and practices, to identify and to supplier understand any barriers which are preventing SMEs etc. from becoming suppliers; training programme for procurement teams on supplier diversity Ongoing: annual review of the policy; tender framework design tailored to facilitate easier access of SMEs etc. (more lots; more detailed information); administrative costs associated with breaking down tenders into smaller lots to facilitate easier access of SMEs etc. (i.e. not necessarily opting for a single general contractor); advertising costs of tenders to target SME markets (i.e. beyond the ones usually used by larger companies); ongoing dialogue during tender phase (email, bulletins, helpdesk, face-to-face meetings); debriefing costs (i.e. providing feedback to unsuccessful tenderers); post contract award meeting with supplier to discuss management and monitoring of the contract; training activities; designing support tools offered to help bid writing, such as forms, templates and checklists; partnership building costs with organisations that broker SME, social enterprise and civil society involvement £14,240

Ongoing costs Ongoing: management costs of managing several contractors (i.e. rather than managing a single general contractor); mentoring costs; monitoring and reviewing supplier performance (e.g. through CAESAR, Sedex or Achilles) £17,353

Total costs: SMEs and social enterprise £33,621 Total costs are NPV 2013-2022, discount rate 3.5%

Overall, total costs associated with SMEs and social enterprise standards assurance criteria per supplier per product group over a ten year assessment period would be £33.6 thousand or £168.1 thousand for all five product groups.

8.1.4 Material sourcing costs

The proposed criteria also cover sustainable and responsible sourcing of materials. In the context of textile and food product groups the requirements address animal welfare issues, while in the building and construction and furniture product groups the criteria address sustainable timber production among other issues.

As a result, bidders would incur a range of costs associated with responding to the PQQ, actual compliance with the stipulated requirements, verification and monitoring (including independent third party audit) and, potentially, mitigation actions. The majority of the costs are likely to be product group specific rather than generic.

The likely costs largely include manpower costs (one-off and/or annual), membership fees (one-off and annual) as well as costs of specific actions. The costs to supplier associated with inclusion of material sourcing criteria in procurement are summarised in Table 8.7.

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Table 8.7 Material sourcing costs to a supplier

Cost element Costs Cost data Product Comments group

Administrative Engagement with animal welfare 15h Textiles, Food These are one-off costs costs groups (e.g. RSPCA) associated with engagement activities during tendering process. The assumption is that all contracts run on a 3-year basis (after which re-tendering takes place).

Develop a sourcing policy (or include 37.5h Textiles, Food, Manpower requirements to in existing sourcing policy) on animal Building & develop a souring policy (one-off) welfare for leather, wool, etc. or Construction, sustainable timber procurement Furniture

Establish appropriate monitoring 22.5h Textiles, Food, These are one-off manpower costs systems to manage enforcement of Building & of establishing a system the standards Construction, Furniture

Annual review of the policy 7.5h Textiles, Food, Annual manpower needs to review Building & policy Construction, Furniture

Develop a sustainable timber policy or 37.5h Building & One-off costs of establishing policy express commitment to UK timber Construction, (manpower) procurement policy Furniture

Annual review of the policy 7.5h Building & Annual costs Construction

Establish appropriate monitoring 22.5h Building & One-off costs of establishing policy systems to manage enforcement of Construction (manpower) standards

Communication of policy commitment 75h Building & These are ongoing annual to all relevant company employees, as Construction communication costs well as sub-contractors. This can be done through workshops, bulletins, email, newsletter.

Time for relevant company employees 15h Building & These are one-off costs during to attend training on sustainable timber Construction tendering process. The (CPET provides these free of charge assumption is that all contracts run to direct suppliers to the public sector). on a 3-year basis (after which re- See: http://www.cpet.org.uk/training- tendering takes place). and-awareness-raising

Cost of specification of legal and 7.5h Building & sustainable timber in contracts and Construction purchase orders.

Cost of implementation monitoring 45h Building & These are annual monitoring and system to check purchases and record Construction, data interpretation costs the information Furniture

Ongoing costs Monitoring and reviewing supplier 45h Textiles, Food Annual manpower needs to performance (e.g. through CAESAR, monitor and review performance Sedex )

Cost of checking that each 45h Building & Annual manpower needs to consignment is certified to FSC or Construction, monitor and check certificates equivalent (e.g. invoices; delivery Furniture notes)

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Cost element Costs Cost data Product Comments group

Costs to respond Compile data and relevant 15 All These are one-off costs to PQQ on documentation associated with tendering process. material sourcing The assumption is that all in supply chain Preliminary engagement with animal 15 Textiles and contracts run on a 3-year basis welfare group (e.g. RSPCA) food (after which re-tendering takes

place). Develop an approach to respond to 15 All tender (may include project meetings If a template is prepared by a to develop approach) contracting authority, this may reduce the time required to Complete PQQ response 7.5 All complete PQQ response.

Remediation costs Costs of remediation measures All These costs have not been monetised as it is impossible to predict the extent of non- compliance and the need for such remediation actions

Auditing costs Costs of an independent 3rd party All These costs have not been audit (where required) monetised.

Administrative and ongoing costs to supplier associated with training, monitoring etc. would constitute the bulk of the likely costs. In addition to the monetised costs suppliers across different product groups are likely to incur additional costs, including:

 Costs of initial set up of monitoring systems (all product groups);

 Cost of providing information and labelling to consumers. This may also consist of cost of gaining accreditation to labels such as Fairtrade; Soil Association; LEAF Marque; Red Tractor; RSPCA Freedom Foods; Farm Assured; Marine Stewardship Council (food product group);

 Where sugar-containing drinks, confectionery and non-baked savoury products have to be made available only in smaller portion sizes, or where a portion of fruit has to be made available at a lower price than a non-fruit hot/cold dessert, revenues are likely to be lower for catering service providers (food product group);

 Lost revenue to catering service providers and one-off costs to vending machine operators, due to the required changes to their food offering for provision of nutritionally, religious and culturally appropriate food (food product group); and

 Cost of accreditation to FSC, PEFC or FLEGT (or equivalent) or costs of ensuring that sub-contractors provide evidence of accreditation to approved certification schemes (e.g. chain of custody certificates). Where no sustainable source of timber is available, costs of voluntary legality verification to ensure legality and ensuring compliance with the UK government’s timber procurement policy (building and construction and furniture product groups).

Table 8.8 summarises the results of the assessment of costs for a suppler associated with the material sourcing criteria across different product groups.

Costs estimates cover largely manpower requirements needed to ensure compliance and monitoring, verification and reporting (these are calculated using the national average hourly gross wage of £11.20 (2011)). The costs are

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estimated per supplier and are presented as Net Present Value of one-off and ongoing costs over a ten year assessment period. The differences in estimated costs for individual companies operating in different sectors are associated with product specific requirements.

Table 8.8 Costs associated with material sourcing criteria per supplier (Net Present Value of one-off and ongoing costs 2013-2022)

Requirements Types of costs Textiles Building & Furniture ICT and construction Food

Costs to respond Ongoing: compile data and relevant documentation; £2,028 £2 028 Na to PQQ on preliminary engagement with animal welfare group material sourcing (e.g. RSPCA) (textiles and food only); develop an in supply chain approach to respond to tender and complete PQQ response

Administrative One-off: develop a sourcing policy (or include in £1,891 £13,955 £13,955 Na costs existing sourcing policy) on animal welfare for leather, wool, etc. or timber; establish appropriate monitoring systems to manage enforcement of standards Ongoing: engagement with animal welfare groups (e.g. RSPCA) (textiles and food); annual review of the policy; building& construction and furniture: communication of policy commitment to all relevant company employees, as well as sub-contractors; training on sustainable timber; cost of specification of legal and sustainable timber in contracts and purchase orders; cost of implementation monitoring system to check purchases and record the information

Ongoing costs Ongoing: monitoring and reviewing supplier £4,338 £4,338 £6,766 Na performance (e.g. through CAESAR, Sedex) (textiles and food); cost of checking that each consignment is certified to FSC or equivalent (e.g. invoices; delivery notes) and costs of reporting compliance to procuring authority (building& construction and furniture)

Total costs: £8,257 £19,742 £22,169 Na material sourcing Total costs are NPV 2013-2022, discount rate 3.5%

Overall, total costs associated with animal welfare standards per supplier in textiles and food sectors over a ten year assessment period would be £8.3 thousand.

The estimated costs per supplier associated with sustainable timber sourcing in the building and construction and furniture product groups would be around £19.7 thousand and £22.2 thousand over the assessment period respectively.

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8.2 Benefits of Adopting Proposed Social and Ethical Criteria

Adoption of the social and ethical criteria in procurement of key product groups could result in a range of benefits to suppliers and procurers118.

Overall benefits to suppliers of adopting the proposed criteria are presented in Table 8.9.

Table 8.9 Summary of benefits to suppliers

Supply chain Domestic International

Contributes to the modernisation and international competitiveness of supply   chains in developing countries which can encourage foreign investment and employment generation

Corporate brand and values, and customer and consumer confidence and    loyalty are protected and enhanced119

“Informal” or “social” license to operate within communities, legal systems and   governments that otherwise might be antagonistic1

Increases in shareholder value (examples from leading companies show that    good supply chain management can increase shareholder value) 1

Easier access to capital at a lower cost and to financing and insurance120 (for    companies that demonstrate a strong understanding and ability to manage potential risks in their supply chains)

Competitive advantage and potentially a prerequisite for awarding contracts,    particularly with the public sector (the ability to demonstrate excellent management processes, supplier diversity and good labour standards in the supply chain)

Case studies discussing financial impact brand value from bad supplier practices (e.g., child labour) and economic costs of supply chain disruptions (e.g. worker strikes) are presented in Box 6.

Box 6 Benefits of avoided financial impact on brand value and costs of supply chain disruptions

118 Please note that the costs to procurers of establishing procurement process suitable for tackling social and ethical criteria (including product specific costs) are discussed in the Section 2 and are not covered repeatedly in this section.

119 http://www.unglobalcompact.org/Issues/supply_chain/index.html

120 The Business Case for Supply Chain Sustainability. A Brief for Business Leaders. Dec-ember 2010, BSR

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Case Studies In 2008, Baxter International spent US $11 million on recall expenses due to contamination of Heparin products made by a Chinese supplier. This incident also resulted in Baxter’s stock value decreasing 13% in the first quarter of 2008. In 2007, Mattel spent US $110 million on recall expenses to recall about 20 million products and a communication campaign due to an erroneous assessment of lead content used by Tier-2 Suppliers. During the crisis, the stock value of Mattel dropped 18% between August and December 2007. In addition, several lawsuits have been brought against Mattel as a consequence of the incident (e.g. Mattel was sued by the State of California in November 2007). In 2006, Norwegian fund sold €414 million in Wal-Mart shares due to child labour issues with suppliers. The exclusion of Wal-Mart from the Norwegian sovereign fund was officially announced 6 June by the Finance minister of Norway. Wal-Mart’s market share fell 11% between 1 June and mid-July. Analysis The case studies show the economic consequences of supply chain issues. In each case, the brand reputation of companies was affected by events involving safety, environmental or social issues with suppliers. These events have also led to significant direct costs (recall of products, financial penalties) and/or indirect costs (decrease in market share, sales and market cap, product boycotts) for these companies. Regarding the direct costs linked to sustainability issues after a supply chain disruption, PwC, EcoVadis and Insead established that those costs represent on average 0.7% of a company’s revenue. The case studies also allowed PwC, EcoVadis and Insead to establish a direct correlation between sustainability-related events and the decrease of these companies’ share price. This correlation appears to exist but generally affects market capitalisation over a short term period. After analysing the cases, an average 12% decrease in market capitalisation after a supply chain disruption due to a sustainability issue was measured. Source: Value of Sustainable Procurement Practices. A quantitative analysis of value drivers associated with Sustainable Procurement Practices, 2010, PwC, EcoVadis and Insead

Furthermore, social and ethical procurement of specific product groups would result in further benefits.

The benefits specifically derived from a focus on social and ethical criteria within procurement of the five product groups are listed in Table 8.10. The benefit assessment also indicates whether these are expected to be domestic and/or international.

Table 8.10 Summary of product group related benefits to procuring organisations and suppliers

Benefits Textile Food Building & ICT Furniture

Construction Theme D Int D Int D Int D Int D Int

Ensures compliance with ILO core conventions           which seek to enhance labour conditions within developing countries.

Providing decent working conditions for      workers reduce the risk of poor quality or production disruptions, as a result of boosted morale and better worker retention.

Strong labour practices can help make      suppliers employers of choice in regions experiencing labour shortages (e.g. China), thereby reducing turnover and keeping labour

costs steady.

Reduces the risk of interruptions to the supply  chain, shortages and significant price volatility

Labour standards Labour due to geopolitical instability.

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Benefits Textile Food Building & ICT Furniture

Construction Theme D Int D Int D Int D Int D Int

Ensuring that products are conflict-free, will  contribute to excluding armed groups and military units from the supply chain. This will not only reduce the resources available to these groups, who are among the worst human rights violators in the conflict, it will also create an incentive for minerals traders to reform their business practices and contribute to a more legitimate trade, one that would deliver more benefits to the Congolese people.1

Reduces the risk of bad publicity resulting from  inappropriate access to confidential data

Enhances skills and training within the      particular supply chain, particularly in the regions where unemployment is higher than average

Offers the contracting authority the opportunity      to focus on issues of relevant to the community, including economic growth, job creation, participation of local businesses.

Apprenticeships increase opportunities for     employment, potentially targeted at minority/disadvantaged groups such as young/unemployed members of the community, lower skilled workers in regions where unemployment is higher than average

According to The National Apprenticeship  Service, 80% of employers said apprentices made their workplace more productive.

Employing apprentices can help towards 

Workforce preventing skills shortages in the future

Supports a strong and sustainable local    economy by involving local suppliers in procurement opportunities, particularly in the sector concerned

Increased involvement of local supply chains in  end of life solutions resulting in product innovation and increased employment.

Promotes social innovation as new business      models, products and services are developed through the involvement of SMEs, social enterprises and civil society

Promotes opportunities that enable inclusion of    the third sector, particularly in the sector concerned

Supports the Government’s commitment to  establish a more open and competitive ICT

Supply chain Supply marketplace in the UK public sector

Promotes compliance with minimum animal    

eria ls Mat health and welfare standards.

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Benefits Textile Food Building & ICT Furniture

Construction Theme D Int D Int D Int D Int D Int

Where animals are farmed for productive   purposes, it is now proven that, in the majority of circumstances, poor welfare will result in reduced biological and economic output.121

Reduced operational risks such as disruption  to supply, increased cost and lack of access to key raw materials.1

Offering culturally appropriate food choices in  the workplaces demonstrates cultural sensitivity to a diverse workforce and can increase employee satisfaction.

Promoting nutritious food options in the  workplace can positively influence the diets of employees resulting can result in their increased health and lower rates of absenteeism and higher productivity.

Thanks to campaigns that have led to stronger  legislation and raised consumer expectations around animal welfare in developed countries, suppliers in the emerging markets are in a good position to capitalise on increased market premiums for more sustainable products. Moreover, as awareness about animal welfare issues increases globally, they may also be able to benefit from future demand in their home markets.122

Certification of sustainable forest management   is a proven way to ensure that biodiversity and ecosystem services including climate change benefits, local communities and indigenous groups and economic implications are taken into account in forest management.110

D = Domestic Int = International

Boxes 7 and 8 provide an illustration of benefits associated with sustainable material sourcing in relation to timber procurement.

Box 7 Benefits of FSC

121 http://www.bsas.org.uk/about_the_bsas/issue_papers/animal_welfare/

122 Good Practice Note. Animal Welfare in Livestock Operations, 2006, IFC

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1. FSC certified forests are managed with consideration for people, wildlife and the environment and therefore consumers . 2. The FSC label guarantees that the trees that are harvested are replaced or allowed to regenerate naturally. 3. Parts of the forest are protected entirely, in order to protect rare animals and plants. 4. FSC protects the rights of indigenous people to use the forest. If they have sacred sites in the forest these are exempt from felling. 5. The forest owner must use local workers to run the forest, and provide training, safety equipment and a decent salary. The forest owner is often obliged to support the community in other ways, such as through the development of schools. 6. FSC is a market-based initiative which also ensures better conditions for the forest and the people whose livelihoods depend on it. 7. FSC gives an assurance that future generations will be able to enjoy the benefits of the forest. 8. All the wood is tracked from the forest to the store. Every link between the forest and the consumer is certified to make it clearly identifiable which wood is FSC certified and which is not. 9. FSC is the only wood certification scheme endorsed by the major environmental charities, including WWF, Greenpeace and The Woodland Trust. 10. The FSC label is also available on floors, decking, paper, printed matter, charcoal, kitchen utensils and venison. Source: http://www.fsc-uk.org

Box 8 Benefits of PEFC

Upholds Highest Standards without Exception  Requires compliance with all fundamental ILO Conventions in forest management since 2001, setting new benchmarks for social issues.  Is tailored to the specific needs of family– and community-owned forests, with lasting contributions to livelihoods and rural development.  Offers well-established processes for group certification, providing access to certification and the marketplace for certified products from locally controlled forestry.  Sets the highest standards for forest certification aligned with the majority of the world’s governments, including o Maintaining or enhancing biodiversity o Protecting ecologically important forest area o Prohibition of forest conversions; exclusion of certification of plantations established by conversions o Prohibition of the most hazardous chemicals and GMOs o Protecting workers’ rights and welfare, and encouraging local employment o Recognising the principle of free, prior and informed consent (FPIC), the UN Declaration on Indigenous Peoples’ Rights, and ILO Convention 169 on Indigenous and Tribal Peoples o Respect for property and land tenure rights as well as customary and traditional rights o Provisions for consultation with local people and stakeholders o Abiding by applicable laws o Safeguarding the basic rights of workers  Requires companies to demonstrate compliance with social, health and safety requirements in Chain of Custody certification. Level of Stakeholder Engagement Equally High for All Standards  Strictly separates standard-setting, certification and accreditation to ensure complete independence and impartiality.  Requires all national standards to be independently developed with the open participation of all interested parties.  Recognides the importance of the nine major groups as defined by Agenda 21 (CSD Major Groups).  Requires that all standards undergo public consultation at national and international level and third-party assessment.  Demands and implements regular revisions of national certification systems.  Builds on Intergovernmental Agreements & Globally Recognized Processes. Builds its understanding of sustainable forest management on broad societal consensus expressed in international and intergovernmental processes  Supports the implementation of governmental agreements through a voluntary, market-based mechanism.  Follows globally accepted ISO Guidelines for certification and accreditation.

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Source: http://www.pefc.co.uk/about-pefc/what-makes-pefc-unique

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9. Specific Impact Tests

9.1 Competition Assessment

The competition assessment guidelines (part of BIS Impact Assessment guidance documents) set out four questions to establish whether a proposed policy is likely to have an effect on competition and competitiveness. A brief summary of the four questions and a response considering potential inclusion of social and ethical criteria in public sector procurement is presented in Table 9.1.

Table 9.1 Competition assessment filter questions 3

Do the proposed revisions to Response Comment the Government Buying Standards…

Q1. …directly limit the number or No Proposals do not seek to directly limit the number of suppliers and having range of suppliers? regard to the number of manufacturers able to supply products complying with the proposed criteria are unlikely to limit the range of suppliers.

Q2. …indirectly limit the range of No For the majority of products there is considered to be sufficient number of suppliers? new and existing suppliers available in a globalised market place. The proposals do not prevent entry or exit from the market.

Q3. …limit the ability of suppliers to No Proposals encourage innovation and competition with a series of continuous compete? engagement and mitigation/ improvement requirements. These proposals do not affect the ability of suppliers to pass costs on to procurers.

Q4. …reduce suppliers’ incentives No Proposals do not seek to directly limit the incentives for suppliers to compete to compete rigorously? and the introduction of award criteria recognising innovation should help encourage suppliers to compete especially with more sustainable products.

Considering this and the information set out in the previous sections, it is expected that inclusion of social and ethical criteria in public procurement will have a low but positive impact on competition. Overall the proposed criteria should encourage innovation and competition.

9.2 Small Firms Assessment

Whilst social and ethical issues are relevant to businesses of any size or type, their detailed application may differ from case to case. It is likely that there will be a burden to SMEs (whether profit or not for profit) directly (if they are the main contractors) or indirectly (if they are subcontractors to whom social and ethical obligations have been transferred by the main contractor) in being required to meet social and ethical criteria.

Public authorities contemplating introducing social and ethical procurement should be aware of these costs and should take them into account when deciding how or whether to incorporate social considerations into their procurement operations.

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Procuring authorities also need to be aware that introduction of social and ethical procurement is unlikely to affect every SME in the same way; some may be more able than others to reap the benefits of these criteria and seize opportunities to compete on the social standards aspects of the contract (e.g. end of life opportunities in the ICT, furniture and textiles sectors).18

9.3 Social Impact Assessment

Social impact assessments include race, disability and gender equality specific impact tests. The adoption of the proposed social and ethical criteria is expected to benefit these groups as the criteria have been specifically designed to promote and encourage their inclusion in the economy.

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10. Summary of Costs and Benefits

10.1 Summary of Monetised Costs and Benefits

The estimated manpower needs per contracting authority per product group are 143h one-off and 67h annual. For all five product groups, the estimated manpower requirements would be 713h one-off and 333h annually. A summary of the costs to the procuring authority are summarised in Table 10.1. The table presents the estimated costs per supplier to comply with the proposed criteria.

Table 10.1 Summary of costs to procuring authority

Procurement Actions Hours NPV (2013- process step 2022) (£)

Commitment Social and ethical procurement policy (overarching):

Background research, development, drafting, organizational feedback loops and 165 1,848 final issue

Annual review 20 1,704

Advocate and adversarial (positioning) 60 672

Product specific policies & alignment: 0

Background research and benchmarking activity 37.5 420

Policy and Strategy alignment and annual review 20 1,704

Advocate and adversarial (positioning) 60 672

Total costs: per product group 3,641

Total costs: all product groups 18,205

Communication Website 7.5 £723

Supplier workshops 15.5 1,494

Total costs: per product group 1,022

Total costs: all product groups 5,110

Assessment & Assessment& prioritisation: per product group 35 1,716 prioritisation Total costs: all product groups 8,581

Collaboration Supplier engagement workshops (covers all products/ contracts and provides 35 3,374 feedback/ discussion on improvements): all product groups

Monitoring Day-to-day contract management (social and ethical aspects): per product group 7.5 723

Total costs: all product groups 3,615

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Total costs: per product group 227 7,777

Total costs: all product groups 1,133 £38,884

The NPV of one-off and annual costs over ten years assessment period would be £7.8k per product group, or £38.9k for all five key product.

The costs to a supplier associated with specific product groups are presented in Table 10.2 (please refer to the Appendix A for a detailed breakdown of costs). When considered on a per supplier basis, costs of compliance with the proposed social and ethical criteria would be most expensive in the ICT sector and associated, in particular, with the costs of participation in an industry collaborative initiative such as the EICC.

Table 10.2 Summary of costs per supplier per product group

Textiles Food Building & ICT Furniture construction

Costs to respond to PQQ on labour practices in 2,508 2,508 2,508 2,508 2,508 supply chain

Set up, monitoring, reporting and verification 88,093 88,093 88,093 256,265 88,093 costs

Auditing costs (3rd party independent audit)

Cost of remediation measures (if required)

Total costs: labour standards assurance 90,601 90,601 90,601 258,773 90,601 Labour Standards assurance Standards Labour Costs to respond to PQQ on skills and training 2,608 2,608 2,608 2,608 2,608

Administrative costs to supplier 5,505 5,505 5,505 5,505 5,505

Ongoing apprenticeship costs 2,815 2,815 2,815 2,815 2,815

Total costs: workforce 10,927 10,927 10,927 10,927 10,927 Workforce Costs to respond to PQQ on SMEs/ social 2,028 2,028 2,028 2,028 enterprises 2,028

Administrative costs to supplier 14,240 14,240 14,240 14,240 14,240

Ongoing costs 17,353 17,353 17,353 17,353 17,353

Total costs: SMEs 33,621 33,621 33,621 33,621 33,621

SMEs/ social social SMEs/ enterprises

Costs to respond to PQQ on material sourcing 2,028 2,028 2,028 2,028

Administrative costs to supplier 1,891 1,891 13,955 13,955

Material Material sourcing

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Ongoing costs 4,338 4,338 4,338 6,766

Auditing costs (3rd party independent audit)

Cost of remediation measures (if required)

Total costs: material sourcing 8,257 8,257 197,42 0 22,169

TOTAL (3) 143,406 143,406 154,891 303,321 157,318

10.2 Summary of Non-Monetised Costs and Benefits

In addition, proposed social and ethical criteria are likely to be associated with further costs and benefits that could not be quantified and monetised, including, in particular:

 Financial costs to suppliers associated with a) remediation measures potentially required in the case of discovered non-compliance; b) an independent 3rd party auditing; and c) establishing monitoring system where no external monitoring/ reporting systems exists (e.g. Sedex etc.)

 Financial costs to suppliers associated with specific product groups, including:

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Benefits to procuring authority, supplier and wider society have not been monetised (with an exception of funding support available to suppliers) and are presented in the previous sections along with selected illustrations and case studies.

10.3 Risks and Uncertainties

Key uncertainties and risk associated with the cost assessment for procuring organisation and supplier are:

 Quantification and monetisation of costs was based on a single entity basis, i.e. a procuring authority (large local authority) and supplier basis;

 Monetisation of costs to procurers and suppliers was based on assumptions in relation to manpower needs associated with implementation of specific requirements;

10.4 Sensitivity Analysis of Costs and Benefits

Sensitivity analysis on the monetised costs and benefits is presented in Table 10.3. The Net Present Value (NPV) is calculated using 10 year assessment period and a 3.5% discount rate.

Sensitivity scenarios considered the following variables:

 Costs to suppliers: manpower costs required to comply with specific requirements including manpower required and hourly pay; and

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 Costs to procuring authority: manpower costs associated with setting up social and ethical procurement process including manpower required and hourly pay.

Table 10.3 presents the estimated costs per contracting authority for all five product groups under low and high scenario.

Table 10.3 Summary of costs to procuring authority

Procurement Actions Hours, NPV Low Hours, NPV High process step low (2013- high (2013-2022) 2022)

Commitment Social and ethical procurement policy (overarching):

Background research, development, drafting, 123.8 1,297 247.5 2,772 organizational feedback loops and final issue

Annual review 15 1,278 30 4,494

Advocate and adversarial (positioning) 45 504 90 1,772

Product specific policies & alignment: £0 £0

Background research and benchmarking activity 28.1 295 56.3 630

Policy and Strategy alignment and annual review 15 1,278 30 4,494

Advocate and adversarial (positioning) 45 504 90 1,772

Total costs: per product group 2,693 8,704

Total costs: all product groups 13,464 43,519

Communication Website 5.6 508 11.3 1,085

Supplier workshops 13.5 1,301 19.5 1,880

Total costs: per product group 768 1,461

Total costs: all product groups 3,839 7,303

Assessment & Assessment& prioritisation: per product group 26.3 1,287 52.5 2,574 prioritisation Total costs: all product groups 6,435 12,871

Collaboration Supplier engagement workshops (covers all products/ 26.3 2,531 52.5 5,061 contracts and provides feedback/ discussion on improvements): all product groups

Monitoring Day-to-day contract management (social and ethical 5.6 508 11.25 1,085 aspects): per product group

Total costs: all product groups 2,538 5,423

Total costs: per product group 170 5,761 339 14,835

Total costs: all product groups 852 £8,807 1,696 £74,177 Notes: High scenario assumes 50% increase in manpower required and involvement of more senior staff in development and review of policies. Low scenario assumes 25% decrease in manpower required and involvement of lower grade staff in background research. One-off costs to a local authority associated with setting up a process of embedding social and ethical criteria in procurement are estimated to be £16.6 thousand for all five key product groups and £8.3 thousand for high and low scenario respectively. In addition, local authority would incur £19.4 thousand and £8.1 thousand in annual costs for all product groups per year under high and low scenarios.

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The NPV of one-off and annual costs over ten years assessment period would be £28.8 thousand and £74 .2 thousand for all five key product groups under low and high scenarios.

The costs to a supplier associated with specific product groups under low and high scenarios are presented in Table 10.3.

Table 10.3 Summary of costs per supplier per product group

Low cost scenario High cost scenario

ruction

Textiles & Food Building & construction ICT Furniture Textiles & Food Building & const ICT Furniture

Costs to respond to PQQ on 2,785 2,785 2,785 2,785 5,625 5,625 5,625 5,625 labour practices in supply chain

Set up, monitoring, reporting and 74,995 74,995 243,167 74,995 114,290 114,290 282,462 114,290 verification costs

Total costs: labour standards 77,780 77,780 245,952 77,780 119,914 119,914 288,086 119,914

assurance

Labour Standards Standards Labour assurance Costs to respond to PQQ on 2,257 2,257 2,257 2,257 4,570 4,570 4,570 4,570 skills and training

Administrative costs to supplier 4,458 4,458 4,458 4,129 8,916 8,916 8,916 8,257

Ongoing apprenticeship costs 2,163 2,163 2,163 2,163 4,118 4,118 4,118 4,118

Total costs: workforce 8,878 8,878 8,878 8,549 17,605 17,605 17,605 16,946 Workforce Costs to respond to PQQ on 1,823 1,823 1,823 1,823 3,701 3,701 3,701 3,701 SMEs/ social enterprises

Administrative costs to supplier 13,293 13,293 13,293 13,293 19,200 19,200 19,200 19,200

Ongoing costs 13,015 13,015 13,015 13,015 26,030 26,030 26,030 26,030

Total costs: SMEs 28,131 28,131 28,131 28,131 48,931 48,931 48,931 48,931

SMEs/ social social SMEs/ enterprises Costs to respond to PQQ on 1,823 1,823 1,823 3,701 3,701 - 3,701

material sourcing

Administrative costs to supplier 2,163 11,068 11,211 4,327 22,136 - 22,423

Ongoing costs 3,254 3,045 5,009 6,507 6,507 - 10,435

Total costs: material sourcing 7,240 15,502 0 17,609 14,535 31,476 0 35,690 Material sourcing Material

TOTAL (£) 122,029 130,290 282,961 132,068 200,985 217,926 354,622 221,481

Notes: High scenario assumes: a) a 50% increase in manpower required in completing the tasks; b) a 50% increase in engagement costs with supply chain on labour standards and c) involvement of senior staff at the average hourly costs of £19.69/h. The tasks affected include, in particular, development and review of policies, practices and programmes as well as approaches to respond to tender regarding labour standards, SMEs, workforce and material sourcing; establishing appropriate monitoring systems to manage enforcement of standards on material sourcing and post contract award meeting with SME suppliers. Low scenario assumes: a) a 25% decrease in manpower required in completing the tasks; b) a 25% decrease in engagement costs with supply chain on labour standards and c) involvement of junior staff at the average hourly costs of £10.48/h. The tasks affected include, in particular, compile data and relevant documentation (costs to respond to PQQ) regarding labour standards, SMEs, workforce and material sourcing and cost of checking that each consignment is certified to FSC or equivalent for Furniture and Building & construction.

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The estimated total costs of compliance with the proposed criteria per supplier across four product groups under low cost scenario would be between £122 thousand (textiles and food products), £130.3 thousand (building& construction) and £132.1 thousand (furniture). In the ICT sector, these costs have been estimated at £283 thousand (of which £256.3 thousand are associated with the EICC membership).

The estimated total costs of compliance with the proposed criteria per supplier across four product groups under high cost scenario would be between £201 thousand (textiles and food products), £217.9 thousand (building& construction) and £221.5 thousand (furniture). In the ICT sector, these costs have been estimated at £354.6 thousand.

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Appendix A Cost Assessment

Table A.1 Costs to a supplier: textiles

Stages of Actions by supplier Hours Unit 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NPV the cost procurement process

Costs to Develop code of 37.5 420 0 0 0 0 0 0 0 0 0 £420 respond to practice of supply chain PQQ on labour policy (that incorporates practices in labour standards or supply chain sign up to the ETI Base Code) if appropriate policy does not exist

Annual review of the 7.5 0 84 84 84 84 84 84 84 84 84 £639 policy

Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 relevant documentation

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290

response

Sub-total: response to 840 84 84 504 84 84 504 84 84 504 £2,508 the PQQ

Set up, Membership cost of a 900 900 0 0 0 0 0 0 0 0 0 £900 monitoring, multi-stakeholder reporting and initiative (e.g. ETI) to verification demonstrate costs engagement with supply chain: one off

application fee Labour Standards assurance Standards Labour

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Membership cost of a 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 £21,519 multi-stakeholder initiative (e.g. ETI): annual membership fee

Putting systems in 1,920 1,920 0 0 0 0 0 0 0 0 0 £1,920 place to collect performance data and report performance (e.g. CAESAR or Sedex): joining fee

Putting systems in 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 £11,362 place to collect performance data and report performance (e.g. CAESAR or Sedex): annual fee

Risk assessment of 75 840 0 0 840 0 0 840 0 0 840 £2,897 textile supply chain (through tools such as Sedex and CAESAR)

Data interpretation and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reporting (through tools such as Sedex and CAESAR)

Engagement with 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 £43,038 supply chain through face-to-face meetings, site visits, email bulletins, supplier forums.

Training and capacity 75 840 168 168 168 168 168 168 168 168 168 £2,118 building of supply chain (e.g. development of toolkits and guidance, training workshops)

Sub-total: setup, 13,824 9,492 9,492 10,332 9,492 9,492 10,332 9,492 9,492 10,332 £88,093 monitoring, verification

Total costs: labour 14,664 9,576 9,576 10,836 9,576 9,576 10,836 9,576 9,576 10,836 £90,601 standards assurance

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579

Wor kfor ce

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respond to relevant documentation PQQ on skills and training Preliminary 15 168 0 0 168 0 0 168 0 0 168 £579 engagement with organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship Service)

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Administrative Develop apprentice 15 168 0 0 168 0 0 168 0 0 168 £579 costs to work programme (HR) supplier Identify and partner with 22.5 252 0 0 252 0 0 252 0 0 252 £869 a reputable learning provider to provide off- the-job training

Recruitment costs – 22.5 252 0 0 252 0 0 252 0 0 252 £869 advertising, interview and selection

Draw up an 15 168 0 0 168 0 0 168 0 0 168 £579 Apprenticeship Agreement (by law)

Training costs of up- 22.5 252 0 0 252 0 0 252 0 0 252 £869 skill and develop line managers so they can coach their apprentice

Cost of training and 22.5 252 0 0 252 0 0 252 0 0 252 £869 appointing an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship

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Apprentice induction 22.5 252 0 0 252 0 0 252 0 0 252 £869 costs

Sub-total: 1,596 0 0 1,596 0 0 1,596 0 0 1,596 £5,505 administrative costs

Ongoing Cost of the supervision, 45 504 0 0 504 0 0 504 0 0 504 £1,738 apprenticeship support and mentoring costs to support the apprentice

Cost of ongoing 22.5 252 0 0 252 0 0 252 0 0 252 £869 performance review of apprenticeship

Off-the-job training 280 3,136 0 0 3,136 0 0 3,136 0 0 3,136 £10,817 costs – in-house training (depending on size of employer) or external recognised training provider

Off-the-job training -3,136 0 0 -3,136 0 0 -3,136 0 0 -3,136 -£10,817 costs – refund from NAS

Apprenticeship wage 737 8,840 0 0 8,840 0 0 8,840 0 0 8,840 £30,491

Avoided employment -7,280 -7,280 0 0 -7,280 0 0 -7,280 0 0 -7,280 -£25,110 costs

NAP funding -1,500 -1,500 0 0 -1,500 0 0 -1,500 0 0 -1,500 -£5,174

Sub-total: 816 0 0 816 0 0 816 0 0 816 £2,815 apprenticeship costs

Cost of Costs of reporting 15 168 0 0 168 168 168 £579 reporting progress to procuring authority

Total costs: workforce 3,168 0 0 3,168 0 0 3,168 0 0 3168 £10,927

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579

respond to relevant documentation

SMEs / social enterp rises

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PQQ on SMEs/ Preliminary 15 168 0 0 168 0 0 168 0 0 168 £579 social engagement with enterprises organisations that broker SME, social enterprise and civil society involvement (e.g. Remploy, Social Enterprise UK, Minority Supplier Development UK (MSDUK))

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Administrative Review and update all 38 420 0 0 0 0 0 0 0 0 0 £420 costs to sub-contracting policies supplier and practices, to identify and understand any barriers which are preventing SMEs etc. from becoming suppliers

Annual review of the 7.5 84 84 84 84 84 84 84 84 84 £639 policy

Training programme for 500 0 0 0 0 0 0 0 0 0 £500 procurement teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework 22.5 252 0 0 252 0 0 252 0 0 252 £869 design tailored to facilitate easier access of SMEs etc. (more lots; more detailed information)

Draft - See Disclaimer A6

Administrative costs 22.5 252 0 0 252 0 0 252 0 0 252 £869 associated with breaking down tenders into smaller lots to facilitate easier access of SMEs etc. (i.e. not necessarily opting for a single general contractor)

Advertising costs of 15 168 0 0 168 0 0 168 0 0 168 £579 tenders to target SME markets (i.e. beyond the ones usually used by larger companies). This can include advertising in the local press and circulating information on contracts through ethnic media and community organisations, as well as mainstream business support organisations and through seminars, meet the buyer and other local business events

Ongoing dialogue 22.5 252 0 0 252 0 0 252 0 0 252 £869 during tender phase (email, bulletins, helpdesk, face-to-face meetings) (would require considerable time and financial inputs)

Debriefing costs (i.e. 7.5 84 0 0 84 0 0 84 0 0 84 £290 providing feedback to unsuccessful tenderers)

Post contract award 7.5 84 0 0 84 0 0 84 0 0 84 £290 meeting with supplier to discuss management and monitoring of the contract

Draft - See Disclaimer A7

Training activities, 37.5 420 0 0 420 0 0 420 0 0 420 £1,449 including briefing sessions on how to do business with the procurer, workshops on successful bid writing or on specific topics (would require considerable time and financial inputs)

Designing support tools 15 168 0 0 168 0 0 168 0 0 168 £579 offered to help bid writing, such as forms, templates and checklists (would require considerable time and financial inputs)

Partnership building 800 800 800 800 800 800 800 800 800 800 800 £6,886 costs with organisations that broker SME, social enterprise and civil society involvement

Sub-total: 3400 884 884 2,564 884 884 2,564 884 884 2,564 £14,240 administrative costs

Ongoing costs Management costs of 90 1,008 1,008 1,008 1,008 1,008 1,008 1,008 1,008 1,008 1,008 £8,677 managing several contractors (i.e. rather than managing a single general contractor)

Mentoring costs 45 504 504 504 504 504 504 504 504 504 504 £4,338

Monitoring and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reviewing supplier performance (e.g. through CAESAR, Sedex or Achilles)

Sub-total: ongoing 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 2,016 £17,353 costs

Total costs: SMEs 6,004 2,900 2,900 5,168 2,900 2,900 5,168 2,900 2,900 5,168 £33,621

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579

Ani mal welf are

Draft - See Disclaimer A8

respond to relevant documentation PQQ on material Preliminary 15 168 0 0 168 0 0 168 0 0 168 £579 sourcing engagement with animal welfare group (e.g. RSPCA)

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 8 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 2028 the PQQ

Administrative Engagement with 15 168 0 0 168 0 0 168 0 0 168 £579 costs to animal welfare groups supplier (e.g. RSPCA)

Develop a sourcing 38 420 0 0 0 0 0 0 0 0 0 £420 policy (or include in existing sourcing policy) on animal welfare for leather, wool, etc.

Establish appropriate 23 252 0 0 0 0 0 0 0 0 0 £252 monitoring systems to manage enforcement of welfare standards

Annual review of the 8 84 84 84 84 84 84 84 84 84 £639 policy

Sub-total: 840 84 84 252 84 84 252 84 84 252 £1,891 administrative costs

Ongoing costs Monitoring and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reviewing supplier performance (e.g. through CAESAR, Sedex )

Sub-total: ongoing 504 504 504 504 504 504 504 504 504 504 £4,338 costs

Draft - See Disclaimer A9

Total costs: animal 1,932 588 588 1344 588 588 1344 588 588 1344 £8,257 welfare

TOTAL COSTS 25,768 13,064 13,064 20,516 13,064 13,064 20,516 13,064 13,064 20,516 £143,406

Table A.2 Costs to a supplier: food & catering

Stages of the Actions by supplier Hours Unit 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NPV procurement cost process

Costs to Develop code of practice 37.5 420 0 0 0 0 0 0 0 0 0 £420 respond to PQQ of supply chain policy on labour (that incorporates labour practices in standards or sign up to supply chain the ETI Base Code) if appropriate policy does not exist

Annual review of the 7.5 0 84 84 84 84 84 84 84 84 84 £639 policy

Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 relevant documentation

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290

response

Sub-total: response to 840 84 84 504 84 84 504 84 84 504 £2,508 the PQQ

Set up, Membership cost of a 900 900 0 0 0 0 0 0 0 0 0 £900 monitoring, multi-stakeholder reporting and initiative (e.g. ETI) to verification demonstrate costs engagement with supply chain: one off

application fee Labour Standards assurance Standards Labour

Draft - See Disclaimer A10

Membership cost of a 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 £21,519 multi-stakeholder initiative (e.g. ETI): annual membership fee

Putting systems in place 1,920 1,920 0 0 0 0 0 0 0 0 0 £1,920 to collect performance data and report performance (e.g. CAESAR or Sedex): joining fee

Putting systems in place 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 £11,362 to collect performance data and report performance (e.g. CAESAR or Sedex): annual fee

Risk assessment of food 75 840 0 0 840 0 0 840 0 0 840 £2,897 supply chain (through tools such as Sedex and CAESAR)

Data interpretation and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reporting (through tools such as Sedex and CAESAR)

Engagement with supply 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 £43,038 chain through face-to- face meetings, site visits, email bulletins, supplier forums.

Training and capacity 75 840 168 168 168 168 168 168 168 168 168 £2,118 building of supply chain (e.g. development of toolkits and guidance, training workshops)

Sub-total: setup, 13824 9492 9492 10332 9492 9492 10332 9492 9492 10332 £88,093 monitoring, verification

Total costs: labour 14664 9576 9576 10836 9576 9576 10836 9576 9576 10836 £90,601 standards assurance

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579

respond to relevant documentation

Workfo rce

Draft - See Disclaimer A11

PQQ on skills Preliminary engagement 15 168 0 0 168 0 0 168 0 0 168 £579 and training with organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship Service)

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Administrative Develop apprentice work 15 168 0 0 168 0 0 168 0 0 168 £579 costs to programme (HR) supplier Identify and partner with 22.5 252 0 0 252 0 0 252 0 0 252 £869 a reputable learning provider to provide off- the-job training

Recruitment costs – 22.5 252 0 0 252 0 0 252 0 0 252 £869 advertising, interview and selection

Draw up an 15 168 0 0 168 0 0 168 0 0 168 £579 Apprenticeship Agreement (by law)

Training costs of up-skill 22.5 252 0 0 252 0 0 252 0 0 252 £869 and develop line managers so they can coach their apprentice

Cost of training and 22.5 252 0 0 252 0 0 252 0 0 252 £869 appointing an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship

Apprentice induction 22.5 252 0 0 252 0 0 252 0 0 252 £869 costs

Draft - See Disclaimer A12

Sub-total: administrative 1596 0 0 1596 0 0 1596 0 0 1596 £5,505 costs

Ongoing Cost of the supervision, 45 504 0 0 504 0 0 504 0 0 504 £1,738 apprenticeship support and mentoring costs to support the apprentice

Cost of ongoing 22.5 252 0 0 252 0 0 252 0 0 252 £869 performance review of apprenticeship

Off-the-job training costs 280 3136 0 0 3136 0 0 3136 0 0 3136 £10,817 – in-house training (depending on size of employer) or external recognised training provider

Off-the-job training costs -3136 0 0 -3136 0 0 -3136 0 0 -3136 -£10,817 – refund from NAS

Apprenticeship wage 737 8840 0 0 8840 0 0 8840 0 0 8840 £30,491

Avoided employment -7280 -7280 0 0 -7280 0 0 -7280 0 0 -7280 -£25,110 costs

NAP funding -1500 -1500 0 0 -1500 0 0 -1500 0 0 -1500 -£5,174

Sub-total: 816 0 0 816 0 0 816 0 0 816 £2,815 apprenticeship costs

Cost of Costs of reporting 15 168 0 0 168 0 0 168 0 0 168 £579 reporting progress to procuring authority

Total costs: workforce 3168 0 0 3168 0 0 3168 0 0 3168 £10,927

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 respond to relevant documentation PQQ on Preliminary engagement 15 168 0 0 168 0 0 168 0 0 168 £579 SMEs/ social with organisations that enterprises broker SME, social enterprise and civil society involvement (e.g.

Remploy, Social

SMEs/social enterprises

Draft - See Disclaimer A13

Enterprise UK, Minority Supplier Development UK (MSDUK))

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Annual review of the 7.5 0 84 84 84 84 84 84 84 84 84 £639 policy

Training programme for 500 0 0 0 0 0 0 0 0 0 £500 procurement teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework 22.5 252 0 0 252 0 0 252 0 0 252 £869 design tailored to facilitate easier access of SMEs etc. (more lots; more detailed information)

Administrative costs 22.5 252 0 0 252 0 0 252 0 0 252 £869 associated with breaking down tenders into smaller lots to facilitate easier access of SMEs etc. (i.e. not necessarily

Draft - See Disclaimer A14

opting for a single general contractor)

Ongoing dialogue during 22.5 252 0 0 252 0 0 252 0 0 252 £869 tender phase (email, bulletins, helpdesk, face- to-face meetings) (would require considerable time and financial inputs)

Debriefing costs (i.e. 7.5 84 0 0 84 0 0 84 0 0 84 £290 providing feedback to unsuccessful tenderers)

Post contract award 7.5 84 0 0 84 0 0 84 0 0 84 £290 meeting with supplier to discuss management and monitoring of the contract

Training activities, 37.5 420 0 0 420 0 0 420 0 0 420 £1,449 including briefing sessions on how to do business with the procurer, workshops on successful bid writing or on specific topics (would

Draft - See Disclaimer A15

require considerable time and financial inputs)

Designing support tools 15 168 0 0 168 0 0 168 0 0 168 £579 offered to help bid writing, such as forms, templates and checklists (would require considerable time and financial inputs)

Partnership building 800 800 800 800 800 800 800 800 800 800 800 £6,886 costs with organisations that broker SME, social enterprise and civil society involvement

Sub-total: administrative 3400 884 884 2564 884 884 2564 884 884 2564 £14,240 costs

Ongoing costs Management costs of 90 1008 1008 1008 1008 1008 1008 1008 1008 1008 1008 £8,677 managing several contractors (i.e. rather than managing a single general contractor)

Mentoring costs 45 504 504 504 504 504 504 504 504 504 504 £4,338

Monitoring and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reviewing supplier performance (e.g. through CAESAR, Sedex or Achilles)

Sub-total: ongoing costs 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 £17,353

Total costs: SMEs 6004 2900 2900 5168 2900 2900 5168 2900 2900 5168 £33,621

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 respond to PQQ relevant documentation on material sourcing Preliminary engagement 15 168 0 0 168 0 0 168 0 0 168 £579 with animal welfare

group (e.g. RSPCA) Animalwelfare

Draft - See Disclaimer A16

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ 8 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Administrative Engagement with animal 15 168 0 0 168 0 0 168 0 0 168 £579 costs to supplier welfare groups (e.g. RSPCA)

Develop a sourcing 38 420 0 0 0 0 0 0 0 0 0 £420 policy (or include in existing sourcing policy) on animal welfare for leather, wool, etc.

Establish appropriate 23 252 0 0 0 0 0 0 0 0 0 £252 monitoring systems to manage enforcement of welfare standards

Annual review of the 8 0 84 84 84 84 84 84 84 84 84 £639 policy

Sub-total: administrative 840 84 84 252 84 84 252 84 84 252 £1,891 costs

Ongoing costs Monitoring and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reviewing supplier performance (e.g. through CAESAR, Sedex )

Sub-total: ongoing costs 504 504 504 504 504 504 504 504 504 504 £4,338

Total costs: animal 1932 588 588 1344 588 588 1344 588 588 1344 £8,257 welfare

TOTAL COSTS 25,768 13,064 13,064 20,516 13,064 13,064 20,516 13,064 13,064 20,516 £143,406

Table A.3 Costs to a supplier: buildings & construction

Draft - See Disclaimer A17

Stages of the Actions by supplier Hour Unit 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NPV procurement s cost process

Costs to Develop code of practice of 37.5 420 0 0 0 0 0 0 0 0 0 £420 respond to supply chain policy (that PQQ on labour incorporates labour standards practices in or sign up to the ETI Base supply chain Code) if appropriate policy does not exist

Annual review of the policy 7.5 0 84 84 84 84 84 84 84 84 84 £639

Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 documentation

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 840 84 84 504 84 84 504 84 84 504 £2,508 PQQ

Set up, Membership cost of a multi- 900 900 £900 monitoring, stakeholder initiative (e.g. ETI) reporting and to demonstrate engagement verification with supply chain: one off costs application fee

Membership cost of a multi- 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 £21,519 stakeholder initiative (e.g. ETI): annual membership fee

Putting systems in place to 1,920 1,920 £1,920 collect performance data and report performance (e.g. CAESAR or Sedex): joining fee

Putting systems in place to 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 11,362 collect performance data and report performance (e.g. CAESAR or Sedex): annual

fee Labour Standards assurance Standards Labour

Draft - See Disclaimer A18

Risk assessment of supply 75 840 0 0 840 0 0 840 0 0 840 £2,897 chain (through tools such as Sedex and CAESAR)

Data interpretation and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reporting (through tools such as Sedex and CAESAR)

Engagement with supply chain 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 £43,038 through face-to-face meetings, site visits, email bulletins, supplier forums.

Training and capacity building 75 840 168 168 168 168 168 168 168 168 168 £2,118 of supply chain (e.g. development of toolkits and guidance, training workshops)

Sub-total: setup, monitoring, 13824 9492 9492 10332 9492 9492 10332 9492 9492 10332 £88,093 verification

Total costs: labour standards 14664 9576 9576 10836 9576 9576 10836 9576 9576 10836 £90,601 assurance

Costs to Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 respond to documentation PQQ on skills Preliminary engagement with 15 168 0 0 168 0 0 168 0 0 168 £579 and training organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship Service)

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 588 0 0 588 0 0 588 0 0 588 £2,028 PQQ

Administrative Develop apprentice work 15 168 0 0 168 0 0 168 0 0 168 £579

costs to programme (HR) Workforce

Draft - See Disclaimer A19

supplier Identify and partner with a 22.5 252 0 0 252 0 0 252 0 0 252 £869 reputable learning provider to provide off-the-job training

Recruitment costs – 22.5 252 0 0 252 0 0 252 0 0 252 £869 advertising, interview and selection

Draw up an Apprenticeship 15 168 0 0 168 0 0 168 0 0 168 £579 Agreement (by law)

Training costs of up-skill and 22.5 252 0 0 252 0 0 252 0 0 252 £869 develop line managers so they can coach their apprentice

Cost of training and appointing 22.5 252 0 0 252 0 0 252 0 0 252 £869 an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship

Apprentice induction costs 22.5 252 0 0 252 0 0 252 0 0 252 £869

Sub-total: administrative costs 1596 0 0 1596 0 0 1596 0 0 1596 £5,505

Ongoing Cost of the supervision, 45 504 0 0 504 0 0 504 0 0 504 £1,738 apprenticeship support and mentoring to costs support the apprentice

Cost of ongoing performance 22.5 252 0 0 252 0 0 252 0 0 252 £869 review of apprenticeship

Off-the-job training costs – in- 280 3136 0 0 3136 0 0 3136 0 0 3136 £10,817 house training (depending on size of employer) or external recognised training provider

Off-the-job training costs – -3136 0 0 -3136 0 0 -3136 0 0 -3136 - refund from NAS £10,817

Apprenticeship wage 737 8840 0 0 8840 0 0 8840 0 0 8840 £30,491

Avoided employment costs -7280 -7280 0 0 -7280 0 0 -7280 0 0 -7280 - £25,110

NAP funding -1500 -1500 0 0 -1500 0 0 -1500 0 0 -1500 -£5,174

Sub-total: apprenticeship costs 816 0 0 816 0 0 816 0 0 816 £2,815

Draft - See Disclaimer A20

Cost of Costs of reporting 15 168 0 0 168 0 0 168 0 0 168 £579 reporting progress to procuring authority

Total costs: workforce 3168 0 0 3168 0 0 3168 0 0 3168 £10,927

Costs to Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 respond to documentation PQQ on Preliminary engagement with 15 168 0 0 168 0 0 168 0 0 168 £579 SMEs/ social organisations that broker SME, enterprises social enterprise and civil society involvement (e.g. Remploy, Social Enterprise UK, Minority Supplier Development UK (MSDUK))

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 588 0 0 588 0 0 588 0 0 588 £2,028 PQQ

Administrative Review and update all sub- 38 420 0 0 0 0 0 0 0 0 0 £420 costs to contracting policies and supplier practices, to identify and understand any barriers which are preventing SMEs etc. from becoming suppliers

Annual review of the policy 7.5 0 84 84 84 84 84 84 84 84 84 £639

Training programme for 500 0 0 0 0 0 0 0 0 0 £500 procurement teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework design 22.5 252 0 0 252 0 0 252 0 0 252 £869 tailored to facilitate easier access of SMEs etc. (more

lots; more detailed information) SMEs/socialenterprises

Draft - See Disclaimer A21

Advertising costs of tenders to 15 168 0 0 168 0 0 168 0 0 168 £579 target SME markets (i.e. beyond the ones usually used by larger companies). This can include advertising in the local press and circulating information on contracts through ethnic media and community organisations, as well as mainstream business support organisations and through seminars, meet the buyer and other local business events

Ongoing dialogue during 22.5 252 0 0 252 0 0 252 0 0 252 £869 tender phase (email, bulletins, helpdesk, face-to-face meetings) (would require considerable time and financial inputs)

Debriefing costs (i.e. providing 7.5 84 0 0 84 0 0 84 0 0 84 £290 feedback to unsuccessful tenderers)

Post contract award meeting 7.5 84 0 0 84 0 0 84 0 0 84 £290 with supplier to discuss management and monitoring of the contract

Training activities, including 37.5 420 0 0 420 0 0 420 0 0 420 £1,449 briefing sessions on how to do business with the procurer, workshops on successful bid writing or on specific topics (would require considerable time and financial inputs)

Draft - See Disclaimer A22

Designing support tools 15 168 0 0 168 0 0 168 0 0 168 £579 offered to help bid writing, such as forms, templates and checklists (would require considerable time and financial inputs)

Partnership building costs with 800 800 800 800 800 800 800 800 800 800 800 £6,886 organisations that broker SME, social enterprise and civil society involvement

Sub-total: administrative costs 3400 884 884 2564 884 884 2564 884 884 2564 £14,240

Ongoing Management costs of 90 1008 1008 1008 1008 1008 1008 1008 1008 1008 1008 £8,677 costs managing several contractors (i.e. rather than managing a single general contractor)

Mentoring costs 45 504 504 504 504 504 504 504 504 504 504 £4,338

Monitoring and reviewing 45 504 504 504 504 504 504 504 504 504 504 £4,338 supplier performance (e.g. through CAESAR, Sedex or Achilles)

Sub-total: ongoing costs 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 £17,353

Total costs: SMEs 6004 2900 2900 5168 2900 2900 5168 2900 2900 5168 £33,621

Costs to Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 respond to documentation PQQ on Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 material respond to tender (may include sourcing project meetings to develop approach)

Complete PQQ response 8 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 420 0 0 420 0 0 420 0 0 420 £1,449

PQQ

Administrative Develop a sustainable timber 37.5 420 0 0 0 0 0 0 0 0 0 £420 costs to policy or express commitment supplier to UK timber procurement policy

Annual review of the policy 7.5 84 84 84 84 84 84 84 84 84 £639 Materialsourcing

Draft - See Disclaimer A23

Establish appropriate 22.5 252 0 0 0 0 0 0 0 0 0 £252 monitoring systems to manage enforcement of standards

Communication of policy 75 840 840 840 840 840 840 840 840 840 840 £7,230 commitment to all relevant company employees, as well as sub-contractors. This can be done through workshops, bulletins, email, newsletter.

Time for relevant company 15 168 0 0 252 0 0 252 0 0 252 £785 employees to attend training on sustainable timber (CPET provides these free of charge to direct suppliers to the public sector). See: http://www.cpet.org.uk/training- and-awareness-raising

Cost of specification of legal 7.5 84 0 0 84 0 0 84 0 0 84 £290 and sustainable timber in contracts and purchase orders.

Cost of implementation 45 504 504 504 504 504 504 504 504 504 504 £4,338 monitoring system to check purchases and record the information

Sub-total: administrative costs 2268 1428 1428 1764 1428 1428 1764 1428 1428 1764 £13,955

Ongoing Cost of checking that each 45 504 504 504 504 504 504 504 504 504 504 £4,338 costs consignment is certified to FSC or equivalent (e.g. invoices; delivery notes).

Cost of reporting compliance 15 168 0 0 168 0 0 168 0 0 168 £579 to procuring authority

Sub-total: ongoing costs 504 504 504 504 504 504 504 504 504 504 £4,338

Total costs: material sourcing 3192 1932 1932 2688 1932 1932 2688 1932 1932 2688 £19,742

TOTAL COSTS 28,028 15,408 15,408 22,860 15,408 15,408 22,860 15,408 15,408 22,860 £154,89 1

Table A.4 Costs to a supplier: ICT

Draft - See Disclaimer A24

Stages of the Actions by Hours Unit 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NPV procurement supplier cost process

Costs to Develop code of 37.5 420 0 0 0 0 0 0 0 0 0 £420 respond to practice of supply PQQ on chain policy (that labour incorporates labour standards or sign up practices in to the ETI Base supply chain Code) if appropriate policy does not exist

Annual review of the 7.5 0 84 84 84 84 84 84 84 84 84 £639 policy

Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 relevant documentation

Develop an 15 168 0 0 168 0 0 168 0 0 168 £579 approach to respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response 840 84 84 504 84 84 504 84 84 504 £2,508

to the PQQ

Set up, Membership cost 3112 3112 0 0 0 0 0 0 0 0 0 £3,112 monitoring, of a multi- reporting and stakeholder verification initiative (e.g. costs Electronic Industry Citizenship Coalition (EICC)) to demonstrate engagement with

supply chain: one Labour Standards assurance Standards Labour

Draft - See Disclaimer A25

off application fee

Membership cost 21781 21781 21781 21781 21781 21781 21781 21780.5 21780.5 21781 21780.5 £187,480 of a multi- stakeholder initiative (e.g. EICC): annual membership fee

Putting systems in 1,920 1,920 0 0 0 0 0 0 0 0 0 £1,920 place to collect performance data and report performance (e.g. EICC-On, CAESAR or Sedex): joining fee

Putting systems in 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 £11,362 place to collect performance data and report performance (e.g. EICC-On, CAESAR or Sedex): annual fee

Risk assessment of 75 840 0 0 840 0 0 840 0 0 840 £2,897 ICT supply chain (through tools such as Sedex, EICC and CAESAR)

Data interpretation 45 504 504 504 504 504 504 504 504 504 504 £4,338 and reporting (through tools such as Sedex and CAESAR)

Draft - See Disclaimer A26

Engagement with 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 £43,038 supply chain through face-to- face meetings, site visits, email bulletins, supplier forums.

Training and 75 840 168 168 168 168 168 168 168 168 168 £2,118 capacity building of supply chain (e.g. development of toolkits and guidance, training workshops)

Sub-total: setup, 35316 28773 28773 29613 28773 28773 29613 28773 28773 29613 £256,265 monitoring, verification

Total costs: labour 36156 28857 28857 30117 28857 28857 30117 28857 28857 30117 £258,773 standards assurance

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 respond to relevant PQQ on skills documentation and training Preliminary 15 168 0 0 168 0 0 168 0 0 168 £579 engagement with organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship Service)

Develop an 15 168 0 0 168 0 0 168 0 0 168 £579 approach to

respond to tender (may include project meetings to

develop approach) Workforce

Draft - See Disclaimer A27

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response 588 0 0 588 0 0 588 0 0 588 £2,028 to the PQQ

Administrative Develop apprentice 15 168 0 0 168 0 0 168 0 0 168 £579 costs to work programme supplier (HR)

Identify and partner 22.5 252 0 0 252 0 0 252 0 0 252 £869 with a reputable learning provider to provide off-the-job training

Recruitment costs – 22.5 252 0 0 252 0 0 252 0 0 252 £869 advertising, interview and selection

Draw up an 15 168 0 0 168 0 0 168 0 0 168 £579 Apprenticeship Agreement (by law)

Training costs of up- 22.5 252 0 0 252 0 0 252 0 0 252 £869 skill and develop line managers so they can coach their apprentice

Cost of training and 22.5 252 0 0 252 0 0 252 0 0 252 £869 appointing an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship

Apprentice induction 22.5 252 0 0 252 0 0 252 0 0 252 £869 costs

Sub-total: 1596 0 0 1596 0 0 1596 0 0 1596 £5,505 administrative costs

Ongoing Cost of the 45 504 0 0 504 0 0 504 0 0 504 £1,738 apprenticeship supervision, support and mentoring to

Draft - See Disclaimer A28

costs support the apprentice

Cost of ongoing 22.5 252 0 0 252 0 0 252 0 0 252 £869 performance review of apprenticeship

Off-the-job training 280 3136 0 0 3136 0 0 3136 0 0 3136 £10,817 costs – in-house training (depending on size of employer) or external recognised training provider

Off-the-job training -3136 0 0 -3136 0 0 -3136 0 0 -3136 -£10,817 costs – refund from NAS

Apprenticeship wage 737 8840 0 0 8840 0 0 8840 0 0 8840 £30,491

Avoided employment -7280 -7280 0 0 -7280 0 0 -7280 0 0 -7280 -£25,110 costs

NAP funding -1500 -1500 0 0 -1500 0 0 -1500 0 0 -1500 -£5,174

Sub-total: 816 0 0 816 0 0 816 0 0 816 £2,815 apprenticeship costs

Cost of Costs of reporting 15 168 0 0 168 0 0 168 0 0 168 £579 reporting progress to procuring authority

Total costs: 3168 0 0 3168 0 0 3168 0 0 3168 £10,927 workforce

Costs to Compile data and 15 168 0 0 168 0 0 168 0 0 168 £579 respond to relevant PQQ on documentation SMEs/ social Preliminary 15 168 0 0 168 0 0 168 0 0 168 £579 enterprises engagement with organisations that broker SME, social enterprise and civil society involvement

(e.g. Remploy, Social SMEs/socialenterprises

Draft - See Disclaimer A29

Enterprise UK, Minority Supplier Development UK (MSDUK))

Develop an approach 15 168 0 0 168 0 0 168 0 0 168 £579 to respond to tender (may include project meetings to develop approach)

Complete PQQ 7.5 84 0 0 84 0 0 84 0 0 84 £290 response

Sub-total: response to 588 0 0 588 0 0 588 0 0 588 £2,028 the PQQ

Administrative Review and update 38 420 0 0 0 0 0 0 0 0 0 £420 costs to all sub-contracting supplier policies and practices, to identify and understand any barriers which are preventing SMEs etc. from becoming suppliers

Annual review of the 7.5 84 84 84 84 84 84 84 84 84 £639 policy

Training programme 500 0 0 0 0 0 0 0 0 0 £500 for procurement teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework 22.5 252 0 0 252 0 0 252 0 0 252 £869 design tailored to facilitate easier access of SMEs etc. (more lots; more detailed information)

Draft - See Disclaimer A30

Ongoing dialogue 22.5 252 0 0 252 0 0 252 0 0 252 £869 during tender phase (email, bulletins, helpdesk, face-to- face meetings) (would require considerable time and financial inputs)

Debriefing costs (i.e. 7.5 84 0 0 84 0 0 84 0 0 84 £290 providing feedback to unsuccessful tenderers)

Post contract award 7.5 84 0 0 84 0 0 84 0 0 84 £290 meeting with supplier to discuss management and

Draft - See Disclaimer A31

monitoring of the contract

Designing support 15 168 0 0 168 0 0 168 0 0 168 £579 tools offered to help bid writing, such as forms, templates and checklists (would require considerable time and financial inputs)

Partnership building 800 800 800 800 800 800 800 800 800 800 800 £6,886 costs with organisations that broker SME, social enterprise and civil society involvement

Sub-total: 3400 884 884 2564 884 884 2564 884 884 2564 £14,240 administrative costs

Ongoing costs Management costs of 90 1008 1008 1008 1008 1008 1008 1008 1008 1008 1008 £8,677 managing several contractors (i.e. rather than managing a single general contractor)

Mentoring costs 45 504 504 504 504 504 504 504 504 504 504 £4,338

Monitoring and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reviewing supplier performance (e.g. through CAESAR, Sedex or Achilles)

Draft - See Disclaimer A32

Sub-total: ongoing 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 £17,353 costs

Total costs: SMEs 6004 2900 2900 5168 2900 2900 5168 2900 2900 5168 £33,621

TOTAL COSTS 45,328 31,757 31,757 38,453 31,757 31,757 38,453 31,757 31,757 38,453 £303,321

Table A.5 Costs to a supplier: furniture

Stages of Actions by supplier Hours Unit 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 NPV the cost procureme nt process

Costs to Develop code of practice of 37.5 420 0 0 0 0 0 0 0 0 0 £420 respond to supply chain policy (that PQQ on incorporates labour standards labour or sign up to the ETI Base practices in Code) if appropriate policy supply chain does not exist

Annual review of the policy 7.5 0 84 84 84 84 84 84 84 84 84 £639

Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 documentation

Develop an approach to 15 168 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 840 84 84 504 84 84 504 84 84 504 £2,508 PQQ

Set up, Membership cost of a multi- 900 900 0 0 0 0 0 0 0 0 0 £900 monitoring, stakeholder initiative (e.g. reporting and Furniture Industry verification Sustainability Programme) to costs demonstrate engagement with supply chain: one off

application fee Labour Standards assurance Standards Labour

Draft - See Disclaimer A33

Membership cost of a multi- 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 2500 £21,519 stakeholder initiative (e.g. FISP): annual membership fee

Putting systems in place to 1,920 1,920 0 0 0 0 0 0 0 0 0 £1,920 collect performance data and report performance (e.g. CAESAR or Sedex): joining fee

Putting systems in place to 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 1,320 £11,362 collect performance data and report performance (e.g. CAESAR or Sedex): annual fee

Risk assessment of textile 75 840 0 0 840 0 0 840 0 0 840 £2,897 supply chain (through tools such as Sedex and CAESAR)

Data interpretation and 45 504 504 504 504 504 504 504 504 504 504 £4,338 reporting (through tools such as Sedex and CAESAR)

Engagement with supply chain 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 £43,038 through face-to-face meetings, site visits, email bulletins, supplier forums.

Training and capacity building 75 840 168 168 168 168 168 168 168 168 168 £2,118 of supply chain (e.g. development of toolkits and guidance, training workshops)

Sub-total: setup, monitoring, 13824 9492 9492 10332 9492 9492 10332 9492 9492 10332 £88,093 verification

Total costs: labour standards 14664 9576 9576 10836 9576 9576 10836 9576 9576 10836 £90,601 assurance

Costs to Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579

respond to documentation

Workfo rce

Draft - See Disclaimer A34

PQQ on skills Preliminary engagement with 15 168 0 0 168 0 0 168 0 0 168 £579 and training organisations that facilitate apprenticeship schemes (e.g. National Apprenticeship Service)

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 588 0 0 588 0 0 588 0 0 588 £2,028 PQQ

Administrative Develop apprentice work 15 168 0 0 168 0 0 168 0 0 168 £579 costs to programme (HR) supplier Identify and partner with a 22.5 252 0 0 252 0 0 252 0 0 252 £869 reputable learning provider to provide off-the-job training

Recruitment costs – 22.5 252 0 0 252 0 0 252 0 0 252 £869 advertising, interview and selection

Draw up an Apprenticeship 15 168 0 0 168 0 0 168 0 0 168 £579 Agreement (by law)

Training costs of up-skill and 22.5 252 0 0 252 0 0 252 0 0 252 £869 develop line managers so they can coach their apprentice

Cost of training and appointing 22.5 252 0 0 252 0 0 252 0 0 252 £869 an employee (in addition to line manager) to act as a mentor or coach for the apprentice throughout their apprenticeship

Apprentice induction costs 22.5 252 0 0 252 0 0 252 0 0 252 £869

Sub-total: administrative costs 1596 0 0 1596 0 0 1596 0 0 1596 £5,505

Ongoing Cost of the supervision, 45 504 0 0 504 0 0 504 0 0 504 £1,738 apprenticeshi support and mentoring to p costs support the apprentice

Draft - See Disclaimer A35

Cost of ongoing performance 22.5 252 0 0 252 0 0 252 0 0 252 £869 review of apprenticeship

Off-the-job training costs – in- 280 3136 0 0 3136 0 0 3136 0 0 3136 £10,817 house training (depending on size of employer) or external recognised training provider

Off-the-job training costs – -3136 0 0 -3136 0 0 -3136 0 0 -3136 -£10,817 refund from NAS

Apprenticeship wage 737 8840 0 0 8840 0 0 8840 0 0 8840 £30,491

Avoided employment costs -7280 -7280 0 0 -7280 0 0 -7280 0 0 -7280 -£25,110

NAP funding -1500 -1500 0 0 -1500 0 0 -1500 0 0 -1500 -£5,174

Sub-total: apprenticeship costs 816 0 0 816 0 0 816 0 0 816 £2,815

Cost of Costs of reporting 15 168 0 0 168 0 0 168 0 0 168 £579 reporting progress to procuring authority

Total costs: workforce 3168 0 0 3168 0 0 3168 0 0 3168 £10,927

Costs to Compile data and relevant 15 168 0 0 168 0 0 168 0 0 168 £579 respond to documentation PQQ on SMEs/ social Preliminary engagement with 15 168 0 0 168 0 0 168 0 0 168 £579 enterprises organisations that broker SME, social enterprise and civil society involvement (e.g. Remploy, Social Enterprise UK, Minority Supplier Development UK (MSDUK))

Develop an approach to 15 168 0 0 168 0 0 168 0 0 168 £579 respond to tender (may include project meetings to develop approach)

Complete PQQ response 7.5 84 0 0 84 0 0 84 0 0 84 £290

Sub-total: response to the 588 0 0 588 0 0 588 0 0 588 £2,028

PQQ SMEs/socialenterprises

Draft - See Disclaimer A36

Annual review of the policy 7.5 0 84 84 84 84 84 84 84 84 84 £639

Training programme for 500 0 0 0 0 0 0 0 0 0 £500 procurement teams on supplier diversity. Cost of a supplier diversity course provided by CIPD

Tender framework design 22.5 252 0 0 252 0 0 252 0 0 252 £869 tailored to facilitate easier access of SMEs etc. (more lots; more detailed information)