Drivers of green procurement

• Investor interest
Investors are becoming increasingly aware of the environmental performance of their chosen companies. Organisations with good environmental records and systems in place to monitor and measure their performance are often perceived as being better at managing a wide range of risks associated with their business, and tend to represent less risk to investors.
• Insurers
Organisations with a good environmental performance record and an accompanying reputation (often stemming from good housekeeping and a strong EMS) generally find insurance more readily available and at lower premiums. Many insurance companies are beginning to request and seek evidence from companies about the management of their operations, including any associated environmental risks.
• Community and other stakeholders
Public concern about the environment continues to increase. Interest often focuses on the local and global environments in which an organisation operates, which, in turn, places pressure on the organisation to improve its environmental and social performance.
Corporate reporting has forced companies to become more transparent and has exposed the environmental performance of their operations in response to community and stakeholder concerns.
• Supplying central and local government
Companies supplying central and local government should be aware of the Government guidance on sustainable procurement in the public sector.
• Customer and competitor pressures
Customer demand for products and services with a better environmental performance is increasing pressure for the supply of such items. An organisation‘s reputation can influence whether customers purchase its products and services. Disclosure about the performance of products and services (e.g. in environmental and social reports), combined with pressure to improve supplier performance and operations, has allowed customers to make a more informed decision about whether to buy a particular product or service. Customer preference presents both threats and opportunities – depending on an organisation‘s response and that of its competitors.
• External benchmarks
Benchmarking is the process of independent evaluation of ‗like for like‘ performance by an organisation. Organisations use benchmarking to better understand how they are performing in order to identify areas of improvement. Numerous external benchmarks have been introduced in recent years which have helped larger organisations to develop and improve their environmental practices and policies. They include:

FTSE4Good

Business in the Community‘s Environment Index

Dow Jones Sustainability Indexes

These benchmarks have encouraged organisations to commit to stated environmental policies and to monitor their impact on the environment. Competitor pressure also plays a large part in driving the adoption of external benchmarks.
• Environmental legislation
Organisations have a legal duty to comply with environmental laws and regulations. Legislation may cover areas such as use of certain hazardous substances, duty of care, waste electrical and electronics, producer responsibility on waste, use of polyethene packaging.
Such legislations affect the market for products, resulting in changes in the purchasing patterns of public and private sector organisations. Environmental legislation is increasingly demanding more from organisations in terms of their environmental performance and compliance. In response, organisations are tending to purchase products and services which will help them
adapt to changing circumstances and market demands.
• Financial policy
Financial policy originating from central government attempts to influence the direction of the economy through changes in taxes, fiscal procedures and/or spending policies. Policies that are changing the way organisations operate around the world and channeling the focus towards reducing environmental impact include:

  1. Landfill tax – This tax is paid in addition to commercial landfill fees. Its aim is to discourage the use of landfill and to encourage alternative options such as recycling.
  2. Climate Change Levy – This is part of a range of measures designed to help the UK meet its commitment to reduce greenhouse gas emissions. The levy is charged via energy bills on the use of non-renewable energy by businesses and the public sector. Exemptions and discounts are available for certain business sectors and in some specific circumstances.
  3. Fuel taxation – This includes the escalator applied to road transport fuels. Vehicle Excise Duty (VED) is also based on the carbon dioxide emissions of the vehicle.
  4. Aggregates Levy – This is a tax on sand, gravel and rock extracted from quarries/mines or dredged from the sea. The levy is intended to compensate for environmental damage and resource depletion arising from primary sources and includes mechanisms to encourage the use of recycled materials and improved sustainability and environmental performance.
  5. Enhanced Capital Allowance (ECA) – This enables businesses to write off the full amount of the capital cost of qualifying machinery in the first year of purchase. This includes water saving devices, energy efficient plant and machinery, vehicles with low carbon dioxide emissions, and natural gas and hydrogen refueling infrastructure.
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