ISO 20400: What You Need to Know About the New Sustainable Procurement Standard Edmund Zagorin - March 17, 2017 6:00 AM | Categories: CSR, Industry News, Procurement Strategy & Planning, Sustainability | Tags: L1, Process & Best Practice Spend Matters welcomes this guest post from Edmund Zagorin, a bid manager at Electronic Auction Services Inc. On April 15, 2017, the International Standards Organization (ISO) will release a new standard focused on sustainable procurement: ISO 20400. Here are the three things you need to know. 1. ISO 20400 is a guidance standard, rather than a certification standard. Unlike the popular ISO 9000, it is impossible for an organization to earn an ISO certification. The purpose of ISO guidance standards is to build a global consensus on the definition of key terms used within a professional practice. In this respect, ISO 20400 resembles ISO 26000 — Social Responsibility, which sought to achieve common definitions and processes among global organizations. 2. ISO 20400 is prescriptive, rather than performance based. This is an important distinction for anyone whose job involves measuring success. Prescriptive standards are usually oriented around a compliance binary or a key threshold. You either comply or you don’t. For example, cleaning products either have a Green Seal certification or they don’t. Therefore, a purchasing standard that requires an organization to purchase Green Seal certified products is prescriptive. In contrast, the Carbon Disclosure Project (CDP) is performance-based and facilitates relative comparisons between carbon footprints using standardized metrics. ISO 20400 is far more like Green Seal than CDP. 3. ISO 20400 uses a holistic definition of sustainability, rather than solely focusing on environmental attributes. There is often an equivocation between “sustainable purchasing” and “green purchasing.” The former includes, however, two other pillars that the latter lacks: social sustainability and economic sustainability. This matters in how an organization’s leaders will frame the risks and opportunities of sustainability improvements. For example, consider the framework that pits environmental concerns against economic ones and implies a trade-off between “green” on one hand and performance, quality and cost on the other. By using a more holistic understanding of sustainable procurement, leaders can preclude these objections from the outset while continuously building the business case for sustainable innovations. By defining sustainable procurement as “best value” in a broad sense, ISO 20400 provides a rhetorical and conceptual toolkit for practitioners to advocate for positive institutional change. What Does the Standard Actually Say? The standard is divided into the following seven sections (or “annexes”): Scope Normative References Terms and Definitions Fundamentals — Understanding the fundamentals (all) Policy and Strategy — Integrating sustainability into the organization’s procurement policy and strategy (top management) Enablers — Organizing the procurement function towards sustainability (procurement management) Procurement Process — Integrating sustainability into the procurement process (individuals responsible for the actual procurement) The shrewd reader will notice that Annexes 4–7 are assigned to particular stakeholder groups within a procurement organization. Much of the advice given therein, however, could apply to any stakeholder within an organization — such as distinguishing between a “policy” and a “strategy” and defining roles and responsibilities among managers to set goals that are specific, measurable, achievable, realistic and timebound (SMART). The 20400 documentation covers category management, as well as approaches to collecting stakeholder input — all topics that will be snugly familiar to any regular reader of Spend Matters. There are sections, however, that delve into more sophisticated guidance, such as identifying types of institutional complicity with unethical behavior or benchmarking sustainability impacts in relation to a stakeholder-created issue matrix (e.g. “climate change” or “local unemployment”). What Effect Will the New ISO Standard Have on Procurement Spending Globally? “ISO 20400 can serve as a good starting point for their multitier suppliers, a good frame of reference,” Nora Neibergall, senior vice president at the Institute for Supply Management (ISM), told me via email. “The new standard will also be useful for small and medium-size companies who desire to start implementing sustainability into their business supply chain process.” (ISM participated in the official U.S. mirror committee for the new standard, an effort that was organized by the American National Standards Institute.) “Frankly, most Fortune 500s are already light years ahead of this standard in terms of their sustainability thinking,” said Chris Erickson, CEO of Climate Earth, a software firm that helps large enterprises improve their supply chain sustainability. “Now, is everyone light years ahead? No, and that’s what this standard does. It provides a useful way to make sure that people who say they’re doing sustainable procurement are actually talking about the same thing.” The greatest opportunity for market transformation exists in commoditized markets with competitive supplier pools, such as consumer electronics or apparel. There the process of embedding sustainability requirements has been shown to cause a so-called green bullwhip effect, whereby environmental requirements can become a signal that then transfers vertically down a supply chain from buyer to distributor to assembler to manufacturer. Given the increasingly global nature of many supply chains, small shifts upstream have the propensity to drive outsized sustainability effects down the chain. Of course, it’s too soon to guess what sort of effect a new sustainability standard will have in an already crowded benchmarking field, particularly given that ISO certification is not yet an option. One should never underestimate, however, the power of a document that, in its own words, is “applicable to any organization, either public or private, regardless of its size and location.” Perhaps an early contribution of ISO 20400 will simply be initiating a conversation about sustainable procurement between conscious buyers and their suppliers. That’s hardly the worst place to start a process of continuous improvement, especially one where the fiscal, ethical and planetary stakes are so high. 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