Environmental sustainability in the plan stage
The plan stage is conducted internally with some external engagement with industry if necessary. There are 3 steps in this stage, supported by 4 templates.
Step 1: Analyse business needs
- Review the need for the goods or services.
- Define environmental objectives.
- Identify environmental sustainability risks and opportunities.
Step 1 of the planning stage is when you should consider environmental sustainability as part of the business needs assessment. Your aim is to establish clear objectives for the procurement and identify risks and opportunities.
Review the need for the goods or services
Before starting any procurement, you should review the need for the goods or services. Avoiding procurement of unnecessary goods and services is the first step in reducing the environmental impact of an activity. Undertaking a demand analysis is a good way for you to review the need for the goods or services.
It's important to determine whether meeting environmental sustainability objectives may also create a need for additional procurements, for example, energy efficiency upgrades or transitioning to a lower emission fleet.
1. Assess the need
Assess if the purchase of a new good or service is needed or essential. Ask if the need can be fulfilled through existing resources, partnerships or alternative methods such as reuse.
2. Do quantitative assessment
Assess if the amount of the new goods or services can be reduced without lowering performance.
3. Explore alternatives
Identify sustainable alternatives or new technology that could replace the proposed goods and services.
4. Consider the circular economy
Use the 10 Rs (Transitioning to a circular economy) to help you consider whether there are opportunities to make the best use of existing goods, materials, or assets, for example purchasing refurbished goods.
5. Access information
Gather as much relevant data as you can from sources such as your agency's sustainability team, and the end users of the goods or services.
Define environmental objectives
When you're defining the environmental objectives of your project you may choose to adopt the NSW Government environmental objectives we introduced in About. Or you can use them as a guide in developing your own objectives.
When defining your environmental objectives, consider the nature of what you’re procuring. Each procurement will have different opportunities to deliver environmental objectives.
Use the Prioritisation sheet, within Template 1 – Environmental Sustainability Risk and Opportunity Assessment XLSX, 182.26 KB, to identify the most important environmental sustainability objectives for your procurement.
Identify environmental sustainability risks and opportunities
You should aim to identify risks and opportunities as early as possible in the process. Having mitigation measures in place from the beginning is key to a successful procurement. However, risks, opportunities, and mitigation measures should be monitored and considered throughout the procurement process.
To identify environmental risks and opportunities you should refer to a range of sources including:
- relevant policies, strategies or regulations
- outcomes from environmental impact assessments (mostly relevant to new developments or infrastructure projects)
- your agency's organisational risk and opportunity registers.
Use Template 1 – Environmental Sustainability Risks and Opportunities Assessment XLSX, 182.26 KB to help identify, assess and mitigate risks and opportunities.
There are 2 factors to consider in analysing environmental risks and opportunities:
- The impact the procurement has on the environment
You need to consider the impacts that the procurement activity may have on the environment (for example, impact of discharging chemicals to the environment). - The impact the environment has on the procurement
You also need to consider the potential impacts and benefits that environmental factors or constraints may have on your procurement activity (for example, how the impact of climate change may affect the reliability of supply chains).
Risk mitigation measures and activities to harness opportunities include:
- alternative delivery methods, materials, or products – that have less impact on the environment
- capital investment to offset operational costs – for example, asset upgrades to save on energy or water efficiency
- asset replacement – at end-of-life, replace goods with more efficient and sustainable alternatives
- research and analysis – for example, further engagement with specialists to better understand risks and opportunities
- early market engagement – to increase understanding of market solutions
- more flexible tender specifications – to procure against the need rather than a solution – for example, performance-based instead of technical specifications
- encouraging innovation – for example, to provide incentives for innovative and value-adding alternatives.
Imagine you're moving into a new office space. You need to purchase furniture, equipment, and technology for your staff. You have a budget to adhere to, but you also have a responsibility to reduce your environmental impact. What would you do?
That was the challenge faced by NSW Ambulance (NSWA) when they entered a lease for part of a commercial office building. The previous tenant, the Commonwealth Bank of Australia (CBA), was leaving behind a significant amount of furniture and fixtures destined for disposal. According to the lease agreement, CBA had to restore the space to its original condition. This presented NSWA with a unique opportunity.
Instead of letting the existing furniture and fixtures go to waste, NSWA saw a chance to repurpose items including workstations, chairs, tables, and whiteboards. This approach offered a sustainable and cost-effective solution to their challenge.
This re-use saved millions of dollars and meant these funds were available for other purposes, such as improving NSWA’s statewide control centre in the same building. This approach prevented the waste and emissions associated with manufacturing and transporting new furniture, as well as the environmental impact of landfilling discarded items. Presently, 95% of commercial furniture waste ends up in landfills.
Lessons learned
This case study shows that there are both environmental and financial benefits to reviewing the need for goods and services and making the most of existing assets. It also shows that you can be creative and innovative in re-thinking what you really need. In this case, a quality fitout was achieved by exploring alternative approaches, rather than following a one-size-fits-all method. You can tailor your procurement to suit the nature of what you are procuring, and the opportunities that arise.
We introduced the NSW Government environmental objectives that you can use as a guide for your procurement. You can tailor these to develop your own objectives, based on your specific needs and context. The key is to think about how you can reduce your environmental impact, while also delivering value for money and meeting your project goals.
Step 2: Analyse and engaging the market
- Conduct market research and early market engagement
- Consider whole-of-life costing (where applicable)
During Step 2 you determine benefits from and options for early market engagement and investigate how whole-of-life costing can be helpful in assessing the environmental sustainability of your procurement options.
Conduct market research and early market engagement
Conducting market research and early market engagement will help you to better understand new technologies, systems and services. It also helps you to identify opportunities to improve the environmental sustainability outcomes in your procurement process.
Purposeful engagement between you and potential suppliers has several benefits.
It helps to:
- identify new solutions and approaches
- identify and address potential risks and opportunities
- create new markets.
Early market engagement also introduces potential suppliers to current NSW government environmental sustainability policies. It helps them to understand and respond to the business challenges before the formal tender process begins.
Purpose of early market engagement
We use early market engagement, with respect to environmental sustainability, to:
- communicate polices and desired outcomes
- understand market capabilities
- identify risks.
When early market engagement is necessary
The effort you put into early market engagement should be proportional to the size and complexity of the product or service you're procuring.
It's typically used when there is uncertainty about the market's ability to meet the needs of the buyer. Procurement processes that tend to require more market engagement include multi-stage procurement and early contractor involvement:
- multi-stage procurement includes expressions of interest (EOIs), requests for quote (RFQs), and industry briefings
- early contractor (or operator) involvement is where contractors or operators are engaged in the early stages of a project to provide industry expertise and participate in planning.
Before engaging with the market, consult with your procurement team to ensure that relevant probity guidelines are followed.
Use Template 2 – Early Market Engagement (Environmental Sustainability) DOCX, 248.72 KB to incorporate environmental sustainability considerations when preparing for early market engagement.
Consider whole-of-life costing
Whole-of-life costing assesses the total cost of a product, service, asset, or project over the course of its entire life cycle. This includes acquisition, operation, maintenance, and end- of-life costs.
Whole-of-life costing can be used to justify higher up-front costs that are offset by lower longer-term costs. It can therefore be used to assess overall value for money in procurement evaluation.
Examples:
- Delivery charge
- Insurance and taxes
- Installation and commissioning
- Internal costs associated with changing from the incumbent supplier (which should be identified before tenders are received)
- Licence(s)
- Purchase cost
- Training and support
Examples:
- Costs associated with equipment downtime
- Reduced output with age
- Specialist tooling and labour
- Spare and replacement parts
- Servicing and inspection regimes
Examples:
- Labour
- Materials
- Consumables
- Energy supply and consumption
- Water supply and consumption
- Contract and supplier management
- Transaction costs
- Environmental costs
- Cost of change, for example decision to use alternative methods
- Reporting
Examples:
- Decommissioning
- Safe disposal (for example, recycling)
- Resale
- Ongoing liabilities
- Reinstatement of land or buildings for alternative use
- Statutory compliance
- Administrative costs
When to undertake whole-of-life costing
It's important to put in an effort that is proportional to the potential benefits that can be gained. You should only undertake this costing where there is likely to be costs incurred throughout the life of the good or service, for example ongoing operating and maintenance costs.
Use the Applicability sheet, within Template 3 – Whole- of-Life Cost Calculator XLSX, 1253.21 KB, to help you determine whether whole-of-life costing would be valuable for your procurement.
Calculating whole-of-life costs
To determine whole-of-life costs you need to gather lifecycle information about the goods, service or asset. In the early planning stage, when data and details are less well known, the costs can be estimated using early market engagement, previous contract data or expert advice.
You may choose to only consider whole-of-life costs qualitatively, supported by research, internal engagement, or benchmarking. This can provide insights into potential whole-of-life costs and the benefits of different options.
Use Template 3 – Whole- of-Life Cost Calculator XLSX, 1253.21 KB to calculate whole-of-life costs for your procurement.
Including whole-of-life costing tenders
When whole-of-life costs are integrated into a tender they should be considered separately to environmental sustainability. This means that the whole-of- life costing should have its own assessment criterion.
You should consider different procurement options as part of a whole-of-life costing assessment. You may assess whole-of-life costs by comparing between several different suppliers or by comparing options offered from a single supplier. Considering different procurement options may improve environmental sustainability outcomes and lead to significant whole-of-life cost savings, for example a more energy-efficient product that saves on electricity bills and greenhouse gas emissions.
Benefits of including whole-of-life costing in tenders
The purchase price of a product is only a fraction of its total lifetime costs. The core advantage of whole-of- life costing is that it enables comparisons between long- term costs, beyond the initial purchase price. For example, a low-cost vehicle for a transport project may be cheaper at the acquisition stage but have higher maintenance costs over its lifetime. Whole-of-life costing calculates the total cost and identifies the most cost-effective long-term option.
Step 3: Finalise your procurement strategy
- Embed outcomes from the Plan stage into your procurement strategy.
- Consider different procurement types and methods.
- Explain how environmental sustainability will be managed.
- Set key performance indicators (KPIs).
Step 3 is the final step in the plan stage. At this step you summarise the environmental sustainability risks and opportunities, market capability and document your procurement approach. Use the procurement strategy template DOCX, 1572.68 KB to help you finalise your procurement strategy.
Embed outcomes from the plan stage into your procurement strategy
When developing your procurement strategy, you should include:
- applicable regulations and policies
- environmental objectives
- outcomes from early market engagement
- key environmental sustainability risks and opportunities identified during steps 1 and 2
- high-level evaluation criteria that tenderers will be assessed against.
Consider different procurement types and methods
Your procurement method (for example, expressions of interest, open tender, early contractor involvement) and contract type have implications on how environmental sustainability requirements and opportunities are managed. For example, more collaborative contract models often allow for incentives and innovative alternative solutions.
Explain how environmental sustainability will be managed
The procurement strategy should outline how environmental sustainability will be incorporated through the source and manage stages of your procurement. This will be based on your understanding of risks, opportunities and market capability developed under steps 1 and 2.
Set key performance indicators (KPIs)
KPIs will help you manage suppliers and achieve the desired environmental sustainability outcomes. KPIs should be:
- defined in your procurement strategy
- embedded as a contract clause
- monitored throughout the duration of the contract.
KPIs will differ depending on the type of contract. The Procurement Methods Guidelines provides an overview of different contract types for construction projects.
Use Template 4 – Setting Environmental Sustainability KPIs DOCX, 242.36 KB to help you develop KPIs.
Principles for setting KPIs and managing suppliers
- Balance the effort of managing suppliers with the benefits to be gained.
- Consult with internal stakeholders to align KPIs with business priorities.
- Aim for 10 KPIs across the whole contract, including environmental sustainability KPIs.
- Select a mix of quantitative and qualitative KPIs.
- Encourage digital and automated data collection, aggregation and reporting.
Templates supporting the plan stage
Use Template 1 to identify environmental sustainability risks and opportunities for your procurement. It's necessary to identify, assess and treat risks and opportunities during the procurement process. By identifying potential risks you can formulate a plan to mitigate them. Similarly, identifying opportunities allows you to improve the overall outcome of the procurement process.
Use Template 2 when preparing early market engagement activities. We suggest 5 activities to prepare for early market engagement:
- consider risks and opportunities
- undertake desktop research
- define objectives
- consider best methods
- integrate findings into the overall procurement’s early market engagement approach.
The purchase price of a product can sometimes only be a fraction of its total lifetime cost. Whole-of-life costing enables comparisons between long-term costs, beyond the initial purchase price.
Template 3 can be used to conduct a whole-of-life costing exercise on your procurement options or preferred choice. The assessment will determine whether the options fit within the cost constraints of your agency.
Use Template 4 to develop key performance indicators (KPIs) to manage supplier performance. It provides step-by-step information on how to prioritise environmental objectives and define KPIs – buy NSW recommends aiming for 10 KPIs across the whole contract (approximately 2 environmental sustainability KPIs).