Engagement Strategy With Suppliers and Manufacturers on Green Procurement in the Health Sector
SAVING LIVES SUSTAINABLY
SPHS’s Engagement Strategy represents SPHS members’ commitment to work in collaboration with suppliers and manufacturers to introduce green procurement in the global health sector. Through a transparent and inclusive engagement process, and by leveraging their normative and market power, members commit to lowering the environmental impact of their procurement, with a final aim of improving human health and well-being.
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The SPHS Initiative
SCOPE AND SCALE OF OUR ENGAGEMENT The SPHS members* conduct high volume procurement in the health sector, representing a sizable portion of some segments of the global pharmaceutical and other health products markets. The cumulative purchasing power of SPHS members in the global health aid market is about USD 5 billion annually. This purchasing power can be leveraged with the SPHS members’ standard-setting role (by referencing corporate policies and standards as well as international conventions and commitments), to engage actively and, where feasible, jointly with suppliers and manufacturers to introduce and enhance sustainable procurement in public health. The SPHS members are actively working in the field of sustainable procurement both within the UN system and at a governmental level by facilitating awareness-raising and capacity building as well as developing guidance on sustainable procurement. * UNDP, UNEP, UNFPA, UNHCR, UNICEF, UNOPS, WHO, GAVI, the Vaccine Alliance, The Global Fund to Fight AIDS, Tuberculosis and Malaria, UNITAID collaborate in the SPHS on an informal basis and voluntary participation
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The informal Interagency Task Team on Sustainable Procurement in the Health Sector (SPHS) was established in May 2012 in Copenhagen, Denmark. The aim for establishing the Task Team was to facilitate and coordinate the introduction of sustainable procurement in the health sector among members and to leverage the standard-setting and joint procurement volumes of member agencies to influence the global health sector (governments and other international development partners) and beyond. Thereby, the SPHS Task Team intends to act as driver for transformational change towards greener health systems and inclusive green economies. The SPHS envisions the United Nations as a leader in sustainable procurement in the health sector. Steps such as integrating sustainable procurement systems into global health sector policies and practices, setting targets and timelines for an overall reduction in the United Nations environmental footprint and ensuring the principle of doing no harm, are among the main objectives of the SPHS. The four main pillars of the SPHS are illustrated in the diagram below: Increase awareness of stakeholders
Procurement as a leverage to advance environmental health agenda Establishment of evidence-based standards Capacitate UN procurement officers, suppliers and health actors
SPHS Engagement Strategy
2 Principles and Vision In the context of global development assistance, mounting a successful and responsible response to current environmental and development challenges often hinges on relationships with suppliers and manufacturers and how these are managed, measured and grown. Relationships with suppliers and manufacturers that are mutually supportive and based on trust and transparency can provide opportunities to eliminate inefficiencies, introduce eco-innovations and develop synergies. SPHS engagement with suppliers and manufacturers will be guided by an incremental, step-by-step approach, based on the principals of transparency, consultation, inclusion and the avoidance of conflict of interest. Engagement will be centered on voluntary collaboration, with initial emphasis on easy wins and low-hanging fruits. The approach also seeks to promote a holistic understanding of environmental sustainability, in which sustainability is incorporated into all facets of operations and procurement.
Life-cycle analysis as a part of the best value for money approach
Driving industry’s development on eco-innovations
Reporting on sustainable procurement is the norm
Language for sustainable procurement standardized
What would success mean?
Creating a market for greener and more costeffective products
Our vision is of the SPHS Task Team and its suppliers and manufacturers as drivers of change, working towards environmental sustainability, by embracing green procurement practices and recognizing them as central to their future competitiveness.
Sustainable procurement embedded in internal operations
Increase of procurement of ‘greener’ products
SPHS Engagement Strategy
Green procurement criteria introduced and set as a target
WHAT DO WE WANT TO ACHIEVE?
Green procurement language included in Requests For Proposals (RFPs)
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3 Product Focus Within the extensive range of products that the SPHS Task Team is currently procuring, a number of key product categories was identified that will be the initial focus of efforts to promote green procurement. These product categories were prioritized on the basis of a number of factors, including the volume of current procurement by the SPHS Task Team and the extent to which certain products could provide quick wins or represent low-hanging fruit. Selection was also made based on environmental performance related to environmental ‘hotspots’ (see Section 4). The diagram below provides a comprehensive overview of the criteria used to determine the product categories. However, it should be noted that selection of product categories and criteria is a dynamic process which will be reviewed and updated as needed.
KEY HIGH-VOLUME PRODUCT CATEGORIES IDENTIFIED: • ACTs • ARVs • Diagnostics • General medical supplies • LLINs • Male condoms • Syringes/sharps • TB medicines • Vaccines This priority list is not exclusive and will be further developed, with the ultimate aim of achieving 100% green procurement.
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Financial impacts
Standardsetting influence
Potential environmenal impact
SPHS members’ market shares
Factors determining the initial SPHS target products
Complexity of the supply chain
Key stakeholders involved
Quick wins
SPHS Engagement Strategy
4 Key Environmental Dimensions In its engagement with suppliers and manufacturers, the SPHS Task Team will concentrate on three main dimensions of environmental performance. Efforts to green procurement practice will focus on these “hotspot” areas, both in relation to products as well as the overall performance of suppliers and manufacturers. These hotspots encompass the following environmental concerns: • Greenhouse gas (GHG) emissions and climate change: focusing on aligning efforts around policy, standardization and measurements and developing concrete actions to reduce emissions • Resource depletion: focusing on efficiency in regard to the consumption of water, energy and raw materials • Pollution and chemical emissions: focusing on compliance with international and national commitments and conventions to reduce the impact of toxicity, along with the substitution of non-compliant and less harmful products
Greenhouse Gas (GHG) emissions
Hotspot Areas
Resource depletion
Pollution and chemical emissions
The SPHS Task Team is also keen to participate in efforts to advance research by jointly or individually assessing the environmental performance of its organizations, particularly in regard to procurement practices related to the three hotspot areas.
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5 Benefits of Greening the Supply Chain As the global sustainability movement gains pace and customers become more attuned to the social and environmental dimensions of purchasing decisions, it has become increasingly clear that business competitiveness will no longer be measured on the basis of a narrow conception of costs. Rather, suppliers and manufacturers will find it necessary to differentiate themselves not only by lowering their direct costs, but also by including external, environmental costs in their calculations. Companies that reflect externalities in their cost structures and manufacture products in a more environmentally friendly manner generate greater value for their customers and communities and send a clear signal of their commitment to operate responsibly. This commitment increasingly provides a competitive advantage to companies, which underlies the growing interest in sustainable practices. In the global health sector, the business case for introducing measures to optimize efficiencies and make continuous improvements throughout supply chains can be incentivized through close cooperation between procurement agencies and suppliers and manufacturers. Adopting environmentally sustainable practices offers suppliers and manufactures a number of clear benefits, including: • Suppliers and manufacturers may gain competitive advantage towards competitors • Staying in business and getting ahead of the regulatory curve • Improvement to the suppliers/manufacturers brand (CSR) • Increased employee commitment and engagement • Healthier communities • Savings potential (materials, energy and other) • Additional resource mobilization for suppliers and manufacturers (through ‘social’ grants) by implementing greener approaches • Better access to market intelligence • Embodying the champion model for change
FINDING WIN-WIN SCENARIOS Suppliers and manufacturers are often concerned that introducing sustainable practices will have a negative effect on the quality of products and/or push up the cost. However, eco-innovative products do not have to be more cost-intensive and win-win situations for buyers and suppliers can be achieved. For example, the Stockholm International Water Institute (SIWI) worked together with more than 30 of the largest Swedish textile manufacturing brands to develop a methodology to reduce energy, water and chemical consumption in the production of condoms and rubber gloves. Implementation of the SIWI methodology has led to considerable savings in terms of water, energy and chemicals for participating companies. Results from the first year showed that the return on investment (ROI) in more resource efficient processes ranged from 270% to 765%.
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SPHS Engagement Strategy
6 Ensuring Fair-Play In the transition to green procurement, the SPHS Task Team is committed to ensuring fair-play for their global base of suppliers and manufactures. The Task Team recognizes that maintaining a level playing field across a diverse range of suppliers and manufactures requires a gradual, tailored approach which takes account of different circumstances and contexts. To this end, suppliers and manufacturers will be segmented according to a range of different factors to inform valuation and ensure equal opportunities. This process will be underpinned by transparent, inclusive and consultative engagement processes.
TRANSPARENT, CONSULTATIVE AND INCLUSIVE APPROACH Engagement with suppliers and manufacturers on the greening of procurement in the global health sector will be based on systematic consultation, ongoing dialogue and voluntary collaboration.
Regulatory / political environment and its’ transparency Total cost of ownership approach
Location of manufacturing base
Factors to tailor the engagement process
Generic and/or originator products
Developed and/or new products
SPHS Engagement Strategy
Competitive advantages of suppliers and manufacturers
Established and/or new companies
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7 Facilitating communication Successful engagement with suppliers and manufacturers on green procurement depends on clear communication and inclusive dialogue. A dedicated platform savinglivesustainably.org facilitates this process and serves as a knowledge-hub and forum for sharing information and exchanging lessons learned. This engagement platform provides the SPHS Task Team with a venue to communicate expectations and reinforce key messages while feedback loops provide valuable information about which approaches are feasible, efficient and cost-effective. Suppliers and manufacturers can raise issues that matter to them, such as challenges that may arise due to new procurement standards. By creating the savinglivesustainably.org platform for discussion and input from policy makers, public procurers, suppliers, manufacturers, the SPHS’ global network of experts and other key stakeholders from the global health sector, the adoption of the SPHS Task Team’s priorities is facilitated and areas for further improvement are clearly identified. The platform also helps to build support for multiparty initiatives to procure key products in a more environmentally sustainable way. In addition to the creation of the online engagement platform, communication with suppliers and manufacturers will also be organized through a variety of different entry points and venues. The SPHS Task Team will participate in a number of key national, regional and international events, meetings and for that bring together United Nations and health sector suppliers and manufacturers, as well as environmental actors and companies with an interest in sustainability.
ENGAGEMENT PLATFORM – savinglivesustainably.org The online engagement platform enables suppliers and manufactures to learn more about the SPHS and provide feedback loops to facilitate gradual product/process adjustments. Initially, it focuses on the global health sector but over time the platform will catalyze multi-stakeholder participation from across the fields of health, the environment and (public) procurement. The platform facilitates: • Sharing of knowledge and experiences • Introduction of innovative products and processes in the market • Sharing of reports on environmental footprints and green procurement performance • Committing to targets and accounting for progress
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SPHS Engagement Strategy
8 Implementation of the strategy Moving forward, the SPHS Task Team has set out a number of priorities for the implementation of the Engagement Strategy. These include the following milestones: • Identification of the key, priority products to which green procurement practices will first be applied. These products will be identified through a mapping exercise based on agency priorities, procurement volume and environmental impact, and other criteria as outlined in Section 3. • SPHS members inform the Task Team about the compliance of individual agencies with key international conventions related to green procurement. Where possible, joint statements may be made to announce compliance with some conventions, such as the 2013 Minamata Convention on Mercury. • Development of green procurement criteria to inform sustainable procurement practices. The methodology that is being developed will draw on data related to resource depletion, greenhouse gas emissions and chemical pollution. These criteria will also inform new green ratings systems such as the Green Procurement Index Health (GPIH). • The SPHS Task Team strengthens information-sharing and collaboration by participating in key events and working groups. Member agencies will also work through United Nations country or regional offices in geographical areas with large numbers of suppliers and manufacturers to foster synergies, capitalize on local knowledge and share lessons learned. • Enhancement of the online engagement platform (see Section 7), with support from the SPHS Task Team by encouraging its supplier and management networks to access, engage and further develop it. • The SPHS Task Team establishes a working group to address the environmental impact of transportation and freight of products.
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Photo Credits Page 2: 2013 © The Global Fund Page 5: 2013 © The Global Fund/ John Rae Page 7: 2002 © UN Photo/ Eskinder Debebe Page 9: 2014 © The Global Fund/ John Rae Page 11: 2013 © Gavi Page 12: 2007 © UNICEF
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For further information please contact: Dr. Rosemary Kumwenda SPHS Coordinator UNDP Istanbul Regional Hub rosemary.kumwenda@undp.org Mirjana Milic SPHS Associate Coordinator UNDP Istanbul Regional Hub mirjana.milic@undp.org Visit our website: www.savinglivesustainably.org Follow us on: Twitter @UN_SPHS All rights reserved Š 2016 UNDP November 2016
Disclaimer This strategy document is produced to inform discussions around strengthening sustainable procurement in public health sector. The content, analysis, opinions and policy recommendations contained in this publication do not necessarily reflect the views of the United Nations Development Programme or other member organizations of the SPHS. Any omissions, inaccuracies and mistakes are responsibility solely of the authors.