Evaluate & Validate

Reward suppliers that are going beyond the minimum criteria

If permissible and where this will improve the quality outcomes or value of your procurement, allocate a percentage of your award criteria or scorecard weighting to sustainability approaches that go beyond the minimum outlined in your qualification and specifications. For example, you may reward companies that have made progress on sustainability or set public goals along with credible action plans to achieve them. Or, if during qualification you ask for a minimum level of prior project experience in a sustainable method, then you could award additional points based on additional depth of experience or additional skills of the delivery team. You could also award extra points for socially responsible employer practices by asking for evidence of the payment of living wages, supporting access to the labour market for vulnerable people, or training and upskilling of staff in sustainability. When doing this, document the rationale behind awarding the additional points.

Consider Total Cost of Ownership (TCO) and Life Cycle Costing (LCC)

It is important to consider not only the initial price but the entire picture of costs. This is where Total Cost of Ownership (TCO) and Life Cycle Costing (LCC) can play a role. TCO involves looking at all expenses over the product's lifetime, like maintenance and energy use and even disposal, helping you make decisions that save more in the long run. LCC takes this a step further by including environmental and social impacts. To use TCO and LCC, clearly define your evaluation criteria. Assign numerical values to both direct costs and potential externalities, like environmental impact or disposal costs. Then, during the supplier evaluation process, assess products or services based on these comprehensive criteria. This ensures you choose options that make financial sense upfront, but also align with your sustainability goals and have lower hidden costs over time.

EXAMPLE: Walmart creates category-specific sustainability scorecards

Walmart’s Supplier Sustainability Assessment (SSA) Scorecard consisted of 15 questions covering four topic areas, energy and climate, material use, natural resources, and community. Working with The Sustainability Consortium (TSC) the company develop well-researched category-specific questions for its scorecards for 100 categories. This provided a much more comprehensive assessment of sustainability performance. For instance, scorecards for laptops include questions on factory workers’ chemical exposure; while the laundry detergents category considers cold-water-wash messaging.^{1 2 3}

Put a price on negative sustainability impacts

Consider putting a price on the social and environmental impacts of the product or service, and include them in the assessment of bids (for instance, include a price for carbon), You can employ methods such as True Costing,^{4 5} Social Life Cycle Costing (S-LCC), or Environmental Life Cycle Costing (E-LCC) to identify the negative environmental and social costs of a product or service.⁶ For instance, you can calculate the price of carbon associated with a product or service by multiplying total associated emissions by a carbon price.⁷ When using these methods, procurement documents should outline the calculation method and required data to ensure fairness and transparency.

EXAMPLE: Global brewers estimate the true cost of water usage

Brewing and beverage companies estimating water usage costs, inclusive of energy and chemical inputs, found their total spend was 2 to 4 times higher than expected. By accounting for broader costs, they developed a financial justification for water conservation and reuse opportunities.⁸

EXAMPLE: How A. P. Møller-Mærsk differentiates good costs and bad costs

“Criteria such as price will always be relevant. The way that we look at it though is good cost and bad cost. If there’s something that costs more because it’s driving the sustainability agenda forward, then we see this as a good cost. It doesn’t mean that we’re not discussing prices and that we’re not adding arguments to our negotiations, but we look at it from the total cost of ownership and the total value of ownership perspectives and calculate what possible positive advantages could come from the extra costs.”⁹

Validate the credibility of supplier sustainability claims

You will need to validate and verify the sustainability claims of the proposals and bids by seeking clarification on proposals and making performance data readily available. For instance, if you are asking for a recycled product or materials, make sure the supplier has provided evidence such as ISO type I eco-label, technical files, or test reports. If needed, and proportional to the procurement scale and impact, request independent verification of the supplier's sustainability claims, such as third-party audits or certifications from recognised sustainability organisations, analysis of supplier sustainability data, such as greenhouse gas emissions, energy use, and waste generation, and/or review of the environmental and social performance of the bidders' suppliers to ensure that they meet the sustainability requirements set out in the tender documents.