The average city procurement officer spends upwards of 15 hours researching cost, quality, and compliance specifications before deciding on where to spend our taxpayer dollars. This process is made more difficult by outdated systems and the many intricacies of policy and product specifications involved with purchasing even the simplest products. Procurement becomes incredibly complex when taking into account the thousands of categories and needs of an entire organization’s stakeholders, reconciling cost and quality, supplier management and vendor selection. Add in environmental and human health compliance product criteria and it makes everything drastically more difficult.
An average city’s procurement screen.
Previously, I was an Environmental Specialist at the Environmental Protection Agency (EPA) headquarters in Washington, DC within the Environmentally Preferable Purchasing (EPP) Program. This program was set up to help federal government purchasers more easily identify and procure environmentally preferable products and services. It was in this role that I saw firsthand how challenging it can be to bridge the gap between sustainability initiatives, cost, and the procurement of goods and services.
The federal government is the largest purchaser in the United States and spent $476 billion on goods and services in FY2016 alone. According to research conducted through the EPA and the General Services Administration (GSA), public procurement of goods and services creates a carbon footprint nine times that of buildings and fleets put together. Given this enormous opportunity to effectuate climate solutions, the question is: how can we harness the government’s spending power for good?
With Great Purchasing Power Comes Great Sourcing Responsibility
Green purchasing is an administrative procedure within local government that directs procurement officers to consider the environmental, health, and sometimes social impacts of their purchasing decisions. Policies that govern green purchasing, called EPP policies, can also be add-ons to sustainability initiatives or targets that encourage local governments to reduce the environmental impacts of their purchasing decisions. These are a way of stating an intent, commitment, or a “promise” to take action.
The first step towards successful green spend management within large organizations is performing an evaluation that can quantify the reporting of impact offsets per dollar spent that are scalable to any category of purchase. This is the sort of work my team does now with a network of cities committed to sustainable purchasing. Through responsible purchasing, these cities we have the opportunity to transfer over $10 billion dollars towards more sustainable products and make a huge global impact.
As the push towards truly sustainable procurement rises, there is increasing demand for product and purchasing transparency across all sectors. Of several approaches to increasing product transparency, one is the use of ecolabels that certify products as “sustainable” across various lifecycle stages. EPP Policies often incorporate or refer to these ecolabels as procurement requirements.
While there were roughly 20 of these ecolabels in the 1980s, there are over 400 today. The plethora of ecolabels can make it difficult to decipher which products are truly the most sustainable option. Within short deadlines and limited work hours, procurement and sustainability officials rarely have enough time to conduct research to sort through and find the best options. While at the EPA I helped in the creation of EPA’s Recommendations of Specifications, Standards and Ecolabels for Federal Purchasers which were developed to add clarity in the marketplace. The ecolabels and standards included in the recommendations were assessed by a third party against criteria from EPA’s Guidelines for Environmental Performance Standards and Ecolabels. However, implementing and tracking this type of policy can be an overwhelming task for purchasers who deal with specifications coming from finance (cost factors), to end users (quality factors), to sustainability and health and safety (regulatory compliance requirements and preferences).
Once a procurement officer decides on which set of standards or ecolabels to use, they still have to write the EPP Policy, consulting with sustainability functions that are often already inundated with more traditional roles within transportation, energy, waste management and building management. Once the EPP policy for a category of purchase has been consulted for and created, there can be additional barriers to implementing a successful policy. In a large organization, like a city, county, or university, it is difficult to enforce the policy while also tracking spend to ensure compliance to environmental, social, and fiscal goals. For example, procuring a simple product like paper can have a lot of intricacies throughout the lifecycle stages of the product from whether is sourced from a sustainably harvest forest all the whether it is disposed or recycled of in the most sustainable way possible.
This graph shows the liabilities of a product along the supply chain, along with the practices that offset these liabilities. Sustainable procurement criteria can ensure that the products you purchase follow good practices to reduce the product’s lifecycle.
Using Data Science to Solve Problems
Data science gives us the ability to create and implement sustainability policies using a full-stack of capabilities: from data ingestion, to structuring, to analytics and reporting functionalities. Solving for information gaps and processing speed has been key to scaling this process. Hotspots can be crowdsourced and identified as areas that are agreed to have significant levels of environmental and/or social impacts throughout the supply chain by multiple judges. And, for the first time, impacts from hotspot areas can be tied automatically to category-level criteria, and to certifications, then to product and suppliers – and back to regulatory policies, in a “best-fit” conformity ranking. With data science, sustainable purchasing practices no longer put an extra burden on the procurement process, while also recognizing the need to reconcile with budget constraints.
Screenshot of ProductBio’s Environmentally Preferable Policy (EPP) Builder Tool.
An example can be found in this Earth Day Webinar from a few months ago in which we compared the publicly available sustainable purchasing policies from 18 cities across North America. We used a calibrated scoring system to compare the practices within the policies along with the environmental, social, and fiscal impacts associated with the products these cities buy. We then compared these impacts to the practices within each city’s policy to rank cities by EPP policy strength.
There was a potential for each product to have 29 different sustainability impacts at each of the 6 stages in the life cycle. We outlined these impacts along an annotation matrix, and mapped each practice within the cities’ EPP policies onto these impacts, which is a lot of data to analyze.
ProductBio’s Sustainability Impact Areas
By quantifying sustainability benefit offsets and impact liabilities of categorical products and services, this information can be compared against supplier claims. These claims are based on accounting for targeted sustainability hotspot issues aggregated from 100+ standards and certifications.
ProductBio’s 29 Impact Areas
Overall we found:
- The average environmental impact offset was 71%
- The average social impact offset was 39%
- Common product categories in which all 18 cities performed relatively well were waste containers and accessories, computers, and cleaning products.
- The product categories in which cities showed the most potential for improvement were furniture and furnishings, and paints and coatings.
We are able to analyze impact offsets along the value chain of all the categories of purchases found in city procurement records in seconds, rather than months. Our findings mean that while the EPP policies for the 18 cities addressed more environmental impacts than social, there was still room for improvement in both.
The next formidable feat is providing product recommendations based on sustainability target impact area goals to fit a purchaser’s needs while reconciling cost constraints. We are currently working on taking this to the next level with benefits and liabilities (B&L) reporting for this capability being leveraged at cities and universities across the US.
The Future of Sustainable Procurement
It’s an exciting time to be in this line of work, creating a knowledge base for the conscious economy and solving the information problems in public purchasing. In my experience of public sector work at the EPA, and implementation work at ProductBio scaling out quantitative solutions, I’m convinced that data science is the key to controlling the Pandora’s box that can be sustainable procurement. To be successful, sustainable procurement will need enforceable policies and performance metrics behind purchasing guidelines. By creating a demand economy that prioritizes the health and wellbeing of people, animals, and our environment; and by giving government purchasers the tools to manage their spending responsibly, we can unlock the benefits of collective sustainable purchasing.