Examination of Witnesses (Questions 120-139)
9 MARCH 2005
DR PAUL
LEINSTER, MR
MARK YEOMANS
AND MR
CHRIS BROWNE
Q120 Chairman: So it is specific to the
Environment Agency?
Dr Leinster: Yes, this particular
bit of guidance.
Q121 Chairman: It is not as though the
government sends out guidance to all sorts of agencies and the
Environment Agency is the one that takes this particular bit of
guidance more seriously than others?
Dr Leinster: No. This is specific
to us.
Mr Yeomans: In respect of our
own environmental performance we wish to support and promote good
practice. We realise that the most significant environmental impact
surrounding our own activities is incurred through our consumption
of materials and services, specifically the procurement activity
of the business where our spend approaches £500 million per
annum. That has been the driver behind us seeking to set best
practice. It is worth noting that the Agency and its predecessor
organisations commenced work on environmental and sustainable
procurement around 11 years ago when there was very little published
process in this area. There was a lot of promotion from an academic
perspective of the need to address the issue but there was very
little in the way of management tools to invoke action within
an organisation to show people how to do this work.
Q122 Chairman: What are the benefits
as you see them of this type of procurement approach? Is it financial
or environmental or both, and, if so, in what measure of each?
Mr Yeomans: The way in which we
would express our view as to why you would do sustainable procurement
is probably a wider question. Our benefits have been around the
achievement of 100% renewable energy to our business. We buy biodegradable
oils and 100% of the computers that we use are recycled or reused.
On the wider question as to why do sustainable procurement, there
is a direct link between consumption and climate change. Obviously
we have Kyoto commitments. If you look at the procurement risks
to the wider public sector, and public sector organisations in
particular, you can look at the risks to the supply chain, the
need to ensure continuity of supply, where you may be able to
reduce your supplier dependency on products that have a high environmental
impact and may not be sustainable in the longer term. There is
a reputational issue for a lot of private sector organisations,
with some high profile cases, and of course the Environment Agency
seeks to protect its reputation as well. It increases the buyer's
understanding of the supply chain because it forces the buyer
to look at the impacts associated with the particular products
or services being purchased and, of course, it means that we look
at cost and risk. There is a very strong link between how we invest
our money and whole life cost.
Q123 Chairman: Do you think as a result
of this policy, that you more than almost anyone else in the public
sector have pursued virtuously and rigorously, you are paying
more than you would otherwise be paying?
Mr Yeomans: Some years ago there
was a very strong issue around the cost premium associated with
buying green goods but the term "green goods" is not
as widely used nowadays as it was. The Agency has found that that
has been less the case as we have moved more into lifecycle costing,
that is, whole life costing, in particular when we are buying
goods or services that consume energy. We have been able to move
the emphasis away from a unit price requirement and more onto
the overall costs of the product in use. That is not to say that
there are not on occasions cost premiums that we incur by taking
the most sustainable route.
Q124 Chairman: And you have managed to
persuade your paymasters at Defra and, via them, the Treasury,
that this is good practice?
Mr Yeomans: We look at the efficiency
programme of the Agency in respect of its procurement activity
and we seek to offset those areas where we incur a price premium
against the overall efficiencies of procurement within the business
and we are in positive balance, I would say.
Q125 Chairman: You touched just now on
the early absence of a methodology to evaluate all this work.
Did you develop your own methodology or did you look at examples
from elsewhere, whether they are in the public or private sector
or maybe overseas?
Mr Yeomans: When we first started
to look at this area there was nothing in relation to process
within a purchasing department that people could take and utilise
in their day-to-day work. We found some work in Sweden which we
felt was very useful and one of the key messages that we received,
over six years ago now, was just to start, to find the means by
which you can start to take into account environmental and sustainable
impacts in particular contracts, but we soon realised through
the wider view of where we should place our priorities that the
resource in this area was an issue, that we needed to find a means
by which we could identify the areas of activity that we should
look at. In that context we came up with the risk assessment methodology
so we looked at the expenditure portfolio of the organisation
and placed our efforts where our environmental impact was greatest.
Q126 Chairman: What in particular did
you find in Sweden?
Mr Yeomans: I will hand you over
to Chris who did actually visit Sweden.
Mr Browne: When we first started
doing this work we could find very little in the UK that had been
done. The work in Sweden had been done by Gothenburg Energy which
is a power producer in Gothenburg. The key findings there were
around doing some very simplistic risk assessment on contracts,
much like the six questions we presented to you when we came a
week or so ago, very simple, very high level questions that can
be answered in a common-sense way and applied to contracts, but
then building up over time as you learn from that experience to
more complex questions and starting to be broader about the sustainability
agenda. It was: start simple, but the key message was, stop talking
about it and start doing it, and that was what we took to heart.
Q127 Chairman: What would you anticipate
being the major internal stumbling blocks that other organisations
following in your footsteps would have to cope with?
Mr Yeomans: The perception that
most purchasing professionals would have is that it is an onerous
process to undertake a sustainability risk assessment for each
individual purchase. That probably is an issue within the wider
public sector as well because resources are obviously at a premium
and the purchasing portfolio of an organisation is being viewed.
The way in which we have looked at it is to champion the approach
and to focus on the areas where we have the greatest impact, and
you really do have to make resources available. That is what we
did. We identified two competent procurement managers who were
well respected and would catch people's ear to go out around businesses
to enable them to be heard. So we put in place a process of promotion
within the business.
Q128 Chairman: Is it onerous?
Mr Yeomans: We do not think so.
The way in which the Environment Agency has approached this is
to integrate the sustainable risk assessment into the purchasing
process so that it becomes, as has been said, a fairly simplistic
first level risk assessment. We believe that if perhaps annually
a sustainable risk assessment were undertaken across the expenditure
portfolio of an organisation then during that year the areas that
came out as being high impact should be addressed. You do not
have to do it every time on everything. You need to do it where
it matters and where you can make the greatest difference.
Dr Leinster: It is important,
as Mark said earlier, that you just make a start. You do a small
thing which is achievable and then once you have started and have
got the confidence and you realise this is something that you
can do using a basic risk assessment you can expand the process.
Q129 Chairman: Did it place many demands
on your existing suppliers?
Mr Yeomans: The way in which the
Agency has approached the supply community is again by identifying
those areas where our suppliers along with ourselves can help
us manage these impacts. We have a development programme for our
top 20 suppliers and they are the suppliers who hold significant
proportions of our current expenditure, for example, in construction.
The interesting thing is that once those organisations knew that
they were having to go through an environmental audit of their
management of their own activities, they very quickly were interested
in learning from us. This goes back several years. In recent years
we have found that all of our construction contractors in flood
defence have achieved ISO140001 along with many of our suppliers.
Q130 Chairman: Did it involve ditching
some suppliers if they were not able to meet the new standards
you required?
Mr Yeomans: We do not recall a
situation where we have ditched an existing supplier.
Q131 Chairman: On those grounds?
Mr Yeomans: On those grounds.
We have influenced existing suppliers to address those issues.
Chairman: That is very interesting.
Q132 Joan Walley: I am finding it a bit
difficult to follow what you say means in practice. In response
to the replies you have just given to the Chairman's questions
can you give me a little bit of the detail of the issues where
you have been getting suppliers to change in respect of procurement
policy? Can you give me a tangible example?
Mr Browne: The main focus of the
supplier development programme has been around trying to get suppliers
to improve the whole environmental management in their organisation.
Typically what will happen is that we will go in and do an environmental
audit of the suppliers' purchases.
Q133 Joan Walley: Which suppliers are
you talking about?
Mr Browne: It changes year on
year. This year it is W S Atkins, Mowlem Construction, McAlpine
Construction, Jacksons Construction, Computacentre, who provide
IT, Hitachi Capital, who provide lease vehicles, etc.
Q134 Chairman: The construction companies
are mainly doing flood defence work, are they?
Mr Browne: Yes, but obviously
companies like McAlpine also do housebuilding and a whole raft
of other things. We start off with an environmental audit of their
management system. With the construction companies we augment
that by doing an environmental audit on the site so that they
can see how the policy at the centre translates to action on site,
and sometimes there is a mismatch.
Q135 Joan Walley: Can I just interrupt?
You are not talking necessarily about companies that you are employing
to do work for you? You are talking about employers who are being
contracted to do work for other contractors almost?
Mr Browne: The companies are doing
work for the Environment Agency.
Q136 Joan Walley: On construction?
Mr Browne: Yes. Just to give you
an idea, the Agency spends about £500 million a year and
those top 20 companies account for about £300 million of
that spend. For example, with all the construction companies we
agreed with them three years ago that they would get ISO140001
within two years and we provided them with support mechanisms
to enable them to get that.
Q137 Joan Walley: You said housebuilders.
Mr Browne: A company like McAlpine,
as well as building flood defences, also do housebuilding and
a whole range of other construction projects. Another example
is our office furniture contractor. When we did the audit we identified
that they had a lot of waste; they were generating more waste
than was typical for the industry, so again we examined the production
process with them and we identified that they were not making
best use of their cutting processes with the timber. We put them
in contact with WRAP and between the two of them they managed
to improve the whole process, reduce their waste and they saved
about £100,000 a year. There is a whole mixture of processes
that we do. The other thing we do, because we do not have resources
to do that with all companies, is that we flag companies to Envirowise.
Envirowise offer free consultancy to companies to improve their
environmental performance.
Mr Yeomans: From the point of
view of consumption we have also promoted the purchase of 100%
renewable energy for the Agency which has been interesting because
we have ended up having to change the way we buy in order to achieve
that, in other words, chasing the capacity for renewable energy
within the market place.
Q138 Joan Walley: Again, in response
to the previous questions to the Chairman, you talked about risk
assessment. Could you say why it is so important to include that
because you talked quite a lot about it in the evidence you gave
us?
Mr Yeomans: Any organisation that
has a fairly broad portfolio of expenditure needs to have a mechanism
by which it can assess where it should place its resources. In
the way in which we operate, and I would imagine it is the same
with most private sector businesses, is that we undertake a review
of the different expenditure areas, identify where they are making
the greatest impact and we put our procurement expertise into
those areas, working with our suppliers and doing our analysis
of the market place and alternatives that we buy to reduce our
impacts. That is certainly the way that we have adopted risk assessment
principles within the way we purchase.
Q139 Joan Walley: Other than yourselves
who else is using this? Would local authorities be using this?
Mr Browne: Do you mean precisely
using our approach or just the basic risk assessment methodology?
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