Realising Aspirations Or, Using Value for Money to Make the Public Sector More Sustainable A report from the Accounting for Sustainability Group convened by HRH The Prince of Wales Contents FOREWORD BY HRH THE PRINCE OF WALES 2 PART 1 To whom is this paper addressed and why? 4 PART 2 What is sustainability, do people want it and how can the 7 Public Sector make a difference? PART 3 The barriers – and how to overcome them 15 PART 4 Suggestions for action 31 PART 5 Links and further information 34 2 Realising Aspirations Realising Aspirations 3 1 To whom is this paper addressed, and why? Government initiatives to increase the efficiency of the Public Sector can go hand in hand with those to enhance sustainability. Public Sector business managers and advocates of sustainable development therefore have common ground. Accountants have an important role to play in helping to demonstrate this link. The focus of this paper is on public procurement, as this is the area in which this link is most clearly understood. 4 Realising Aspirations This paper has been written for leading to greater costs. Meanwhile, Following the Gershon Review, public three groups: sustainability specialists often believe, bodies have to deliver efficiency especially when considering the savings of over £20 billion by 2008. Public Sector managers – at potential effects of climate change, Can they really achieve this and all levels, from departments that sustainability ought to be the increase their sustainable purchasing? through to schools and hospitals; Public Sector's most important sustainability specialists – both priority, and that it cannot afford to The answer is yes, because efficiency those working within the Public think differently. and sustainability can go hand in Sector, and from independent hand. In fact, the Gershon Review sustainability groups; The Government has clearly signalled offers increased opportunities to the extent of its commitment to mainstream sustainable procurement, accountants and auditors sustainability in its recent Sustainable given its potential to achieve greater – those working in or with Development Strategy. In his efficiency. Hard-pressed business the Public Sector, and those Foreword, the Prime Minister writes managers can welcome advocates developing methodologies for that the "Government will lead by of sustainability as their natural allies, taking sustainability into account. example…. We want to ensure that while sustainability specialists can 1 Though not mutually exclusive, the we spend your money sustainably". progress their objectives by using the first two groups do not often overlap. language of value for money. At the same time, the efficiency Public Sector managers already have targets announced by the Accountants also have a central role to a host of targets and agendas to meet Government in the wake of Sir Peter play not only in understanding, – which they must deliver within Gershon's Efficiency Review in 2004 demonstrating and achieving the budget, while demonstrating value for might seem to risk increasing the efficiencies that can be gained from money. Sustainability may be one of a potential divergence of priorities sustainable practices, but also in the number of different policy objectives between full-time sustainability wider field of sustainability in general. they have to take into account, and specialists and those who see it as To be successful sustainability depends one they may see as inherently more tangential to their everyday job. on the generation, analysis, reporting 1 Securing the Future – The UK Government Sustainable Development Strategy, March 2005, CM6467, http://www.sustainable-development.gov.uk/publications/uk- strategy/uk-strategy-2005.htm Realising Aspirations 5 and assurance of robust and accurate One particular area, however, where What is in this paper? information (both financial and non- there is already clear and practical The paper is focused on Public Sector financial). It is vital that the scope for progress is procurement. procurement – on making it more accountancy profession understands When it comes to purchasing goods sustainable, and saving money at the the concepts of sustainability, and the and services, organisations have clear same time. It has three main sections: challenges and opportunities it poses calculations to make, based on a set of in achieving long-term value for public factors which should and can take into What is sustainability, do people money, and provides the systems and account aspects which go beyond want it and how can the Public information required. fitness for purpose and capital and Sector make a difference? running costs. For example, in The barriers – and how to weighing-up which vehicles to The focus of this paper is overcome them. sustainable procurement purchase, an organisation should not only examine factors such as initial Suggestions for action. As discussed in Section 3 of this cost, maintenance costs, fuel costs and paper, putting monetary values on fitness for purpose, but also the impact wider, longer term and less tangible of both carbon emissions and travel consequences of decisions is patterns on the local economy. In this notoriously difficult, and as a result way, procurement activities should sustainable accounting is a nascent naturally be focusing organisations on field, with many different approaches the wider and longer term costs and and much potential for future benefits of their decisions. development. 6 Realising Aspirations What is sustainability, do people want it and 2 how can the Public Sector make a difference? Sustainability means taking into account the wider and longer term consequences of decisions. However, there are considerable practical difficulties. The public is keen that there should be greater attention to sustainability issues and believes that it is principally the Government's responsibility. Public sector procurement has a significant role to play in increasing the sustainability of the UK economy and fulfilling this responsibility. Realising Aspirations 7 What is sustainability? Sustainability is, consequently, a 'negative externalities'. The problem concept with an enormously wide often is that costs which threaten Sustainability means thinking about application, and with, in principle, sustainability are either not known the impact of economic activities enormous appeal. If activities are or not given full consideration. When – things bought, investments made, unsustainable then the world will the costs become apparent, the waste thrown away, pollution be left a poorer place for future activity may collapse or be seen to generated – on the natural and generations. Why, then, is there so be too costly to continue. History has human resources on which they much unsustainable activity? provided many examples where an ultimately depend. activity thought to be sustainable Every day, thousands, perhaps even was, in fact, unsustainable. A good It means ensuring that the productive millions, of decisions are taken which example is that of over-fishing. The capacity of these resources is not will affect the lives of people who Canadian cod fisheries in the North irreparably damaged, or that they are had no direct role in taking those Atlantic used to be among the richest not depleted faster than they can be decisions. The decisions range from in the world, but as a result of a replenished. To put it another way, issues such as the building of a new short-term approach stocks collapsed an activity is unsustainable if, when airport or a new hospital, to a change in the 1990s, and the industries and continued, it would undermine and in the opening hours of a library. Even communities which once profited by eventually exhaust the basis for its when taken for very good reasons, them have suffered accordingly. own existence. In practical terms, these decisions will usually have this means taking into account the unintended or hidden effects. The case of over-fishing clearly consequences of economic decisions demonstrates how economic activities on the natural environment, on People can take decisions without have an impact on the environment, regional economic development, realising that they themselves will which can have a corresponding and on the social conditions in which later pay a high cost. In other cases impact back on the economy, and people live and work. the costs will fall on people who which in turn can have an impact on were not part of the decision process. local communities. Economists call these latter costs 8 Realising Aspirations That is to say, an economic decision of toxic gases, which sometimes led collection rate for fares would have – for example, to buy the cheapest to fatal results. CFCs are inert and been very appealing to the company goods rather than those from local non-toxic, and so were considered accountants. However, this policy suppliers – will often have major an immense improvement on what considerably slowed buses down, knock-on effects on the local preceded them. In these respects they especially during the rush hour, with economy and community. What may were. Now it is known that they also the buses stationary at each stop seem to make economic sense in have very serious hidden costs, but it while passengers queued to pay. But the short term to those making the has taken decades to discover this. not only were the buses stationary, decision, may in the long run end up so very often were the cars behind costing much more to society as a Activities which are so unsustainable them, unable to overtake on crowded whole. Sustainability is all about taking that they cause themselves to collapse city streets. This increased congestion, these knock-on effects into account at in the short term are, thankfully, pollution and irritation, and a decision, the time the initial decision is made. relatively rare. More common is a perfectly sensible in business terms, situation where an activity is carried had much wider negative social This is not to accuse decision makers out in the way it is only because costs.