Supply Chain Council of European Union | Scceu.org
Procurement

What does it really mean to be “green” from a public procurement perspective? – American City and County

COVID-19 may have derailed many public sector projects and forced leaders to reprioritize goals for the 2021 fiscal year, but it didn’t tamp sustainability ambitions. In fact, many agencies may be placing an even greater emphasis on the procurement of green goods and services as they strive to reduce the impact of their programs and services on both the planet and public health.

The challenge, of course, is finding a way to achieve green buying goals within the confines of the current fiscal environment. Sustainable products and services tend to have a higher price tag due to the materials, equipment and labor required to carefully manufacture, transport and implement a higher-quality solution. But that doesn’t mean that you can’t maintain – and even expand – your sustainable procurement practices in the middle of a pandemic and amidst budget cuts. You just need to do three things to make the more responsible choices more cost effective:

  1. Clearly categorize products and services certified as greens options
  2. Configure policies, processes and procedures to cultivate a sustainable purchasing culture
  3. Chronicle both successes and challenges


Step One: Keep Sustainable Options from Getting Buried

Even before the COVID-19 outbreak began, procurement teams were understaffed and overwhelmed. They had to source supplies and services as quickly as possible, and figuring out which products were “green” was like searching for a needle in a haystack. To be honest, this issue still exists within many agencies today, with the need for speed growing exponentially due to COVID-19’s additional procurement burden.

If your state or local government wants to meet its green purchasing goals, it has to make it as easy as possible for buyers to find the environmentally-preferred products available on pre-negotiated contracts and approved catalogs. One of the easiest ways to do that is by tagging products that have been verified by either your team or a third party as meeting your agency’s green criteria. This is where a universal commodities classification system such as the NIGP Code becomes very valuable. Many ERP and financial systems don’t support green delineations, and the NIGP Code’s framework is specifically designed to classify vendors, products and spend data from a categorical perspective. That’s actually why it became the first classification taxonomy to be used by the public sector for green spend tracking over a decade ago.

By setting up a “green” coding structure, you make it easy for the procurement team to find sustainable products and services in a quick sort or filter function. The search becomes even easier if all shoppable catalogs and catalogs are aggregated into a single e-commerce type marketplace solution that clearly articulates the business rules for sustainable purchasing to buyers, enables them to see all options on one screen and features green products at the top as recommended selections.

When determining the best coding structure for your green goals, remember that it may be most beneficial to create both green certified classes and class-items to reflect certified products. This allows for clear delineation of green versus non-green products and services (i.e. creating a new Class 486: “Janitorial supplies, environmentally certified by an agency recognized certification entity” for the Class 485 “Janitorial supplies”). Five-digit codes beneath that class would reflect the same structure as the original, noncertified products and services.

Of course, there are other options beyond the NIGP Code, such as the creation of an XML-based “green” attributes tag, which would allow you to use your existing NIGP Codes as is. However, few systems support this, and looking at the commodity code and base description, there would be no differentiation between regular and green-certified products. You could also create a Code suffix (e.g., 485-06-G) to denote green certified products. But for systems that use a numeric commodity-code numbering schema, the introduction of an alpha character would not be supported without modifications to the systems.

Ultimately, it will be up to you to define what standards are acceptable and what certification entities are recognized by your agency – as certification standards, entities and processes are a moving target from entity to entity. Just be sure that…

  • Your codes are compatible and applicable across all information systems involved in the procure-to-pay process and scalable to support future growth of your sustainable purchasing program and ongoing catalog/contract diversification.
  • Whatever approach you take to tag green products doesn’t become disruptive to existing classification system implementations or your processes.
  • All eligible vendor offerings are in fact coded – and coded properly. That may take a little work up front, but the resulting time and money saved will be exponentially greater.


Step Two: Adapt Processes and Policies to Support More Responsible Purchasing

Categorizing and coding green products is like planting a seed in the garden for your sustainable purchasing program. It may grow on its own, but it would be better supported by the right mix of water, sun and soil nutrients – or, in this case, the right mix of policies, processes and procedures.

Whether you’re just now establishing green procurement goals or have a more mature program in place, it’s critical to stop and assess your progress and evolving needs in the context of today’s climate:

  • What is a green product by our definition? What are the criteria for “certification”?
  • How will we “certify” goods and services as green? Is there a specific validation process we will manage? Or will we rely on third-party organizations’ ratings?
  • What types of terms and conditions do we need in our contracts to ensure vendors fully comply with our green criteria?
  • What types of policies should be implemented at the state and/or local level to encourage agency prioritization of environmentally-preferred products and services?
  • How will we sift through all of the information in our historical records to benchmark green purchasing practices? And how can we best track our progress going forward (if we don’t already have a green taxonomy such as the NIGP Code in place)?
  • Who else, beyond the procurement team, should we enlist on our “go green” team? What role must each employee play in the effort to ensure environmentally-preferred items are requested and tracked accordingly?
  • What is it going to take to achieve our green goals in a cost-effective manner? What types of goods and services do we need to source? How can we increase competition? You will likely need to conduct a cost-benefit analysis to help all stakeholders – buyers, government leaders, customers and even tax payers – understand the value of increasing sustainable purchases.

Once these insights are gathered, you will be better equipped to develop policies, re-engineer processes and refine workflows so that it becomes easy and natural to execute a sustainable purchasing program. It’s critical to empower buyers to work with green certified vendors as much as possible. This type of discovery may also help you understand how best to incentivize customers so that they commit to more sustainable purchase requests. Like anything new or unfamiliar, change management is going to be in order.

If you need help with any of these policy, process, procedure and training actions, I recommend that you tap into the expertise and bandwidth of NIGP Consultants. They have years of experience developing, implementing and refining green purchasing programs for the public sector.


See How the Needle Moves

Of course, like any specialized purchasing program, you need to closely assess impact and amend workflows and policies as needed. If you’re leveraging the NIGP Code to categorize spend, then you will be able to track progress toward your goal via regular procurement reports and audits within your eProcurement system. Sustainable purchases can be monitored in the scope of all spend or within a more focused lens on specific classes of green products and services.

If you would like an expert assessment of your sustainable procurement strategy or need help with execution, visit https://www.periscopeholdings.com/nigp to learn more about the NIGP solutions available to you.

 

Jean Clark, FNIGP, CPPO, C.P.M, CPM is President of NIGP Code and Consulting Services at Periscope Holdings, Inc. She is an NIGP Past President and former State of Arizona Procurement Administrator.

 

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