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Quality, Risk and Procurement Management- Sustainable Procurement Practice in Australia

4586 words (18 pages) Business Assignment

1st Dec 2020 Business Assignment Reference this

Tags: Business AssignmentsBusiness

Introduction

The paper aims to provide a brief view of the sustainable procurement practices of Australia. Sustainability generally encompasses the economic, social and environmental factors, whereas sustainable procurement is the process that makes a positive impact on these factors by minimizing their adverse impact. Thus sustainable procurement practices are necessary to develop a positive aspect in the whole atmospheric process. The paper will also discuss the principle and key concepts of sustainable procurement along with the drivers as well as the focus of sustainability. As per the Australian government, sustainability plays an essential role in procurement practices as it provides benefits to both organization and society by influencing them to reach their goals and reduce their risks too. Considering this fact in Australia, some rules and regulations are followed in terms of sustainable procurement practice, and this will be briefly discussed in this context. Moreover, the role of corporate social responsibility and the role of sustainable procurement in the public sector will also be demonstrated in this paper.                  

Literature review

Sustainable procurement practice

In the words of Bellantuono, Carbonara and Pontrandolfo, (2017), sustainable procurement practice is to consider as the guideline of sustainability that helps in deciding by encompassing social, environmental and economic elements of the Triple Bottom Line (TBL). It is demonstrated as the sustainable development indicators that influence relatively more-advanced atmospheric practices so that it creates a positive impact on the socio-economic factors of the society. For the sustainable procurement practices, Triple Bottom Line (TBL) is considered as the paradigm which helps the organization as well as society to meet their needs of present and the future goals by considering all the three factors. In Australia, not only TBL but the sometimes quadruple bottom line (QBL) is also followed in terms of maintaining a sustainable procurement practice in the organization (Ghadge et al., 2019). In this QBL, government and leadership is the additional factor that also helps in making a positive impact on society.

According to Meehan and Bryde, (2011), sustainable procurement practice provides an opportunity to add more value in the business by improving their performance, productivity, accessing value, enabling communication between stakeholders and suppliers, purchasers and it also encourage innovation of the products and services of the firm. Hence overall, it provides a positive impact on the organization by increasing their status and value in the market where it operates the business. As stated by Barclay and Miller (2018), procurement management plays an important role in maintaining sustainable procurement practices in the organization. Procurement management makes the contract in such a manner that it must be beneficial for both the parties. The procurement management role is to ensure that both the parties receive good results in return as well as after the completion of the project. Thus with the help of this procurement management, the firm maintains its sustainable procurement practice approach with that of their contractors of the projects and several stakeholders.

In the opinion of Popova, Tomashevska and Popova, (2017), the key role of sustainable procurement practices is to look outside the boundaries of the firm so that they can also improve their green supply chain management practices. Hence this practice not only enhances the sustainable development in the organization but also influence the management to think outside the box that can overall makes their business stable in the current operating market. However, many researchers demonstrated that maintaining a sustainable procurement practice in the organization is a complicated process as it still needs infancy and along with further research has to be done on this aspect of sustainability that helps in building positive procurement practice in the business.

The main difficulties occur when the activities of the management go beyond the boundaries of the organization, and at that time, they cannot fulfil their business needs. As proposed by Naoum and Egbu, (2015), changing external environmental factor is also a reason that reduces the inertia of sustainable procurement practices in the organization. Thus for maintaining a stable environmental aspect, it is important for every organization to make an endorse sustainability environmental schemes by which they easily manage the changing environmental condition without affecting their sustainable procurement practices. In addition, by maintaining the inter-organizational relationships, the firms can improve their sustainability as well as maintain sustainable procurement practice in their business.                                                                          

Principles of sustainable procurement

According to the NSW Procurement Policy Framework (2015), the principle of sustainability procurement are provided below:

  • It helps in adopting the appropriate strategies that should be useful in managing the demand and avoiding the unnecessary activities of the business (Nadeem, Mohamad and Nik Ab Halim, 2017)
  • It makes an accountable impact on environmental, social, economic factors and also on the firm supply chain procedure
  • It provides a transparent procurement process and helps in maintaining ethical behaviour in organization supply chain perspectives (Harris and Divakarla, 2017)
  • It helps in avoiding prejudice and bias in all decision-making process of procurement
  • It influences the organization to respond, consider and respect their stakeholder interests and aware of any violations related  to the human rights and supply chain aspects
  • It also helps in maintaining sustainability objectives by encouraging the firm to innovate their goods and services as per the market needs (Ong, Trireksani and Djajadikerta, 2016)
  • It improves the existing procurement practices by maximizing the sustainable outcomes of the firm and considering the cost benefits of their procurement activities
  • It influences the organizations to continually improve their procurement outcomes and practices by encouraging their supply chain perspectives
  • It minimizes the environmental impacts on the life cycle of every service and good and along with it also lowers the adverse impact of several risks that occur during the production stage of goods                       

Key concepts of sustainable procurement

According to Lim and Loosemore, (2017), the key concepts of sustainable procurement is to maintain a value for money in terms of the products and services of the companies. As per the Australian government, every organization must have to consider both the non-financial and financial benefits and costs of their goods before selling these on the markets. These activities can improve their sustainable procurement practices in their business and also in the Australian market. Another key concept is sustainable development and the environmental management that help in making strategic arrangements for improving the sustainability of the firm and reducing the adverse environmental impacts that affected their business procedure.

In the words of Tang, Ng and Skitmore, (2019), whole-of-life costs and the life cycle assessment are also the concepts that help in enhancing the sustainable procurement practices of the organization in Australia. Whole-of-life costing is the method that provides financial benefits to the organization by which they maintained their sustainability approaches in the business. Life cycle assessment is similar to that of the costing method, and the only dissimilarity is that it provides an international framework that helps in understanding, communicating and quantifying the performance of services, products, assets and processes of the organization. All these key concepts enable the firm to maintain its sustainable procurement practices in their business without facing any issue from the Australian government.                                          

Drivers and focus on sustainability

According to Rimmington, Carlton Smith and Hawkins, (2006), sustainability helps in reducing the waste, carbon emissions, increasing the diversity prospects, water efficiency, equal opportunities, promotion of well-being so that the people can create a stable, stronger and efficient atmospheric condition in the society. The main focus of sustainability is to secure the acquisition of services and goods by providing sustainable procurement practices in the environment. In addition, it also ensures that the society, as well as the environment, can get the least impact throughout the whole life cycle of their product range. As evaluated by, the focus of sustainability is to make sustainable development so that every organization, as well as people, can fulfil their aspirations and desires without compromising it. In order to make a sustainable development, it is essential for the firm to follow some policies and standards and make some target setting, provide some training to the staff members. If the organization follows these aspects, then it easily improves its sustainability rate and also helps them to maintain the sustainable procurement practices of their business. 

In the words of Walker and Brammer, (2016), corporate social responsibility is one of the drivers of sustainability that enable several organizations to maintain their business competitive advantage and also help them to deal with the external pressures of the global world. In addition, it also helps the companies to handle their consumer demands and expectation over the firm. Thus with the help of this driver, the firms become able to maintain their sustainable procurement practices in both local and international markets. As cited by Simpson and Power, (2016), customer possesses a small knowledge on sustainable development, and due to this reason, the firm faces some issues in their business. For the presence of such aspects, the sustainability approach of the firm has reduced and hence to improve this condition; it is necessary for the organization to enhance the power of their internal drivers of sustainability. Internal drivers know about doing sustainability-oriented practices, and thus by their help, the firm can improve its sustainable procurement practices and sustainability too.

In the opinion of Mansi and Pandey, (2016), sustainability mainly focuses on reducing the complexities of business by using appropriate procurement strategies. Besides this, the procurement framework focuses on environmental standards only for building a sustainable supply chain procedure that can improve its sustainability agenda. Sustainability also focuses on external collaboration for developing sustainable supply chain practices. According to Zhang et al., (2015), business complexity create a negative impact on the sustainable procurement practices, and therefore proper policy and strategy should be implemented by the firm to reduce the adverse impact. Absence of development by the suppliers creates a potential barrier in the sustainability approach, which affects the procurement practices. In order to reduce the procurement practices should focus on acquiring the correct product at the correct price so that it can increase the consumer interest over the firm. Thus by using appropriate driver, the organizations can improve the overall procurement practices of their business.                                                          

Rules and regulation related to sustainable procurement practice in Australia

The rules and regulation related to sustainable procurement practice in Australia are as follows:

Local Government Act 1993 (NSW) - The individual approaches of the councils of NSW towards the sustainable procurement practice is supported by this Act. Under the Section 55 of this Act, the councils need to implement good governance for the activities of procurement. In the sustainability context, it is sensible to consider social, environmental and economic influences within good governance. Under the Section 8A, this Act has clearly stated to the councils to undertake the principles of environmentally sustainable development properly in the decision making processes. As stated by Bardos et al., (2016), the Office of Local Government of NSW has recognized the significance of QBL and these principles has been explicitly included in several frameworks, especially those related to planning as well as reporting.

NSW Procurement Policy Framework for NSW Government Agencies - This framework gives guidance related to the sustainable procurement. According to Brammer and Walker, (2011), it implies that the commitment of the government for spending public money ethically, economically and effectively is achieved by the sustainable procurement. This framework also implies that it is compulsory to undertake the value of money for the whole lifetime of the goods and the services.  

Local Government (General) Regulation 2005 (NSW) - In order to make sure that the high-value agreements are fairly awarded, the councils of NSW are needed to consider a tender procedure for the agreements with higher than $150,000 or utilize a prescribed service of tendering under this regulation. In the words of Ravenswood and Kaine, (2015), firms like Procurement Australia (PA) and Local Government Procurement (LGP) give support for helping the councils to meet the regulatory obligation that includes setting up contract panels, considering professional growth, executing efficient contract management and accessing consultation services.

Tendering Guidelines for NSW Local Government 2009 - This guideline needs to consider the value of money for the whole lifetime of the goods or the services under the Department of Cabinet and Premier.

Policies and Vision Statements of Local Councils - The mission and vision statements of all the councils of NSW are compatible with the principles which consider the sustainable procurement with the commitment to wisely utilize the funds of the community and deliver the goods and the services sustainably, ethically, economically and effectively (Mansi and Pandey, 2016). 

Role of corporate social responsibility in sustainable procurement practice

Corporate Social Responsibility (CSR) in sustainable procurement practices is basically about the considerations of overall affordability and values for money and contracting firms take environmental, economic and social impacts of their buying activities into account to maximize the positive consequences and minimize the adverse outcomes. As stated by Young, Nagpal and Adams, (2016) as the consumer experience currently driving towards brand loyalty, the firms have begun to concentrate heavily on CSR in sustainable procurement practice. The ethics of the firms are becoming crucial differentiators in the international markets. As the firms are seeking to strengthen their social values, they are focusing on specific features like community, sustainability, fairness and honesty.

The firms are also looking for innovative methods to gain profits by utilizing environmentally and socially responsible ways.  A company with the promise to run the business with great purposes indicates that the company have to walk the talk. As per Fayezi, Zomorrodi and Bals, (2018), the market placement, growth potentiality and public identity of the companies rely on their capability to follow the ethical norms for purchasing, employing and partnering.  For example, if the mission of the company includes an ecologically conscious responsibility to reduce the carbon footprint, then the sustainable procurement team of the company would focus entirely on sourcing non-toxic and sustainable resources from the suppliers those who share the same values.

For integrating CSR within the sustainable procurement practices, the companies must have a clear outline for matching their policies to their values. According to Jenner, (2016), the companies need to equally give priority to the environmental, economic and social impacts together with the quality and price. The firms that carry it better are outperforming their competitors with considerably lower employee turnover, higher monetary rewards, deeper brand networks and more transparent supply chains. It is significant for the contracting companies while buying products, services as well as works to spend funds in such ways so that they can achieve values for the money.

The contracting companies can contribute considerably to meet broader CSR objectives by incorporating legal and sensible aspects for an overall assessment of affordability and values for money. As mentioned by Renukappa et al., (2016), there is contract among the contracting companies so that the progress of the sustainable procurement practices that can create the source for more sustainable practices and report in the framework of CSR can be a successful approach.

Role of sustainable procurement in the public sector

The sustainable procurement implies the act of combining a concern for broader environmental and social effects in procurement practices considered by the government or public sectors. The public bodies are motivated for sustainable procurement for reducing their ecological and social footprint and also to encourage sustainability in the private sectors. As stated by Zhang et al., (2015) only some practices of sustainable procurement are evident in the procurement practices of the public sector, and even the nature and expansion of the sustainable procurement practices differ considerably across the regions or nations. 

When the public sectors face the issues of countervailing objectives and budget constraints, it is considered that the perceptions about the cost efficiency and economic viability of sustainable procurement will play an individually significant role. It has been observed that the cost issues are the most severe hindrance to take the environmental aspects into account in the buying processes. The firms under the public sector have the possibilities to pursue sustainable procurement in those situations where they can perceive winning circumstances.  But they might be reluctant in those situations where they see of the unclear payoffs and conflicts for maintaining the competition as well as deliver values for the money.  As mentioned by Simpson and Power, (2016), as most of the products and services of the public sectors are highly specialist, recognizing the sustainable supply sources might be extremely challenging in some situations.   

The policy situation that concerns the sustainable procurement in public sectors in the UK is on the basis of the group of guiding principles which includes accountability, competitiveness, integrity, transparency, legality and efficiency and aims to support the delivery of best values for the money in sustainable procurement in public sectors. In the words of Sarpin, Yang and Xia, (2016), the sustainable procurement in public sectors in EU is on the based on the guidelines of national policy frameworks along with policy frameworks of EU for opening up EU’s sustainable procurement in the markets of the public sector for competition by outlawing the domestic policies of buying and promoting the free movement of products as well as the services.

The focus of the EU's policy of sustainable procurement in public sectors is more environmental than social. For instance, it is compulsory in Italy that 30% of the products bought by public sectors, paper and wood product in the UK and the Netherlands and 50% of the vehicles of government in Belgium need to comply with the environmental criteria.  As per Renukappa et al., (2016), the sustainable procurement policies in public sectors in the USA is shaped by non-discrimination, and in Canada, the sustainable public procurement policies are based on complying with the economic criteria.

According to Sarpin, Yang and Xia, (2016), the international and national environments of sustainable procurement policies are the main determinants of the extension of the public sectors to which they are involved in sustainable procurement. A vital aspect in sustainable procurement, which is executed by the public sectors is leadership. Economic concerns are the biggest obstacles to sustainable procurement with the buyers in public sectors are still reluctant to pay more for buying sustainably.

Conclusion

The paper concludes that for maintaining a sustainable procurement practice, it is essential for every organization in Australia to follow the quadruple bottom line (QBL) procedure. By following this firm make a positive impact on the socio-economic and environmental factors related to the business. It is noted that corporate social responsibility and the key concepts of sustainable procurement together play a vital role in improving the procurement practices of Australian firms. However, many difficulties have been generated in maintaining a sustainable procurement practice but the principles drivers of sustainability help the firms to manage the whole situation. Furthermore, it is analyzed that for maintaining sustainable procurement practice, the organizations have to follow some regulations and rules of the Australian government, and this has influenced them to make a positive impact in business.

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