Sustainable Supply Chain Management
Policy & Procedures
|2. Enablers of sustainable procurement||3|
|3. Benefits of sustainable procurement||3|
|5. Key considerations for MH||5|
|6. Procurement Process||6|
|7. Measurements and results||7|
|9. Establishing governance roles||8|
|10. Establishing risk||9|
|11. High spend and key nominated purchases||9|
|12. Documentation, monitoring and reporting||10|
Sustainability is a key business objective for Mountain Heritage Hotel & Spa Retreat (“MH”). It is an essential component in the way we operate. Our sustainability policy identifies the areas in which we focus, namely:
• Energy intensity improvement
• Carbon footprint reduction
• Water use reduction
• Waste reduction
• Sustainable supply chain management (“SSCM”)
• Team member engagement and awareness
SSCM refers to our sustainable procurement procedures. The purpose of SSCM is to ensure:
• A demonstrated commitment to best practice in environmental management via the supply chain.
• MH is engaging with reputable suppliers to identify and procure whole-of-life environmentally sustainable products and services. This includes upstream production impacts and downstream disposal and product stewardship.
• Suppliers comply with relevant legislation, regulations and standards including labour standards and conditions.
• MH is supporting community based suppliers wherever possible.
• Procurement and supplier risks are identified and addressed.
Increasingly, businesses are recognizing the importance of strong governance, corporate social responsibility and the link between economic, social and environmental performance. One way to achieve this is through establishment of sustainable supply chains. This requires MH to engage with suppliers and contractors to encourage and demonstrate good corporate social responsibility and to minimize adverse environmental and social impacts. Benefits to MH will include environmental improvements, reduced risk exposure and may include reduced costs.
A key requirement of SSCM is effective stakeholder engagement. MH will communicate its objectives, expectations and policies, and work with suppliers to ensure these are met. In the instances where MH is seeking to engage new business, these expectations should be clearly articulated.
Outcomes sought include reduced energy and water consumption in the manufacture of the goods, the supply of goods that reduce water and/or electricity consumption, reduced carbon emissions, a reduction in packaging and waste and demonstration of commitment to environmental and corporate social responsibility and assurance that sound workplace policies are employed.
2. Enablers of sustainable procurement
Enablers that facilitate successful adoption of a sustainable supply chain include:
Strategy - sustainability must be part of MH's strategic thinking and be incorporated into MH's Strategic Plan as a clearly articulated objective. Much of sustainable supply chain management concerns business or operational continuity. As MH seeks to attain longevity, the organization needs to consider how supply chain management can assist to achieve this.
Organizational culture - a culture of sustainability within MH and across the MH supply chain needs to be deeply ingrained. MH needs to engage with stakeholders and articulate its expectations to work with, and influence suppliers and contractors. Capacity building within MH will eventually flow through the supply chain.
Transparency - the trend of businesses and government requiring greater consideration of environmental and corporate social responsibility needs to be adopted by MH. Whilst MH will look to suppliers and contractors to demonstrate these principles, our customers too, will increasingly expect MH to deliver its services with greater consideration of environmental, social and economic benefits e.g. types and use appliances, solar hot water systems, greater choice and flexibility in community care packages, methods to create efficiencies and cost savings.
Risk management - a critical factor in sustainable supply chain management. Avoiding supply chain disruptions must form part of the risk management strategy. Risk management should extend to preparing for product recalls or end of life disposal. Reducing the potential for headline risk is another key strategy i.e. ensuring MH does not forms relationships with disreputable suppliers and companies and ensuring business transactions are ethical and beyond reproach.
3. Benefits of sustainable procurement
The benefits of sustainable procurement which include:
• Reduction of adverse environmental impacts arising from procurement action including reduction of waste to landfill quantities, reduced energy and water use, reduction of greenhouse gas emissions and pollution, saving of money through material use and reduction in consumption of natural and processed resources.
• Reduced risk through greater due diligence.
• Efficiencies- cost reductions through energy efficiency, reduced disposal costs and reduced risk/exposure.
• Stimulation of innovation -increased availability of environmentally sustainable products and services, market expansion for sustainable goods and services, cost lowering, increased accessibility through engagement with suppliers and manufacturers and better design of goods and services to meet customer expectations and requirements.
• Marketing - increased marketing opportunities and benefits. Provides a point of difference amongst the sector, increases positive reporting, good news stories and reduces negative publicity associated with unsustainable product purchasing.
MH is committed to achieving stronger sustainability outcomes through consideration of environmental, economic, governance and social parameters throughout the MH supply chain. A number of steps will need to be followed. The objectives of undertaking sustainable supply chain management are outlined below. Figure 1 shows the five key processes that are involved in meeting the principle objective of a sustainable supply chain. The following sections of this manual give effect to these five processes. The objectives include:
• Assurance that goods and services procured are done so with minimal or reduced environmental and social impact.
• Periodically review the procurement process to identify inefficiencies and reduce waste/costs.
• Promotion and encouragement throughout the supply chain to minimize resource use.
• Internally identify high risk areas within the supply chain from a financial, environmental and marketing perspective; and through internal consultation manage these risks.
• Develop positive relationships with key supply chain stakeholders to encourage continual improvement in the management of environmental and social impacts.
• Undertake ongoing MH wide education on best practice sustainable supply chain management including regular review and updating of preferred product inventories and suppliers.
The figure below shows the 5 steps to achieving a sustainable supply chain.
5. Key considerations for MH
A number of key principles are required to be considered in developing a SSCM framework. Where gaps exist in meeting these principles, a process of continuous improvement will ensure these gaps are filled over time. Key considerations of a best practice model include:
• People – The Procurement and Sustainability Managers have principle responsibility to lead MH in SSCM. For relevant staff (including senior management and facilities maintenance staff) sustainable supply chain/procurement awareness and experience should be included in position competencies, position descriptions and selection criteria. Annual operational plans and performance reviews should include consideration of sustainable supply chain management and actions that give effect to achieving incremental improvements in achieving relevant outcomes.
• Policy, strategy and communications - Key staff (procurement, risk, maintenance, sustainability) need to be aware of the purpose and objectives of adopting SSCM and understand their roles in implementing SSCM responsibilities.
Risk management, process integration, marketing, supplier engagement, measurement and review need to be recognized as key operational issues of SSCM. Relevant external stakeholders must be made aware of MH expectations including prospective tenderers and contractors. Comprehensive regular monitoring and reporting (internal and external) regime should be established and supported by senior management e.g. change in procurement of white goods to more energy/water efficient choices, percentage purchase of copy paper with recycled content, reduced packaging, avoidance of product recall as a result of sound risk management etc. The Sustainability Manager will be required at appropriate times to reinforce the link between SSCM and MH’s strategic plan.
6. Procurement Process
Contracts should be won on value for money, not lowest price.
Suppliers should have an understanding of MH’s sustainability policy, principles and expectations and demonstrate compliance with MH’s requirements or a preparedness to achieve compliance within an agreed timeframe.
The Procurement officer will be required to ensure relevant information is supplied to prospective tenderers. The ability for a tenderer to demonstrate compliance with MH’s requirements should be used in decision making when awarding contracts.
Examples where sustainability principles should be included in tender documentation include seeking to engage architects for building design, contractors associated with all forms of construction and waste management, suppliers of electronic and electrical goods and hardware, supply of chemicals and detergents and building/asset maintenance.
Targets and objectives for suppliers will be identified and MH will assist contractors to meet these (where possible improvements and benefits should be measured). The Sustainability Manager will be responsible for establishing targets and objectives. Life cycle analysis should be undertaken and documented for major purchases (high cost and/or high risk) particularly in construction and procurement of ICT & white goods.
7. Measurements and results
Detailed appraisal of key sustainability impacts of procurement should be identified and measures implemented to manage the identified high risk impact areas.
Knowledge sharing and comparisons with peer organizations should be undertaken to drive continuous improvement Benefits of sustainable procurement when clearly evidenced should be promoted and marketed.
The following procedure is designed to provide guidance for staff involved in supply chain management and procurement. The SSCM Plan should be viewed as an overarching and complimentary document that provides guidance on supplier engagement, environmental improvement, supply chain risk management, social and ethical requirements of suppliers, and regulatory compliance.
The SSCM Plan should be read in conjunction with the MH Sustainability Policy and includes:
• Identification and role of key nominated personnel
• Determining value for money - Procurement decisions for high risk, high spend and key nominated purchases are to be based on value for money over the life of the good or service. Value for money purchasing will require researching the market and making informed decisions. Part of this process will include stakeholder/supplier engagement and should include consideration against criteria including a business’ ability to demonstrate compliance with legislation and specifications, whole of life cost, availability (or not) of supplier support, identification and documentation of environmental impacts in the manufacturing and operation of the product, length of warranty, energy/water efficiency and social benefits including ease of use. In some cases the selection of environmentally preferable products may be more expensive. MH should give strong consideration to procurement of the more expensive product or service where it can be easily and readily demonstrated that on balance, the environmental benefit outweighs the additional monetary cost. Principle responsibility for determining 'value for money' will rest with Manager of Procurement - this responsibility will include documenting the criteria to establish value for money and for ensuring relevant personnel understand their responsibilities in exercising this requirement.
• Establishing environmental goals - MH should only engage suppliers who comply with all relevant environmental legislation at a minimum. Where necessary MH will need to ensure that environmental credentials of suppliers are evidenced (as far as legally practicable this could be included as an essential criteria in the tender documentation) prior to finalisation of contract documents or supplier agreements. Suppliers should be provided the opportunity to submit environmentally friendly alternatives to the specified product or service. In doing so, specifications and relevant standards are required to be met. Where relevant, MH will request low emission and/or low embodied energy options for goods and services to be procured. Equally, MH will seek and give preference to more sustainable alternatives including low toxicity or non-toxic products.
Where relevant and as far as legally required, the supply chain will be expected to subscribe to product stewardship or extended producer responsibility principles (and formal associations) and/or the National Packaging Covenant.
9. Establishing governance roles
To drive sustainable principles, MH will engage with key supply chain stakeholders to ensure that expectations are clearly articulated and incorporated into the supply chain.
Criteria will be included in contracts and tender documentation for identified high risk, high spend or key nominated purchases in the first instance. The inclusion of specific governance criteria in tenders and contracts assist in ameliorating risk to MH within the supply chain and forms part of the SSCM Code of Practice.
MH will seek suppliers who have evidenced systems and processes in place that promote safe and healthy workplaces including no child or forced labour, provision of fair pay and working conditions and a workplace free of discrimination of any kind. MH seeks to do business with service providers who can demonstrate compliance with legislation and who can demonstrate that continuous improvement is an accepted and adopted part of the organization.
Where suppliers cannot demonstrate compliance with these points, the supplier will be provided the opportunity to work toward achieving them within identified timeframes. As part of its commitment to good governance, MH will work collaboratively with suppliers to develop systems and processes that satisfy MH’s requirements.
The Manager of Sustainability has the principle responsibility for ensuring governance issues are embedded in supply chain documentation and for ensuring these principles are reviewed and remain current The Procurement Manager will have responsibility for contributing to and ensuring governance is considered during the procurement process including tender and contract documentation.
10. Establishing risk
There are four components to addressing risk within the MH supply chain:
• Establishing what the areas of risk are within the supply chain (e.g. reputation, cost, legislative).
• Establishing the level of risk (high, medium, low) to MH.
• Documenting risk
• Managing risk
Principle responsibility for overseeing risk management within the supply chain rests with the Manager of Procurement.
11. High spend and key nominated purchases
Apart from high risk suppliers, MH will be responsible for identifying high spend and key nominated purchases and will target these service providers in the first instance. The objective is for MH to engage those suppliers considered by relevant managers as significant from a financial or supply perspective.
Determination of key supply chain issues was made at an initial meeting of the above personnel. Some examples include cost, reliability of supply, and life expectancy of products, energy efficiency and ability to establish environmental benefit.
The Manager of Procurement, in consultation with key internal staff will identify service providers and will begin a process of engagement. Initial correspondence to identify relevant senior staff members of supplier organizations will be followed by formal written correspondence. Correspondence is to clearly outline MH’s commitment toward achieving sustainable outcomes and clear demonstration of MH’s expectations. Correspondence will include requests for formal advice and demonstration of the supplier's commitment toward environmental and governance matters, including policies, procedures and formalised systems. In its correspondence, MH will include a preparedness to work with the supplier to achieve these desired outcomes.
12. Documentation, monitoring and reporting
A formal documentation and reporting framework will be required to be established. In the first instance this will focus on the targeted key service providers and will be expanded upon over time. The purpose of documenting and monitoring will be to identify improvements to MH's supply chain and procurement process. Improvements through service provision will include but not be limited to, reduced adverse environmental impacts, lower carbon footprint, greater awareness of sustainability issues, and reduced consumption of unsustainable/toxic products and stronger more effective relationships with service providers.
Responsibility for ensuring formal documentation, monitoring and reporting will rest with the Managers of Procurement and Sustainability. Responsibilities will include developing of a matrix of key suppliers which documents each provider's bona fides consistent with MH’s procurement requirements. Where gaps exist MH will work with suppliers and this too will be included in the reporting framework. Areas of improvement will also be documented and reported.