Sustainability in Procurement Article Series – Sustainability in the Procurement Plan

Sustainability in the Procurement Plan

This article forms part of our Sustainability in Procurement Article Series, which to date has explored integrating sustainability into the procurement process and how to conduct market research for sustainable procurement. This week we explore how local governments can integrate sustainability into the procurement plan to achieve more sustainable outcomes. We consider the key stages of procurement planning and the key considerations which should be given at each stage. Next week’s article will explore integrating sustainability into the market approach, and how the right approach can lead to more sustainable solutions.

Introduction

Integrating sustainability into a procurement plan has become a fundamental requirement for local governments to ensure they are operating in a socially and environmentally responsible manner. Public sector organisations face increasingly heightened scrutiny to demonstrate that sustainability principles are embedded at the core of their procurement activities. This is critical to delivering long-term community, environmental and economic benefits.

Sustainability in procurement is about more than just ticking boxes or meeting minimum standards. It involves rethinking how each procurement can proactively support broader sustainability objectives throughout the local government’s operations and community. Early and intentional consideration of sustainability ensures procurement activities meet operational needs while encouraging resilience and positive outcomes for future generations.

The Commonwealth Government’s Sustainable Procurement Guide outlines two essential steps in procurement planning:

1. Analyse environmental sustainability opportunities
2. Assess the risks

By systematically incorporating these steps into procurement planning, local governments can align their procurement practices with sustainability principles and goals, legislative requirements, and the growing expectations of their communities. This article explores these two crucial steps in detail, providing guidance on how local government can effectively embed sustainability into their procurement plans.

Analysis of Environmental Opportunities

The first step in integrating sustainability within the procurement plan is undertaking a thorough analysis of environmental opportunities. This involves gaining a clear understanding of how sustainability can be advanced and achieved throughout the procurement process. The analysis can be broken down into three distinct but interconnected components:

1. Demand Analysis
2. Sustainability Impact Analysis
3. Supply Market Analysis

Each plays a key role in building a comprehensive sustainability procurement plan.

Demand Analysis

Demand Analysis focuses on critically examining the desired outcomes of the procurement to determine if the ‘need’ can be met through more sustainable means. This phase is essential for uncovering opportunities to:

• avoid or reduce consumption by exploring alternative solutions
• identify available and more sustainable options
• revise procurement expectations to promote more sustainable outcomes

By challenging traditional assumptions about what is needed and how it is delivered, innovative solutions can be achieved which reduce environmental footprints and promote sustainability.

A key aspect of Demand Analysis is identifying and engaging key stakeholders early. Stakeholders such as end-users, business analysts, technical officers and sustainability specialists hold valuable insights that shape procurement objectives and ensure sustainability considerations are incorporated from the outset.

For significant procurements, articulating how sustainability contributes to the ‘value for money’ principle is critical. Rather than viewing sustainability as an added cost, it should be recognised as a value driver that enhances long-term financial savings, reduces risk exposure and delivers broader community benefits. This approach strengthens the business case for sustainable procurement and aligns with the sound contracting principles.

Key considerations during Demand Analysis include:

• Can the required outcome be achieved with lower environmental impact?
• Are there opportunities to redesign or reuse instead of purchasing new?
• How can sustainability objectives support cost-effectiveness and quality?
• Who are the key stakeholders and how will their input shape requirements?

For example, a local government procuring office furniture might explore leasing options or sourcing products made from recycled materials, rather than simply buying new furniture. This approach reduces waste and encourages circular economy principles.

Sustainability Impact Analysis

Sustainability Impact Analysis is a deeper examination that assesses the whole-of-life environmental and social impacts associated with the goods or services to be procured. This holistic perspective helps local governments to understand the sustainability issues, risks and opportunities to achieve sustainability which are inherent to the procurement.

Key sustainability impacts to consider include:

• climate change: emissions and carbon footprint of production, use, and disposal;
• energy: consumption and efficiency during lifecycle;
• water use and quality: impacts on water resources and pollution;
• waste: volume, type and management of waste generated;
• toxic substances, pollutants and emissions: hazardous materials and air quality impacts;
• resource use intensity: use of finite or renewable resources and potential for circularity; and
• social responsibility and ethical practices: labour conditions, community impact, modern slavery and human rights.

This lifecycle thinking encourages local governments to look beyond purchase price and upfront costs and consider ongoing operational impacts, maintenance and disposal at the end of use. For instance, where a local government is procuring vehicles, that local government might assess fuel efficiency, emissions standards and potential for electric alternatives.

Research during this phase involves reviewing best practice benchmarks, industry standards and case studies to define the desired level of sustainability performance. Local governments should prioritise the most significant sustainability impacts related to the goods or services in question, focusing efforts where they can make the greatest difference.

Benefits of Sustainability Impact Analysis include:

• providing a clear understanding of long-term environmental and social consequences;
• informing procurement specifications and evaluation criteria; and
• identifying risks and opportunities to manage or capitalise on sustainability issues.

For example, when procuring construction services, sustainability impact analysis might highlight the importance of sourcing responsibly harvested timber, minimising construction waste and ensuring fair labour practices on site.

Supply Market Analysis

Supply Market Analysis develops a comprehensive understanding of the current sustainability capabilities within the supply market. This includes assessing suppliers’ performance, capacity and willingness to meet sustainability requirements.

This analysis helps local governments to:

• identify suppliers already practising sustainable procurement;
• understand barriers suppliers face in adopting sustainability measures;
• gauge the local government’s ability to influence suppliers and drive market transformation; and
• identify emerging innovations and opportunities in the supply chain.

Understanding the market’s current approach on sustainability enables local governments to set realistic expectations and tailored procurement strategies. For instance, if few suppliers currently offer low-emission vehicles, local governments may choose to introduce sustainability requirements gradually or work collaboratively with the market to encourage innovation to increase the market for low-emission vehicles.

Larger local governments or those undertaking significant procurements can leverage their purchasing power to drive improvements in supplier sustainability practices. Collaborative purchasing with other agencies can also increase influence.

Supply Market Analysis supports:

• strategic supplier engagement and capacity building;
• risk identification and mitigation related to supplier sustainability; and
• identification of new products and services that align with sustainability goals.

Assess the Risks

Risk assessment is a fundamental part of procurement planning, and local governments should explicitly include environmental and social sustainability risks in this process. Sustainability risks may impact cost, delivery, reputation, compliance, and ultimately the long-term success of procurement activities.

A comprehensive risk assessment should address a variety of potential issues. For example, environmental risks could include resource scarcity, where limited availability of key materials might disrupt supply or increase costs. To mitigate this, local governments could seek alternative materials or promote reuse and recycling within their procurement specifications.

Social risks are equally important. Suppliers may fail to uphold fair labour standards or ethical sourcing practices, which can expose local governments to reputational damage or legal challenges. Local governments can reduce these risks by incorporating sustainability practice methodologies into tender submission requirements and evaluating the same, as well as  including clear ethical sourcing clauses in contracts and conducting supplier audits to ensure compliance.

There are also opportunities within sustainability risks, such as adopting energy-efficient products or services. These opportunities not only reduce environmental impact but can also lower operational costs over time. Local governments can encourage these positive outcomes by specifying minimum energy ratings or incentivising innovative sustainable solutions in their procurement processes. Local governments may also explore innovative solutions that ultimately solve one problem whilst simultaneously producing a separate outcome. A key example of this is converting landfill waste to energy. The environmental issue is excess greenhouse gas emissions caused by landfill waste. The solution is to install gas collection networks to recover landfill gases and using those to generate energy. Projects of this kind also produce jobs. Ultimately, a sustainable outcome ensues from what once was an environmental risk and is now improving social and environmental outcomes. You can read more about landfill gas management projects here.

Reputational risks should not be overlooked. Procurement decisions that conflict with community values or fail to engage stakeholders adequately, may lead to public opposition or loss of trust. To avoid this, local governments should engage with the community early and maintain transparency throughout the procurement lifecycle.

By thoroughly identifying and understanding these types of risks and opportunities, local government can develop targeted actions and treatments. This proactive approach enables them to safeguard procurement outcomes, align with sustainability goals and strengthen resilience against unforeseen challenges.

Conclusion

Embedding sustainability in procurement planning is now essential for local governments committed to responsible governance and long-term community wellbeing. Through a structured approach incorporating environmental opportunity analysis and comprehensive risk assessment, local governments can lead by example in delivering sustainable outcomes.

Ultimately, sustainable procurement planning enables local governments to deliver true value for money, considering not only financial costs but the lasting benefits for the environment, society and the economy. This positions local governments as leaders in fostering resilient, equitable and environmentally responsible communities, ensuring the wellbeing of current and future generations.

If you would like to explore more opportunities and methods for incorporating sustainable procurement practices into your procurements, please do not hesitate to contact us.

Over the coming weeks we will cover the remaining topics in this Sustainability in Procurement Article Serries, including integrating sustainability into the Market Approach; Evaluating Sustainability Criteria, requirements and outcomes; Contract Management and the development of a Sustainable Procurement Policy.