Environmental sustainability in the manage stage
Step 7: Manage the contract
- Monitor environmental sustainability performance.
- Identify opportunities to improve environmental sustainability performance.
- Review and capture your lessons learned.
- Actively manage existing supplier relationships.
Step 7 shows how you manage supplier performance by monitoring KPIs and continuously identifying improvement opportunities. Using a collaborative and adaptive approach to supplier management will help you to achieve improved environmental sustainability outcomes.
Monitor environmental sustainability performance
You need to monitor environmental sustainability throughout the contract, ideally using a contract management plan. Engaging with your supplier builds trust and supports a collaborative approach to identifying and resolving issues. You should identify a representative from your agency to manage the environmental sustainability performance of the contract.
The representative should:
- establish periodic reporting against KPIs and other metrics
- audit adherence to contract requirements and targets and identify areas for improvement
- develop a data management plan for the collection, processing and storage of data for the life of the contract.
The buy NSW Supplier Relationship Management Guidelines for NSW procurement practitioners outlines 3 steps for effective supplier performance management:
- Establish metrics and a baseline using historic performance data and business objectives.
- Measure, report and review against the agreed KPIs and metrics.
- Manage improvements by identifying, measuring and reporting performance levels.
Identify opportunities to improve environmental sustainability performance
It's important that you identify opportunities to improve environmental sustainability performance. You should do this in collaboration with the supplier and by engaging your internal subject matter experts.
Performance review meetings
The performance review meetings will be used to monitor performance against KPIs. The agenda should include identifying challenges to meeting the KPIs and opportunities to improve. To achieve better outcomes for the supplier and your agency, you should also review how data and performance against KPIs is collated, reported and managed.
Risk and opportunities register
We recommend you use an environmental sustainability risk and opportunities register to identify issues and initiatives and to track their implementation and mitigation.
Supporting suppliers
You can improve performance and motivate suppliers by supporting them in their communications and relationships with your agency and with their own sub-contractors and supply chain.
You should consider helping them to present their ideas, suggested improvements to the contract, and other proposals to relevant people within your agency.
Suppliers need to communicate their reporting needs, timeframes and expectations to their own sub-contractors and suppliers. By helping your suppliers in their approach to managing their reporting processes you will also improve contract outcomes.
Review and capture your lessons learned
At the end of the contract, you should thoroughly review the environmental sustainability outcomes of the contract, for example the amount of recycled content included, and capture the lessons learned. This is important in improving future procurement activities. Seek feedback from the broader procurement and project team, your supplier and key stakeholders. This feedback will identify contract problems and their causes that can be used to improve future procurement activities.
Lessons learned should also be captured at the end of each procurement stage (that is plan, source, manage) to improve the procurement process of the following stage.
We recommend a SWOT (strengths, weaknesses, opportunities and threats) analysis as a useful tool to use in your review of the environmental sustainability aspects of the contract.
Strengths
Identify what went well for environmental sustainability.
- What actions by the supplier or agency led to improved environmental sustainability outcomes?
- What worked well across each stage?
Weaknesses
Identify what didn't work well for environmental sustainability.
- Were any opportunities to improve outcomes missed? What were the reasons?
- Were there any environmental sustainability non- conformances?
- Did the supplier’s performance reduce over time?
Opportunities
Identify opportunities for environmental sustainability improvements that can be applied in future procurements.
- What could be improved across each stage?
- Were opportunities raised during the contract that weren’t implemented but could be considered in the future?
Threats
Identify threats to environmental sustainability performance that could be mitigated in the future.
- Did anything occur that prohibited the achievement of environmental sustainability objectives?
- Are there any market changes that should be considered for the next procurement?
Sharing the lessons learned
Lessons learned can be shared with internal stakeholders. These will include other procurement practitioners and staff within your agency, the senior leadership staff (for high-value contracts) and across other NSW Government agencies, for example NSW Government Procurement Professionals Community of Practice.
It may also be appropriate to share some of the lessons learned with the wider industry at industry events, using briefing sessions or as part of early market engagement for future procurement activities. However, it's important to make sure that commercial, confidential and privacy information is not divulged.
Actively manage existing supplier relationships
With long duration contracts, there is still opportunity to introduce new requirements or practices into the contract before the contract is renewed or re-tendered. While KPIs and reporting requirements are specified in the initial contract conditions, there are several ways to achieve the new objectives that may have been introduced.
Case study 3 is an example of supplier consultation outside specific tender processes.
Develop strong relationships with suppliers
Building trust and working collaboratively with suppliers will help drive value for money and environmental sustainability outcomes. Suppliers will also have their own environmental sustainability objectives, so open discussion can result in mutual benefits. If your supplier values your relationship, they will be motivated to meet new expectations that will prepare them for future contracts.
Periodically review contract clauses and KPIs
Periodically reviewing contract clauses and KPIs will determine their currency and appropriateness and allow you to consider new government policies. There may be opportunities to better align the contract with new policies and strategies without significantly affecting the supplier’s contract delivery.
Inform suppliers of new expectations ahead of contract renewal
By informing suppliers of new policies and processes ahead of contract renewal you will increase their preparedness for the next tender or contract negotiation.
Imagine you're in a hospital. You may not realise it, but every day, you are surrounded by hundreds of products and services that have an impact on the environment. From the bandages and syringes that are used to treat you, to the food and beverages that are served, to the energy and water that are consumed by the hospital, everything has a carbon footprint. And that’s not even counting the emissions that come from the transportation and disposal of these goods and services. These are called Scope 3 emissions, and they can have a huge effect on the climate.
That’s why the NSW Ministry of Health’s Climate Risk and Net Zero Unit have a big goal: to make NSW Health’s procurement more environmentally sustainable. They want to reduce the Scope 3 emissions that come from buying and using goods and services for NSW Health. They knew that this would not only help the planet, but also improve value for money, and enhance social value.
What they did
They decided to talk to the suppliers who provide goods and services for NSW Health. They wanted to understand how they could work together to reduce the environmental impact of their products and services. They organised roundtable discussions with suppliers from 4 different categories: medical equipment (imaging and non-imaging), pharmaceuticals and waste. They asked them about their environmental sustainability practices and current environmental initiatives. They wanted to know what opportunities and challenges they faced in making their products and services more environmentally sustainable.
What they learned
The discussions were very productive and collaborative. The suppliers shared their views and experiences with NSW Health. They also gave feedback on how NSW Health could improve its procurement processes to support environmental sustainability. They said that one of the main challenges was to balance cost, quality and sustainability considerations. They also said that they were keen to work with NSW Health to reduce the carbon footprint of clinical care and improve the environmental performance of their goods and services.
Some of the suppliers also shared some inspiring insights into their progress. A medical equipment supplier said, ‘In terms of supply chain, we’ve got ambitious targets with all our suppliers, and that’s a 7 times greater impact than just ourselves being carbon neutral.’ A waste supplier said that ‘We have plenty of other major commercial customers pushing it. Environmental and sustainability performance is the key to every contract these days.’
This industry engagement was critical for NSW Ministry of Health to understand where key suppliers are on their own environmental sustainability journey.