Jun 29, 2021

China Launches UN-Backed Sustainable Procurement Programme

publicprocurement
sustainableprocurement
China
UNDP
ELISE LEISE
3 min
Green public procurement- the new focus. Just this week, China and the UN Development Programme signed the latest eco-friendly initiative.

On Monday, China announced its latest public procurement leap. Facing serious environmental problems, one of which is stifling pollution, the nation’s government wants to clean up its act. At Xihongqiao Tonglian, an industrial park near China’s International Import Expo, the China International Centre for Economic and Technical Exchanges, the UN Development Programme, and the Qingpu District Government signed their commitment to the new programme: ‘Knowledge Sharing, Capacity Building, and Supporting Service on Sustainable Procurement’. 

How’s China’s Green Procurement History? 

Well, it’s relatively short—a product of the late and great 1990s. Academics talk about it in three stages

Furthermore, let’s not forget the 2008 Beijing Olympics, in which Chinese committees implemented green procurement while building Olympic training and performance facilities. Obviously, there is some measure of central government support. Yet the path forward will have its share of challenges. 

What’s the Problem, Mate? 

China’s green procurement industry is handicapped by infrequent media coverage, lack of specificity in its rules and regulations, and a dearth of subsidies. For example, its Government Procurement Method states that officials should give priority to eco-friendly, high-tech products—but fails to define exactly what that entails and how procurement decisions should be made. 

In addition, many Chinese firms illegally label non-green materials and products as green. One must point out that this isn’t, and never will be, a purely Chinese problem—greenwashing is a worldwide trend—but it does represent yet another constraint on the nation’s sustainable public procurement. If companies can’t trust that the products they source are as labeled, any green agreements in procurement will carry less cachet. 

How Will This Program Affect Chinese Procurement? 

For many Chinese businesses, green procurement efforts seem long overdue—especially ones that directly benefit businesses like the new Sustainable Procurement programme. Rather than setting strict rules and regulations over what companies can and cannot purchase, the central government will now equip smaller Chinese firms with the resources to enter the green market. 

First, it’ll offer a platform for Chinese businesses to get involved in the global public procurement market, with the ultimate aim of carbon neutrality. Second, it will provide resources and support to small- and medium-sized businesses (SMEs), along with female-owned firms. Third, it will allow Chinese companies, especially in the Yangtze River Delta region, to participate in procurement for the United Nations. 

Fundamentally, this will tie China’s efforts into a larger international effort to improve public procurement. And as the U.S. and Europe start to kick back against China’s market dominance, 

China will benefit from close ties with international organisations such as the WTO and the UN. Said Xu Jian, acting governor of Qingpu District: ‘This is a win-win situation’. 




 

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Jul 24, 2021

A Watershed Moment for Sustainability Commitments

Vizibl
ESG
Sustainability
sustainableprocurement
Mark Perera, CEO, Vizibl
5 min
Mark Perera, CEO of Vizibl discusses the Royal Dutch Shell climate commitments and how the ruling has sent ripples through the oil, gas, and energy sector

Last month saw a landmark ruling where Royal Dutch Shell was instructed to significantly step up its 2030 climate commitments and slash absolute emissions by 45% compared to 2019 levels. This ruling represents a considerable advance on Shell’s stated aim to cut 45% of its emissions intensity compared to 2016 levels by 2035 – a target which provided leeway for increasing emissions as long as the relative carbon emitted per unit of energy produced fell. Now, this imposes a much larger climate obligation on Shell in calling for an urgent absolute reduction.

 

A ruling that sent ripples through the oil, gas, and energy sector

A watershed moment, this ruling is sure to cause significant alarm amongst fellow oil and gas giants who recognise – for perhaps the first time – that national courts can compel organisations to accelerate their reduction of harmful emissions under the Paris Agreement. Not only does it have "far-reaching" consequences for Shell itself and may even curb the potential growth of the company, but the decision is also likely to set a legal precedent for other energy companies and corporations. According to Thom Wetzer from Oxford University, who heads up the sustainable law programme: “all companies in the energy industry and all heavy emitters will be put on notice and have to accelerate their decarbonisation plans.”[1]

This court mandate applies to not only the Shell group’s own operations but notably also to all the suppliers and customers of the group – strongly implying that Shell is being asked to tackle its Scope 3 emissions. Consequently, it is clear that Shell cannot meet the ruling’s demands alone; to make an impact across all carbon emissions scopes, Shell and other large businesses must immediately look towards forging new, productive partnerships with supplier stakeholders. Failing to do this not only means missed targets and mounting legislative action but also the reputational damage that this will cause to its brand and the company.

 

Activist investor warns of existential business risk

Reports on the Shell ruling were almost immediately followed by news of a coup attempt in American oil and gas corporation Exxon Mobil. Due to concerns surrounding Exxon’s strategic direction, hedge fund Engine No. 1 ousted sitting board members, stating that the climate crisis poses an "existential threat to the business", which the board has been reluctant to confront.

This small hedge fund accused Exxon of "a failure to take even initial steps towards evolution" and of "obfuscating rather than addressing long-term business risk", partly due to a historical lack of energy industry experience in Exxon’s board. This signalled an imminent shift in the company’s sustainability strategy, which was well received by the market, with Exxon’s shares rising 1.2% the day after the event.

 

The drive to reduce Scope 3 emissions

And if that wasn’t enough of a shakeup, this was followed by American multinational energy corporation Chevron’s shareholders voting 61% in favour of a proposal to cut Scope 3 emissions at their AGM, signalling frustration with the company’s slack approach towards climate change. Chevron has thus far failed to match its competitors’ net-zero targets with any commitments of its own.

For those less familiar, corporate emissions fall into three categories: Scope 1, 2, and 3. Scope 1 covers emissions from sources that an organisation directly owns or controls. Scope 2 refers to emissions from purchased electricity, steam, heating, and cooling that the reporting company consumes over the course of its operations. And Scope 3 is everything else – all other indirect emissions that occur within an organisation’s value chain, both up and downstream.

Why is this significant? Until now, Scope 3’s heady combination of difficult-to-manage and thus far easy-to-ignore has led large companies to abdicate responsibility for their value chain and sweep its emissions under the carpet. However, the Shell ruling indicates that this approach is no longer viable for big business. With courts stepping in and dictating climate policy to corporations as well as governments, the pressure is mounting on all heavy emitters to tackle their true impact and reduce Scope 3 emissions.

As organisations like Shell, Chevron and Exxon are considered responsible for the actions of their entire ecosystems, sustainability performance becomes contingent on supplier behaviour. The clearest example of this lies in Scope 3 emissions which, for many organisations, considerably exceeds the CO2 they emit directly.

Therefore, the time for green-washing and lip service is now over as pressure mounts from all stakeholder groups for large corporates to take decisive action on sustainability in the supply chain. However, businesses cannot turn promises into concrete progress without actively collaborating with stakeholders across the value chain.

 

For every five weeks that pass, we lose 1% of the decade

2030, the deadline for achievement of UN SDG-related climate commitments, is fast looming, and with every five weeks that pass, we lose 1% of the decade. The imperative to take immediate action has never been clearer. It’s now down to procurement, wider business leaders, and their associated supplier ecosystems to put sustainability strategy into action by:

 

      Defining, aligning, and communicating their corporate sustainability goals to focus suppliers, partners and the wider stakeholder groups on how they can make an impact.

 

      Collaborating systematically through technology using transparent processes that develop trust with suppliers and partners.

 

      Harnessing the innovation and IP within the supplier ecosystem, turning ideas into projects that can be managed and reported on transparently, and adding clear value trackers to prove impact.

 

Working closely with stakeholders in the supply chain is an infamously complex process, but it can be made that much simpler using Supplier Collaboration & Innovation (SC&I) technology. This ensures strategic alignment between buyer and supplier and provides comprehensive relationship governance and real-time performance visibility. This allows companies and their suppliers to work on sustainability initiatives more cohesively and develop innovative ideas through collaboration.

 

Here at Vizibl – through our SC&I platform combined with our knowledge and expertise – we are helping large enterprise organisations in the energy sector better leverage their supplier relationships and move closer to meeting those lofty 2030 sustainability goals.

 

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