Plan for pre-qualification
Pre-qualification can support sustainable procurement, especially for recurring, large, complex, or high-risk purchases. There are two general approaches. First, pre-qualification with no limit on the number of qualified suppliers allows you to identify and build a large, sustainable supply pool before solicitation.
Second, pre-qualification with a limit on the number of qualified suppliers (also known as pre-selection) is a way to shortlists a certain number of suppliers based on minimum sustainable qualification criteria for the procurement concerned.
Pre-qualification is an effective way to exclude suppliers who do not align with your sustainability objectives. However, it does require more time and creates a smaller supplier pool. This makes it less suitable for, new sectors or innovative categories where there is already limited number of suppliers, or procurements where time is limited. For public procurement, always check local legal frameworks regarding pre-qualification.
EXAMPLE: Disney avoids sourcing in high-risk regions
Disney has created a predefined list of countries from which its products can be sourced to avoid regions with a high risk of child and forced labour. The list is based on the World Bank Governance index, the US Department of Labour's List of Goods Produced by Child Labor or Forced Labor, and the US Department of State's Trafficking in Persons Report.¹, ²
Pre-screen suppliers against your minimum sustainability criteria
There are many methods for pre-screening suppliers against your minimum sustainability criteria. For instance, designing a supplier questionnaire (SQ) or pre-qualification questionnaire (PQQ). Or establishing minimum criteria for suppliers based on their: values (such as including sustainability in their mission and vision statements), commitments (such as public sustainability goals and targets), or efforts to improve (e.g. policies, processes, certifications such as ISO 14001). You can also pre-screen suppliers by reviewing their track record on sustainability, such as demonstrated compliance with environmental and social regulations or demonstrated performance improvements.
Where possible, gather enough information to rank each criterion on more than a yes/no basis. For example, if a pre-qualification criterion is having an "action plan for net zero by 2050," request details on the goal and how it will be achieved.³ Make sure to also clearly outline the information and evidence you will accept for each criterion.
EXAMPLE: Patagonia uses a "4-Fold" approach to screening⁴
Patagonia has implemented a "4-fold" approach to new supplier screening based on (1) sourcing, (2) quality, (3) social, and (4) environmental standards. The Social and Environmental Responsibility (SER) supply chain team, alongside the sourcing and quality teams, all have full veto power over onboarding a new factory. This process screens out suppliers who cannot meet the "4-fold" standards.
Assess suppliers based on pre-qualification submissions
Verify suppliers’ eligibility to bid on your contracts by dedicating a portion of your pre-qualification criteria weighting to environmental and social factors. Make sure to also assess the credibility of supplier performance claims and commitments. For example, you may review professional qualifications of staff, certifications, past performance, references, and product samples. In some cases, where a promising supplier does not meet your pre-qualification standards, you may choose to give them the opportunity to improve performance. Additional ideas on verification can be found under the SELECT pathway in the Evaluate & Validate practice.
EXAMPLE: Selecting suppliers with circular commitment in The Netherlands⁵
University Medical Center Utrecht (UMCU) issued a circular tender for office furniture, using selection criteria that assessed supplier commitment to circularity. This included the compatibility of the supplier's vision with UMCU's vision, the degrees to which the supplier has integrated its vision into action and how it sees its role in a circular contract. UMCU’s criteria also outlined specific, measurable, achievable, relevant, and time-bound (SMART) goals
to further assess commitment and compatibility.
EXAMPLE: IKEA supports suppliers in reaching minimum standards⁶
The IWAY Standard is IKEAs code of conduct (CoC) for suppliers. It sets clear expectations and ways of working for environmental and social impact. IWAY encourages openness and honesty about areas that require progress and supports suppliers to continuously improve by giving them time to get up to the minimum standard.
EXAMPLE: UK Government net zero commitment pre-qualification criterion⁷
The UK government set a sustainability pre-qualification criterion for contracts exceeding a spending threshold of £5 million. To be eligible to bid, suppliers must demonstrate a commitment to net zero emissions by 2050 and have published credible carbon reduction plans for achieving the goal.
Support supplier diversity
Pre-qualification can also help to enable diverse supplier types such as SMEs, local businesses, social enterprises, and Indigenous-owned businesses to participate in the contract. You can, adjust functional requirements based on capability (for instance, volume and timing for delivery), make diverse business attributes a minimum requirement and, crucially, ensure the pre-qualification and bidding process is not too long and complicated. You can also encourage and support sustainable practices through coaching or feedback calls with diverse suppliers who may not fully meet pre-qualification criteria.
EXAMPLE: University uses pre-qualification to accommodate diverse business types
A Canadian University had a large five-year catering contract which required vendors to have a license to serve alcohol. This requirement prevented two desired catering suppliers (an Indigenous caterer and a social enterprise) from bidding on the contract or catering for small events where alcohol was not required. The University worked around this by using a pre-qualification process to approve these two additional suppliers for catering services for smaller events where alcohol was not served.
Footnotes
1 https://thewaltdisneycompany.com/app/uploads/2019/06/ENG_Disney_ILS_Manual.pdf
2 https://impact.disney.com/app/uploads/2022/01/Permitted-Sourcing-Countries-Policy-2022_07_20-PSC-update.pdf
3 https://www.copper8.com/wp-content/uploads/2018/10/Circular-Procurement-in-8-steps-Ebook.pdf
4 https://eu.patagonia.com/es/en/our-footprint/working-with-factories.html
5 https://www.copper8.com/wp-content/uploads/2018/10/Circular-Procurement-in-8-steps-Ebook.pdf
6 https://www.ikea.com/global/en/our-business/how-we-work/iway-our-supplier-code-of-conduct/#:~:text=IWAY%20is%20the%20IKEA%20way,providers%20that%20work%20with%20IKEA.
7 https://www.gov.uk/government/news/companies-bidding-for-major-government-contracts-face-green-rules