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Publications
Department of the Environment and Heritage, 2003
ISBN 0642 54955 9
The CPGs state that "value for money is the core principle governing Commonwealth procurement" and they make clear that "the lowest price is not necessarily an indicator of best value for money".
Good environmental performance can be considered to add value to a product. An environmentally friendly product may, for example, reduce the risk to employees, contractors and the environment associated with product use. It may make more efficient use of energy, water and materials - and efficiency normally leads to lower costs, particularly on a whole-of-life basis. Evidence from studies in Australia and overseas indicates that a high standard of environmental performance by a service provider may be associated with a high standard of management generally, and could, therefore, represent reduced risk and better quality service for Australian Government agencies.
In many cases, an environmentally friendly option will reduce costs, either initially or over the life of the product. Even where an environmentally friendly product or service costs more than a conventional product or service, consideration of Value for Money requires purchasers to give due regard to the benefits obtained from good environmental performance. For example, although a contract to recycle paper and other wastes may cost more than a contract that sends all waste to landfill, there are clearly environmental benefits from recycling, which should be considered.
As many suppliers of environmentally preferable goods and services are small to medium enterprises (SMEs) and Australian companies, environmental purchasing can also make a positive contribution to the SME and industry development objectives of Australian Government procurement policy.
Environmental purchasing is based on reducing the environmental impacts of products and services. Such impacts may be associated with any stage in the production, use or disposal of a product. Environmental purchasing therefore needs to consider impacts throughout a product's life cycle. Issues related to different stages of the life cycle might include the following.
| Life Cycle Stage | Environmental Issue |
|---|---|
| extracting resources/harvesting raw materials | pollution and ecological disturbance resulting from mining/harvesting |
| processing raw materials and manufacturing components | pollution and generation of hazardous wastes |
| manufacturing the product | choice between virgin material/recycled material/post-consumer recycled material |
| Using the product (including inputs such as energy, water and chemicals) | energy consumption and greenhouse gas emissions |
| recycling the product or its components | reduced dependence on virgin resources |
| disposing of the product | pollution and amenity impacts of landfilling |
Environmental life cycle assessments of products have shown that the environmental impacts created when a product is used are often much greater than those resulting from manufacture of the product. This is generally the case for products that use power, water, fuel or other consumables. Similarly, the costs of such consumables over the lifetime of a product may be far greater than the initial cost of the product. It is therefore important for a purchasing evaluation to take the costs of these consumables into account when comparing products. This can help to ensure that appropriate and comprehensive Value for Money decisions are made.
It is Australian Government policy to assess Value for Money on a whole of life basis so that all costs and benefits across the procurement cycle can be adequately considered. The Department of Finance and Administration has further guidance on Whole of Life Costs in relation to Value for Money, and the Australian National Audit Office has produced a Life Cycle Costing Better Practice Guide to help Government departments.
It is important to note that these costing procedures only take account of direct costs to the Australian Government. They do not assign costs to the environmental impacts associated with the life cycle effects of the product: that is, to the environmental costs of resource extraction, manufacture, use, and disposal of products. These external costs are real and are borne by the community as a whole. They are often called "externalities".
The environmental purchasing programme described here is based on a life cycle approach and aims to provide both an understanding of whole of life environmental issues and a system for considering them in procurement. It does not, however, encompass detailed life cycle assessment (LCA) of environmental effects. Detailed LCA is very expensive, and results of assessments involving comparison of products may be highly dependent on the assumptions and the data used in the analysis.
Many manufacturers and suppliers acknowledge that environmental issues need to be addressed from the earliest design stages of production, all the way through to end-of-life. Reducing environmental impacts through better design (such as using less toxic components, or making the product easier to disassemble and reuse) is referred to as "Design for Environment" or "DfE". Many manufacturers and suppliers (or their industry associations) may be able to provide information on their DfE activities. For an Australian example, see Designing for the Environment by the Australian Information Industry Association.
The Department of the Environment and Heritage has been involved in providing other guidance on DfE principles and practices. A key report is Product Innovation: The Green Advantage, An Introduction to Design for Environment for Australian Business, which is at www.deh.gov.au/industry/finance/publications/producer.html
Its sister publication is the consumer-oriented Shop Smart Buy Green, which can be found at www.deh.gov.au/settlements/industry/corporate/eecp/publications/shop.html
Consumers and investors are increasingly judging organisations by the activities of their suppliers as well as the organisation's own activities (e.g. manufacturing suppliers that use child labour). As a result, environmental purchasing is a growing trend in industry as well as in government, forming part of the increasingly common practice of supply chain management.
Several companies in Australia, such as Ford, General Motors Holden, Toyota, Unilever, and Rio Tinto are imposing requirements on their suppliers to ensure environmental performance. Some are establishing codes of conduct for their suppliers' operations as well as their own.
These companies are saying to their suppliers, "If you want to do business with us, you will have to meet certain levels of environmental or social performance in your operations." Typical requirements include developing an Environmental Management System or preparing a Public Environmental Report.
Some companies are seeking to improve their performance by working with their suppliers to incorporate recycled materials into packaging, make other modifications to their products, or take back packaging after use. For example, Telstra has arranged with a mobile phone manufacturer to take back packaging after delivery to Telstra's retail operations.
At present, the Australian Government does not impose mandatory environmental requirements on its suppliers. But, while there are not whole-of-Government environmental standards for suppliers, individual agencies are able to determine their own environmental requirements and may apply those across the range of goods and services they deem relevant.
The Australian Government does, however, have several programmes where it works in partnership with industry to improve the environmental performance of products and services. Examples include the national Water Efficiency Labelling Scheme (WELS), the Eco-Efficiency Programme of the Department of the Environment and Heritage, the Energy Efficiency Best Practice (EEBP) Programme of the Department of Industry, Tourism and Resources, and several Australian Greenhouse Office programmes.
Some states and territories will have their own partnerships with industry to improve environmental performance. Examples include the Extended Producer Responsibility work of the NSW EPA (which covers such things as computers and batteries) and the Sustainability Covenants agreed between industry and the Victorian Government. For more information, go to the website of the relevant environment or sustainability agency in the jurisdiction.
Individual corporations or their industry associations may also have supply chain initiatives in place or under development. These could include voluntary codes of conduct (such as the Product Stewardship Commitment agreed to by the Vinyls Council of Australia covering PVC), environmental reporting commitments, eco-efficiency agreements, or industry-initiated actions to offset the environmental impacts of their activities.
Industry development is a supporting principle of Australian Government procurement policy. This includes encouraging small to medium enterprises (SMEs) to enter the market and compete successfully for government business. Many Australian SMEs, across different goods and services sectors, consistently achieve high levels of environmental performance in their operations, manufacturing and supply. Because of that high standard of performance, environmental purchasing can make a significant contribution to the import competitiveness of Australian SMEs.
The Australian Chamber of Commerce and Industry, with Australian Business Limited and the Department of the Environment and Heritage (DEH), has produced a guide for SMEs on reporting their environmental performance. Called Environmental Reporting: Handbook for Small and Medium Size Businesses, it is available from the DEH website at www.deh.gov.au/industry/finance/publications/smehandbook.html This handbook provides useful guidance to SMEs on how to effectively communicate their environmental initiatives and performance to stakeholders, including government purchasers.
SMEs can find practical guidance about opportunities to improve their environmental performance in the Good Practice for Cleaner Production SME guides produced by the
Victorian EPA, as well as from other environment, industry or sustainability agencies.
See www.epa.vic.gov.au/Business_Sustainability/SME/default.asp
Many industry associations have environmental initiatives underway that extend to their small business membership. These can cover such issues as energy efficiency, reducing greenhouse gas emissions, water conservation, pollution prevention, cleaner production and public reporting.
Australian Government procurement officers should also be aware that many suppliers of environmentally preferable goods and services will be SMEs. Some of these may not be able to access the government marketplace because their purchasing officers do not recognise environment as part of Value for Money. For example, the Environment Industry Action Agenda refers to a report that estimates that over 80% of the environment industry is classified as small to medium enterprises3. Excluding government agencies, the waste management industry has 71% of trading businesses employing fewer than five persons.4
| By choosing to recycle organic waste through a local worm farming business, the Department of the Environment and Heritage diverts waste from landfill, avoids associated greenhouse emissions and helps support a local small business. The Checklist for office equipment consumables recommends that purchasers consider remanufactured toner cartridges, sourced from an industry sector that is predominantly SME. |
With clear communication about environmental tender criteria, many SMEs are well placed and flexible enough to come up with the performance information your agency requests. Indeed, Telstra's experience with their environmental purchasing policy suggests that SMEs are more responsive to these questions than some larger organisations.
The Australian Government has recognised that there are benefits in improving the environmental performance of government operations. In May 2001, it decided that all Australian Government departments and agencies should be encouraged to:
An EMS is a structured tool for measuring and continually improving the performance of an organisation in maintaining its regulatory compliance and managing its environmental risks. Agencies can include their purchasing activities as a significant aspect of their EMS, and then set appropriate objectives and targets for performance. As purchasing makes a major contribution to the waste an agency must dispose of, the energy and water it consumes, and the greenhouse gas emissions it generates, it often makes sense to consider environmental purchasing under the umbrella of an EMS and as part of a Greenhouse Challenge Agreement.
Any environmental purchasing programme your organisation undertakes will need to be compatible with other energy and environmental management initiatives that you have underway. Do the purchasing officers in your organisation know about your EMS, and the relevant goals and objectives your organisation has on energy and environmental management? Having your EMS and purchasing teams working together can make a real difference.
For further information on EMSs for Agencies, see the EMS pages of the Greening of Government website at: www.deh.gov.au/settlements/government/purchasing/index.html