Sustainable procurement duty - impact and value analysis: main report

Chapter 2: Improving economic, social and environmental wellbeing through procurement and reducing inequality

Section 9 of the Procurement Reform (Scotland) Act 2014 provides that in meeting the Duty, public bodies must “before carrying out a regulated procurement, consider how in conducting the procurement process it can improve the economic, social, and environmental wellbeing of the authority’s area”. The Duty can cover a wide range of outcomes including socio-economic and environmental risks and opportunities in respect of fair work, ethical supply chains, climate change, bio-diversity and tackling waste.

In this chapter, we examine the extent to which these requirements within the Duty are being met by public bodies, informed by: analysis of annual procurement reports submitted by public bodies, a survey of public bodies and in-depth interviews with individuals from selected organisations.

The extent of information available to undertake this assessment varied considerably between organisations. Many organisations continue to describe their approaches in procurement reports and in survey responses in general terms. Some organisations, however, provided a more detailed overview of actions taken to address this. Where available, examples of good practice have been incorporated into this chapter.

Community benefit requirements

Frequently, public bodies described ensuring improvements to the economic, social and environmental wellbeing of their area through the inclusion of community benefit requirements in contract specifications.

Community benefit requirements have been an important feature of public procurement in Scotland since 2008.^[25,26] The Scottish Government’s Guidance on the Duty^[27] notes that “community benefits may be viewed as a subset of the Sustainable Procurement Duty”. These requirements allow public bodies to achieve various social, economic and environmental impacts through procurement. Public bodies can insert clauses in contracts requiring contractors to:

• create employment, training, apprenticeship and skills development opportunities for local people
• promote sub-contracting among SMEs, the third sector and supported businesses
• take action to promote environmental wellbeing
• provide resources or support for community organisations or facilities.

By doing this, as well as contributing to the National Performance Framework, public bodies can tailor community benefit requirements to support local policies and priorities.

Section 25 of the Procurement Reform (Scotland) Act 2014 gives the use of community benefit requirements a legislative basis. It states that public bodies must consider imposing community benefit requirements in regulated procurements where the estimated value of the contract is equal to or greater than £4 million. The guidance on the Duty, however, notes that: “while the Act has a specific threshold at which community benefits must be considered, application of the Sustainable Procurement Duty means that community benefits may be achieved below this threshold”. In some cases, individual public bodies have set their own internal thresholds for considering community benefit requirements that are lower than £4 million.

In this section, we discuss the steps that public bodies are taking to embed community benefit requirements in regulated procurement activity, the types of benefits achieved, and the impact of community benefit requirements. Additional examples are included in Appendix 4.

Use of community benefit requirements

Community benefit requirements are an important aspect of public bodies’ approach to implementing the Duty. This is demonstrated by our analysis of annual procurement reports which shows that a large proportion (89, 81%) of public bodies included community benefit requirements in contracts awarded in 2018-19. This represents the same percentage as in 2017-18, and shows that progress has been made since the previous research into community benefit requirements was carried out in 2015,^[28] which found that the use of community benefit requirements at that time was increasing among public bodies.

Responses to our survey of public bodies also indicate that most bodies use community benefit requirements. All but one respondent (32, 97%) agreed or strongly agreed that their organisation promotes community benefit requirements through its regulated procurement activities.

Number of regulated contracts with community benefit requirements

As Figure 2.1 below shows, forty-nine public bodies (45%) provided information in their 2018-19 annual procurement reports about the number of contracts valued at £4 million or greater that included community benefit requirements. In total, these 49 organisations awarded 194 regulated contracts above this value that included community benefit requirements. This equates to 78% of all contracts of this value awarded by these bodies. As in 2017-18, most of these contracts were awarded by the local government sector (128, 66%).

Similarly, there were 941 regulated contracts with a value of less than £4 million that contained community benefit requirements in 2018-19 among the 96 public bodies (87%) that provided this data. Again, the local government sector accounts for the highest proportion (714, 76%) (see Figure 2.2 below).

It is important to note that the figures provided above are likely to be an underestimate, given the number of public bodies that did not provide this information in their annual procurement report.

Public bodies’ approach to embedding community benefit requirements in procurement processes

Public bodies have taken various steps to implement and embed community benefit requirements in their procurement activity. Many stated in their annual procurement report that they consider community benefits in all procurements that meet certain criteria.

Some explained that community benefits are considered for inclusion ‘where applicable’, but do not always describe the criteria they use to determine if a contract is suitable for community benefits. For example, one public body stated in its 2017-18 annual procurement report that it “looks for opportunities to impose formal community benefit requirements where the nature of the procurement would be appropriate”. Registers of Scotland’s policy is to “promote the use of community benefits within procurement exercises where relevant and proportionate to the contract”.^[30]

Others stated that, while the consideration of community benefit requirements is only mandatory for procurements valued at or above £4 million, they have set their own, lower, thresholds. Some reported that community benefit requirements are considered for all regulated procurements. For example, Comhairle nan Eilean Siar confirmed that: “Community benefits are considered for inclusion in all regulated procurement exercises”.^[31] South Lanarkshire Council: “considers inclusion of these requirements in all regulated tenders, regardless of value, while considering the nature of the supply and the value and duration of the contract”.^[32] Others have set different thresholds. For instance, Glasgow City Council considers community benefit requirements for all contracts worth over £50,000 for goods and services and £500,000 for works contracts.^[33]

Although Scottish Government policy indicates that community benefit requirements should be relevant and proportionate to the contract, some public bodies have found that community benefit requirements can be a barrier to smaller organisations bidding for contracts. One interviewee, for example, reported that their organisation made revisions to thresholds based on lessons learned. They had previously included community benefit requirements in all contracts worth £10,000 or more, but increased this internal threshold to £50,000 in order to ensure that the contracts were more accessible to SMEs.^[34] This also enabled them to focus their resources on monitoring the impact of community benefit requirements included in higher value contracts. We return to the issue of community benefits requirements creating barriers later in the report.

Some public bodies limited their discussion to a confirmation that they consider community benefit requirements in all relevant contracts. Most (78, or 68% of the 115 public bodies that submitted an annual procurement report in 2017-18) provided details about how they promote the use of these requirements and ensure that they are considered where appropriate. We discuss the information provided by public bodies about how they are implementing community benefit requirements below.

The most common approach, taken by many public bodies, is to adapt invitation to tender documents to request information from tenderers about the community benefits required. A few examples are below:

“Community benefits are being built into the contracting process for all major contracts… with standard clauses now being introduced into relevant invitation to tender and similar documents”^[35] (Police Scotland)

“Where relevant and proportionate to the subject matter of the procurement… Tenderers are asked to describe their approach to delivering the community benefits noted in the tender specification" (public body annual procurement report, 2017-18)

“Development of model questions for contracts and frameworks to encourage appropriate and preferred benefits linked to our communities”^[36] (City of Edinburgh Council)

“Suppliers are required to make a community benefits submission as part of their overall tender submission”^[37] (Midlothian Council)

“Community benefits are considered at the contract strategy development stage and, if considered appropriate, are thereafter reflected in the tender documentation”^[38] (East Renfrewshire Council)

“Within our standard invitation to tender for regulated procurement projects… we strongly encourage community benefits to be included in tender returns”^[39] (Scottish Enterprise)

“The Procurement Team has also developed the section of the tender response document that requests information on community benefits”^[40] (River Clyde Homes)

“Tenderers are required to make a community benefits submission in respect of the spend they will receive through access to the relevant framework and this is monitored throughout the duration of the framework agreement” (public body annual procurement report, 2017-18)

In some cases, such as Strathclyde Partnership for Transport^[41], tenderers’ responses to questions about community benefit requirements are scored as part of the tender assessment process and this information is used to help select the successful tenderer. This represents good practice and helps prevent suppliers from spending significant time producing information which is not a determinant of success. In addition, it reinforces the importance of community benefit requirements as part of the delivery of a contract.

Other steps that public bodies have taken to embed community benefits into their procurement processes include the following:

• stakeholder consultation: some public bodies - particularly universities and colleges - noted that they consult stakeholders to determine if community benefit requirements are appropriate for certain contracts. For example, Glasgow School of Art explained that its “policy on identifying community benefit requirements is to conduct risk and opportunities assessments through stakeholder consultation and engagement”^[42]
• training for staff: one public body, for example, reported in its 2017-18 annual procurement report that "community benefits are an important element of our approach to sustainable procurement, and as such we have incorporated training within the Procurement Governance Framework to support and promote this requirement"
• encouraging staff responsible for procurement to consider community benefits. For instance, Moray Council reported, “all Lead Officers are challenged at strategy development stage to consider what can be included”.^[43] Orkney Islands Council noted that “officers with Delegated Procurement Authority must complete a Commodity Strategy for all Regulated Procurements which includes a section on Community Benefits to be considered where applicable”^[44]

Types of community benefits delivered

Public bodies reported delivering various types of community benefit requirements. Figure 2.3 illustrates the percentage of public bodies that delivered each type of requirement in 2018-19.  This is based on data provided by the 89 public bodies (81%) that reported including these requirements in contracts procured in 2018-19.

Figure 2.3 shows that the most common types of community benefits delivered were:

• employability outcomes for priority groups^[45] (work placements, apprenticeships, opportunities for training and qualifications, job creation, and other employability-related activity)
• support for community organisations and clubs
• charitable donations and fundraising
• reducing environmental impact
• business support for SMEs, social enterprises and the third sector

Employability outcomes (work placements, apprenticeships, opportunities for training and qualifications, job creation, and other employability-related activity)

In 2018-19, as in 2017-18, the most common form of community benefits delivered were those related to: employability-focused activity such as work placements (55, 62%), apprenticeships (54, 61%), opportunities for training and qualifications (49, 55%), job creation (41, 46%), and other employability-related activity such as careers talks and site visits (40, 45%). For example:

• one public body reported the following benefits in its 2017-18 annual procurement report: 21 school educational visits with over 600 pupils involved; support for 26 school career events; 10 visits to support universities; 24 work experience placements for unemployed people; 15 work experience placements for educational establishments; 14 traditional apprenticeships; 4 adult apprentices; and the creation of four new full-time jobs
• one survey respondent noted that it “had some success in generating employability and actual job offers” for people it supports
• another public body reported creating six jobs, 24 apprenticeships and 105 work placements, all for priority groups in 2017-18
• a public body reported that community benefit requirements created 52 apprenticeships, 146 new jobs and 29 work placements in 2017-18
• another 2017-18 annual procurement report described a contract for fresh butcher meat that included community benefit requirements related to the creation of a Modern Apprenticeship and work experience placements
• one survey respondent observed that a construction contract led to securing one vocational qualification
• a catering service for City of Glasgow College provided, among other benefits, 3 Modern Apprenticeships, 31 work placements and mock interview sessions^[46]

Many public bodies provided quantitative data about the employability outcomes achieved through community benefit requirements in 2018-19.  This includes the numbers of jobs, apprenticeships, work placements and qualifications created or achieved as a result of community benefit requirements. It is likely that the figures provided below are significant underestimates, given that this data is not available for the public bodies that did not publish an annual procurement report for 2018-19, or for bodies that published a report but did not include this data.

Nonetheless, data provided by 76 public bodies (69%) shows that 843 jobs were filled by priority groups as a result of community benefit requirements. The highest proportion of these (345, 41%) was in the local government sector and the lowest (23, 3%) among registered social landlords (Figure 2.4).^[47,48]

Community benefit requirements in contracts awarded by 79 public bodies (72%) resulted in 617 apprenticeships being filled by priority groups (Figure 2.5). Again, the local government sector accounts for the highest proportion of these apprenticeships (449, 73%).

Data provided by 75 public bodies (68%) shows that community benefit requirements led to a total of 597 work placements. Most of these (346, 58%) were provided in the local government sector (Figure 2.6).

Figure 2.7 shows that 716 qualifications were achieved by priority groups as a result of community benefit requirements across 74 public bodies (67%). The central government sector accounts for the highest proportion of these qualifications (287, 40%).

Below, we discuss other common types of community benefit requirements.

Support for community organisations and clubs

Thirty-six public bodies (40% of those that provided details of the types of community benefit requirements achieved in 2018-19) reported including requirements related to support for community organisations and clubs. We have included some examples of the outcomes delivered through these below:

• in 2017-18, a public body reported achieving 235 hours of non-financial support for communities through community benefit requirements
• a landscaping contractor delivering a contract for Highlands and Islands Enterprise provided free shrubs for a social enterprise and medals for a swimming gala^[49]
• West Dunbartonshire Council reported gaining community benefits worth £5,550 linked to support for community initiatives^[50]
• staff from a road aggregates contractor for Scottish Borders Council painted walls and buildings at a local charity that supports young people^[51]

Charitable donations/fundraising

Charitable donations and fundraising were the focus of community benefit requirements awarded by around a third of public bodies (31, 35%) in 2018-19. Some examples of these include:

• a catering supplier for a public body made a financial donation to a local ice rink in 2018/18
• one of Almond Housing Association’s contractors donated £200 to a project providing household items for people who have previously been homeless^[52] and
• a roads maintenance contractor for Transport Scotland carried out fundraising activities for various charities including Marie Curie, Macmillan and the Trussell Trust^[53]

Examples of community benefits linked to environmental wellbeing are included later in this chapter, while an overview of benefits related to SMEs and supported businesses are included in Chapter 3.

City Region Deals and community benefits

City Region Deals are commonly cited as significant contracts through which community benefits are delivered. In this section we discuss City Region Deals and their importance in achieving various community benefits through procurement.^[54]

City Region Deals are agreements made by the Scottish Government, UK Government and regional partners, including local authorities. They involve a strategic programme of investment to support long-term improvements in the economies of regions centred around Scotland’s cities. They are tailored to the needs of each individual region and there are currently six deals in operation in Scotland: Glasgow, Aberdeen, Inverness & Highlands, Stirling & Clackmannanshire, Edinburgh & South East Scotland, and the Tay Cities Region.

City Region Deals involve multi-million pound investment in various initiatives designed to improve local infrastructure and amenities. These include housing construction, cultural facilities and developments around digital connectivity and transport, as well as programmes designed to improve skills and employment opportunities among local people.

Given the large-scale public procurement involved in delivering the City Region Deals, they offer an opportunity for public bodies to achieve significant community benefits through procurement. For example, the Glasgow City Deal’s Community Benefits Strategy^[55] notes that “community benefits are a key component in maximising social, economic and environmental benefits within the City Deal programme” and states that “community benefits will be targeted in all City Deal contracts, adopting an appropriate approach which is proportionate and relevant to the contract”.

Changing trends in community benefit requirements

In 2018-19, as in 2017-18, the most common form of community benefit requirements were those related to employability, including the creation of opportunities for employment, work experience and training and qualifications as well as careers talks, site visits and so on. Ninety-two per cent of organisations (79) that submitted an annual procurement report for 2017-18 included community benefit requirements related to employability, and in 2018-19 this figure was 89% (79).

However, as displayed in Figure 2.8, we have identified an increased focus on community benefit requirements in the following four categories in 2018-19 compared with 2017-18:

• support for community organisations/clubs
• charitable donations/fundraising^[56]
• reducing environmental impact
• business support activities such as capacity building workshops for SMEs, social enterprises and/or the third sector

Capturing the impact of community benefit requirements

As discussed above, many public bodies have reported quantitative data about the outputs achieved through community benefit requirements, such as the number of jobs created, apprenticeships delivered, sub-contracting opportunities for SMEs and supported businesses. This data provides a helpful indication of the activities and opportunities that have been provided through community benefit requirements, and provides evidence that the Duty, and the use of community benefit requirements, is having a positive impact on public bodies and local communities.

Some public bodies provided further information about the wider impact of these activities and opportunities. For example, one survey respondent reported that community benefit requirements “supported our small rural towns and villages to ensure the local economy and people continue to develop and grow”. Another observed that these requirements have a positive impact in “providing work opportunities for people that may not be readily available to them… encouraging kids to be active by sponsoring local activities… [and] providing support to small businesses to increase knowledge, confidence and capacity”.

Often, however, the information provided seems to be based on an assumption that the activities and opportunities provided by community benefit requirements will have a positive impact on local communities, rather than any robust evidence. For instance, one survey respondent commented that “these will have a positive impact on local communities”. Another reported “it is apparent that these have had a significant impact on communities”.

The 2015 research by TERU included recommendations about the ways in which public bodies should measure the impact of community benefit requirements. The Scottish Government reflected this in the statutory guidance associated with the Duty.

However, some public bodies are not fully implementing this. Many provide little evaluative evidence in their procurement reports about the wider mid- to long-term impact of community benefit requirements on priority groups, organisations (including SMEs, supported businesses and the third sector), communities, contractors or the public body itself. There is a lack of feedback or evidence from priority groups, communities or organisations about the impact of the activities on them. Public bodies provided little information about whether or not these activities and opportunities would have occurred without community benefit requirements, the extent to which employment opportunities have been sustained, or if work placements and apprenticeships have resulted in permanent positions.

In addition, public bodies provided little information about how these community benefit requirements contribute to local or national outcomes. There are some examples where public bodies have done this (Perth & Kinross Council reported that “our approach to community benefits through contracts is aligned to the Developing Young Workforce agenda”^[57]) but, on the whole, public bodies reported little detail about the links between community benefit requirements and national or local outcomes.

It may be that it is too early to understand the full impact of these community benefits and longer-term evaluation may be beyond the remit of public bodies’ procurement functions. However, there is a clear message coming through that many public bodies are finding the monitoring and evaluation of community benefit requirements a challenge, not least in terms of ensuring that the data requested from suppliers enables them to evaluate their impact.

There may be various reasons for this lack of evidence of impact. Some public bodies reported that resources and finances are scarce and that available resources are often devoted to activities considered to be higher priority than measuring impact, both in general and in relation to procurement activity.

Others described difficulties in capturing evidence of impact because they “have not engaged directly with recipients of the benefits” (survey respondent). In at least one other case, this information is not collected because there is a feeling “this is not the job of procurement to monitor these impacts and nor should it be” (survey respondent).

In some other cases, such as South Ayrshire Council, the information is not being collected now but: “a new process to record and report information on how community benefits are contributing to local and national outcomes is now also being embedded into the Council’s procurement process.”^[58] In other cases, we are aware that public bodies might have collected the information but have not reported it in their annual procurement reports. We return to the issue of monitoring and evaluation in Chapters 6 and 7.

Monitoring and evaluation should be a feature of any rigorous contract management process – but this does not appear to be widespread at present. Whether this is about scarcity of resources or how these resources are being deployed is unclear. It also raises questions about role demarcation – and where responsibility for monitoring and evaluation lies within the organisation.

There may be a question around where responsibility lies for monitoring the impact of community benefit requirements when these feed into, for example, apprenticeships and other training programmes which are likely to be the subject of wider impact evaluations. These are decisions for local bodies to make – but are areas where greater clarity seems to be required.

Overall, our research has shown that the vast majority of public bodies are considering when it is appropriate to incorporate community benefit requirements into their procurement processes. Many are successfully achieving significant community benefits through their procurement activity including benefits such as employment opportunities for priority groups and sub-contracting opportunities for SMEs.

However, the lack of evaluation of community benefit requirements being undertaken by public bodies is an issue that has been noted in previous research into community benefits,^[59] and limits the conclusions we can draw about the wider impact of these requirements.

There has undoubtedly been progress made in the evaluation of the impact of community benefit requirements since the 2015 TERU research^[60]. Community benefit requirements are reported to be having a substantive impact on individuals, local communities and organisations but evidence of this impact is more limited. This requires:

• more leadership
• greater clarity around roles and responsibilities
• activities to further raise awareness and increase take-up among public bodies of the existing guidance around evaluation
• consideration of any further support that bodies need to collect more robust evidence of their wider impact and contribution to local and national outcomes

Improving environmental wellbeing

In relation to the environmental wellbeing aspect of the Duty, we analysed the extent to which organisations addressed environmental wellbeing in terms of energy efficiency, waste reduction, and other environmental factors. Section 9 of the Procurement Reform (Scotland) Act 2014 provides that in meeting the Duty, public bodies must “before carrying out a regulated procurement, consider how in conducting the procurement process it can improve the economic, social, and environmental wellbeing of the authority’s area”.^[61]

In this section, we consider how the environmental wellbeing aspect of the Duty has been addressed, exploring the information that public bodies provided about how they met environmental wellbeing objectives, particularly in reference to energy efficiency, waste reduction and climate change. We draw on evidence provided in procurement reports submitted by public bodies across the 2017-18 reporting period, responses to our survey of public bodies and information provided through in-depth interviews.

Responses to our survey suggest that most public bodies are taking action to promote environmental wellbeing and tackle climate change through their regulated procurement activities. Sixty-seven per cent of respondents (22) agreed with this and 27% (nine) strongly agreed. This is a positive indication of action in this area. However, 6% of respondents (two) disagreed that their public body was promoting environmental wellbeing and tackling climate change through regulated procurement activities. For example, one of these public bodies explained that climate change is a complex issue and that focusing on procurement practices “fails to identify strategic infrastructure issues that need to be addressed by both local government and industry”.

We found that a large proportion of public bodies (60, 52%) provided only minimal detail about how they were promoting environmental wellbeing through their procurement activity (please see Appendix 3). While this lack of detail in reports may not necessarily indicate a lack of action, and may reflect under-reporting, more detailed discussions with key informants and case studies suggest this is an area where organisations require additional support to fulfil their duties more effectively.

We return to the issues of support needs and how these may be addressed later in this report.

Many public bodies showed how they addressed environmental wellbeing through including details of the organisation’s overarching policy statement regarding environmental wellbeing. For example, “Procedures are in place to ensure that consideration of environmental, social and economic issues and benefits is made, where appropriate, on a contract-by-contract basis”^[62], or a similar iteration of this phrase, was the most commonly used blanket policy statement in reports. However, some public bodies struggled to provide information beyond the policy statement. They did not include more specific detail, such as how much weight is placed on consideration of environmental wellbeing when awarding contracts, or specific evidence of how the public body has implemented actions to address environmental wellbeing.

For example, Fife Council provided extensive details of its policy related to environmental wellbeing and climate change. An excerpt from its 2018-19 annual procurement report is included below^[63].

The Council is keen to try to reduce the environmental impacts of our procurement activities, and to use procurement to assist with compliance with our duties under the Climate Change (Scotland) Act and is seeking to do this via a number of activities. The Procurement service works with other services to develop contract terms and procurement award criteria. Procurement weightings are developed in collaboration with the service area. If any barriers are identified in such discussion, effort is made to overcome these barriers.

We utilise the Scottish Government’s ‘Procurement Journey’ guidance in terms of best practice. This includes considerations such as sustainability and climate change mitigation and tools are provided to be utilised with the goods/services that are intended to be procured in mind. Mainstreaming these best practice principles to our procurement activities will contribute to our compliance with climate change duties.

Fife Council’s Procurement Strategy acknowledges the national legislative framework for sustainable public procurement in Scotland. To aid the Council achieving its aim of ‘Inclusive Growth’ (Fife’s Economic Strategy 2017-2027), the Council, through its procurement activities will incorporate the Sustainable Procurement Duty into its processes and consider prior to defining procurement requirements. Fife Council shall consider/support:

• the use of whole life cost where appropriate;
• the use of Sustainable Procurement Duty Tools that aid the prioritisation of sustainability to achieve maximum benefits within all regulated procurements and also to prioritise and focus on those categories of spend that offer the greatest potential sustainable outcomes;
• the use of the Scottish Government Flexible Framework Self-Assessment Tool (FFSAT) to ascertain the level of performance of sustainable procurement across the Council. This tool will provide a clear action plan that will set out how, and by when, improvements in sustainable procurement will be made;
• the environmental impact of construction projects as appropriate, including specifying high Building Research Establishment Environmental Assessment Methodology (BREEAM) ratings for sustainable design and construction;
• encourage recycling and reuse of materials through waste management plans in order to minimise waste to landfill;
• the use of low energy equipment and environmentally friendly chemicals;
• maximise use of materials from sustainable sources in accordance with government buying standards, and
• corporate initiatives/working groups in relation to the sustainability agenda where supplies/services are relevant and undertake any associated procurement activity, e.g. elimination of single use plastics.

The procurement function has established a workstream to support Sustainable Procurement activity with scope and actions to formalise and embed the above throughout the Council.

Climate change and waste

Many organisations included a specific section addressing climate change, which often included new policies or contracting initiatives to reduce waste. Many public bodies referred to new policies which sought to reduce greenhouse gas emissions, increase use of renewable energy products, increase percentage of reused and recycled materials, and reduce waste to landfill.

Some public bodies reported on specific initiatives they have introduced in their procurement process to reduce waste and energy usage. Examples of these include:

• change in waste contract which produced significant reductions in emissions, with non-recyclable waste streams sorted prior to energy recovery, rather than being sent to landfill (Public body 2017-18 annual procurement report 2017-18)
• ensuring CO2 emissions are no higher than 110g/km when procuring leases of vehicles^[64]
• contracting facilities management provider that uses environmentally certified and phosphate-free Ecolab cleaning materials, delivered as super-concentrates to reduce plastic waste and transport^[65]
• including a requirement for all furniture and window coverings to be sourced in an environmentally responsible nature, with all furniture to be from sustainable sources^[66]
• reducing the use of single use plastics in catering outlets, including cutlery and straws^[67]
• the use of low energy equipment including alternative fuelled vehicles and LED street lighting^[68]

The following example shows how the Scottish Prison Service has contracted a waste carrier that provides closed loop recycling to maximise waste reduction:

“SPS’s contracted waste carrier (ENVA) provides various containers to support waste streaming. ENVA provides closed loop recycling & reporting to the SPS Sustainability Manager to support SPS’s climate change reporting around the end use of materials. ENVA is committed to maximising recycling of the different waste streams generated:

- General/Residual waste materials: Bulked & processed as Refuse Derived Fuel (RDF) to MVV and EEW Energy

- Glass: Collected & processed into pellets or ground glass sand to be used in flooring or construction

- Wood: Wood is processed through the ENVA timber recycling plant where materials chipped and sold on to make biofuel briquettes or sent for the manufacture of MDF

- Metals: Metals are segregated and then processed as a commodity

- Green Waste: Is bulked and then sent for composting to Buchley Eco or GP Environmental

- Dry Mixed Recyclables (DMR): Segregated at each geographical location bulked and sold directly as commodities

- Food Waste: Processed for anaerobic digestion through Energen Biogas”^[69]:

Many public bodies have had some success in addressing climate change and waste reduction aspects of environmental wellbeing, with some being recognised for their commitment. For example, a public body reported in 2017-18 that it was awarded the Carbon Trust Triple Standard award in recognition of its achievements in cutting carbon emissions, water use and waste. It had reduced its carbon footprint by 1,670 tonnes since 2011. Another public body, NHS National Procurement has been recognised internationally by the UN Conference on Sustainable Production for its new plastic measures. The replacement of 60ml pots with 30ml pots resulted in reduction of virgin plastic consumption by approximately 12 tonnes^[70].

There has been a clearer political drive to address climate change recently. This may account for public bodies taking more extensive action in this area than before and including more information about this issue in their annual procurement reports. This suggests that where political drive is greater, more action results. A number of interviewees felt strongly that this is the case.

Community benefits addressing environmental wellbeing

Public bodies also addressed environmental wellbeing through community benefit requirements. Many public bodies included a policy statement that environmental wellbeing would be included as a general consideration under community benefits requirements for procurements over £4 million.

Twenty-eight public bodies (31%) reported including community benefit requirements related to environmental wellbeing in contracts awarded in 2018-19. A few examples are below:

• the contractor on Transport Scotland’s A737 Dalry Bypass project used electric and low emission vehicles - “this is the first time these have been used on a major road construction contract in Scotland”. In addition, the contractor re-used around 84% of the materials it excavated to construct the road and embankments^[71]
• a community benefit requirement included in National Records of Scotland’s Facilities Management contract resulted in the development of a biodiversity garden^[72]
• NHS Ayrshire & Arran reported several contracts that included requirements to help the health board use more renewable sources of energy^[73]
• a clause associated with Robert Gordon University’s contract for nursery services requires the contractor to promote environmental wellbeing in a number of ways, including increasing environmental awareness among the children in the nursery^[74]

Many universities and colleges included the same blanket policy statement on community benefit requirements to address environmental wellbeing aspect of the Duty. The policy statement is as follows:

“For every procurement over £4m, the University of Aberdeen considers how it can improve the economic social or environmental wellbeing of its local area through inclusion of community benefit requirements, to assist with achieving sustainability in contracts activity, including targeted recruitment and training, small business and social enterprise development and community engagement” (public body annual procurement report, 2017-18)

Addressing environmental wellbeing through the supply chain

Some organisations also addressed environmental wellbeing through demonstrating a commitment to an ethical supply chain. Most universities and colleges, for example, referred to a requirement for all contractors to adhere to the APUC Supply Chain Code of Conduct and Sustain^[75] (APUC’s supply chain sustainability web portal). For example, one university explained how it uses the code of conduct in its 2017-18 annual procurement report:

“Procedures are in place to ensure that consideration of environmental, social and economic issues and benefits are made, where appropriate, on a contract-by-contract basis during the planning stage, utilising tools including APUC’s Supply Chain Code of Conduct, and Sustain… Current and potential suppliers are asked to acknowledge their compliance with the principles of the APUC Supply Chain Code of Conduct with respect to their organisation and their supply chain”

APUC itself also reported that they had worked with their Heads of Category and together published Responsible Supply Chain Category Guides in late 2017, which included guidance around carbon reduction and sustainable procurement.^[76]

Challenges in implementing the environmental wellbeing aspect of the Duty

There is extensive advice and support available from the Scottish Government on implementing the environmental wellbeing aspect of the Duty, including the statutory guidance associated with the Duty and the Scottish sustainable procurement tools. This includes a suite of guidance covering a wide range of environmental considerations including climate change adaptation, vehicle emissions, waste production, materials security and scarcity, and biodiversity.^[77] Individual procurement centres of expertise also provide support and guidance for public bodies in achieving environmental benefits.

During interviews though, many raised concern over how a lack of clarity around what is expected in addressing environmental wellbeing has led to varying interpretations by both vendors and suppliers. They felt that more direction was needed from the Scottish Government. While this might indicate a lack of awareness of the guidance that is already available, many interviewees stated that without more specific and practical guidance as to how environmental wellbeing should be addressed, organisations will simply include vague requirements for environmental wellbeing in tender documents to “tick the box”. They stated that this only pays lip-service to the Duty and is not effective in embedding the Duty as a core part of the procurement process that is understood by both vendors and suppliers.

One interviewee stated that the environmental aspect of the Duty was not relevant at the moment as their procurements for the year were mostly contract extensions for services, not purchases of items with environmental impact, such as vehicles. Another interviewee stated that they still operated in a diesel-based economy and that it would take much longer to prioritise climate and environmental considerations due to the large infrastructure changes which will be required. They also stated that it would take a while for suppliers to adequately address the Duty as “local firms are not fully aware of what it all means for them” and what they should be including in their bids. This was reinforced by a survey respondent, who noted that “tenderers often struggle with responses” on questions around environmental wellbeing.

In the next section, we discuss how public bodies are addressing fair work practices and payment of the real Living Wage, promoting equality and tackling inequality through procurement.

Fair Work

The Scottish Government expects public bodies to promote fair work practices in all relevant procurement processes while ensuring the appropriate balance between quality and cost of the contract, including the impact of cost on working conditions.^[78] The Fair Work Framework launched by the Fair Work Convention in 2016, endorsed by Scottish Government, sets out the different dimensions of fair work that employers should adopt. The five dimensions are security, respect, opportunity, fulfilment and effective voice.^[79]

Types of action taken by public bodies

The types of action taken by public bodies in 2018-19 to promote fair work practices was similar to that reported in 2017-18. Many public bodies only provided a policy statement or statement of confirmation in their annual reports. Many of the universities and colleges referred to similar policies, such as "Where appropriate and proportionate, fair work practices will be evaluated as part of the tender process, with areas such as zero-hours contracts and payment of the real/national Living Wage being taken into consideration" (public body annual procurement report, 2017-18) or some similar iteration of this phase.

Other examples included in the 2018 annual procurement reports include:

“Relevance of fair work practices is considered for all regulated procurements”^[80] (City of Edinburgh Council)

“We have promoted the Living Wage and the adoption of fair work practices in all our regulated procurement activities and a number of our suppliers have obtained Living Wage Accr0editation during the year” (public body annual procurement report, 2017-18)

Some public bodies addressed fair work practices through their tendering process, such as including fair work practices as an evaluation criterion or by issuing an equality and diversity questionnaire to suppliers. Data published by 85 public bodies (77%) as part of their 2018-19 annual procurement reports indicates that 36% of regulated contracts awarded by those 85 bodies in 2018-19 included a scored fair work criterion. Some examples from annual procurement reports are below:

“[The public body] has included corporate and social responsibility factors in the tender evaluation criteria in order to recognise employers who pay the real Living Wage, employ local people through apprenticeship schemes and/or are involved with local charities” (public body annual procurement report, 2017-18)

“[The public body] became an accredited Living Wage employer in April 2016.  As part of this accreditation we made the commitment to develop our understanding of fair work practices, including payment of the Living Wage in our supply chain. To this end we include questions on the approach to fair work when engaging with prospective suppliers for services. We re-tendered our seasonal operational support services during 2017 and have been successful in agreeing payment of the Living Wage to all workers under this contract” (public body annual procurement report, 2017-18)

“Invitations to Tender require all potential suppliers to complete a comprehensive Equality and Diversity questionnaire, as a mandatory requirement. Organisations which are awarded contracts are expected to comply with all current fair work practices, equality and diversity legislation and actively adopt equalities of employment and service delivery (as specified in the Suppliers’ Guide). All staff members are required to complete Essential Learning in Equality and Diversity on appointment” (public body annual procurement report, 2017-18)

The real Living Wage

The Scottish Government considers the payment of the real Living Wage to be a significant indicator of an employer’s commitment to fair work practices^[81] (falling under the ‘Security’ dimension of the Fair Work Framework) and that payment of the real Living Wage is one of the clearest ways an employer can demonstrate that it takes a positive approach to its workforce.

Types of action taken by public bodies

In their annual reports, many public bodies only included a brief statement confirming that they comply with this element of the Duty or that they encourage and support the payment of the real Living Wage. In many reports, public bodies included a statement that they have become a Living Wage employer, for example “Fife College has gained accreditation as a Living Wage Foundation Employer during this reporting period which also ensures on-site contractors (catering & cleaning) are paid in line with the Living Wage Foundation rates, updated annually in November^”[82] or that they are in the process of becoming accredited. Further examples are given below:

“The SFRS became a Living Wage Employer during the reporting period and the Service recognises the value of a well-motivated and dedicated workforce both within SFRS and those organisations which provide goods, services and works to the Service”^[83] (Scottish Fire and Rescue Service)

“SRUC is committed to contracting only with suppliers that comply with all appropriate and relevant legislation. Where appropriate, and on a contract by contract basis, the institution will assess the legislation applicable to a procurement and take steps to ensure bidders comply with it e.g. Health and Safety, Equality and Late Payment legislation. SRUC is a Living Wage employer, and therefore, where relevant and proportionate the Living Wage and fair work practices of suppliers are promoted in tender documentation”^[84] (Scotland’s Rural College)

“The University of Glasgow is proud to be an Accredited Living Wage employer.  This means:

We are committed to paying all employees at least the Living Wage.

We ensure that all casual workers engaged directly by the University are paid at least the Living Wage.

We have set up our procurement procedures to ensure that we engage with contractors and potential contractors to encourage them, as far as possible, to also pay the Living Wage to people regularly working on our premises"^[85] (University of Glasgow)

Most health bodies referred to the real Living Wage with the same or similar statements. For example, “NHS Lothian Procurement will work with suppliers through contracting and relationship management to look for opportunities for its suppliers to implement the Living Wage within their staff structures. To guide this work, NHS Lothian developed a Workforce Matters Procurement Policy.”^[86]

As was the case in relation to addressing fair work practices, some public bodies have adapted their tendering documentation to promote the payment of the real Living Wage. For example Scottish Enterprise asks tenderers to complete an “information appendix” that “requires suppliers to make a declaration in respect to real Living Wage, zero hours contracts and whether they are Scottish Business pledge accredited.”^[87]

Data submitted by public bodies as part of their 2018-19 annual procurement report^[88] shows that, based on a combined total of suppliers engaged by public bodies:^[89]

• 23% of suppliers committed to pay the real Living Wage in the delivery of a regulated contract awarded during 2018-19 (based on data from 68 public bodies (62%))
• 7% of suppliers awarded a place on a regulated contract in 2018-19 were accredited Living Wage employers (based on data from 66 public bodies (60%)) and
• 8% of suppliers awarded a place on a regulated contract in 2018-19 had signed up to the Scottish Business Pledge (based on data from 55 public bodies (50%))

Fairly and ethically traded goods

The Scottish Government expects public bodies to have appropriate standards for its organisation and its supply chain regarding legal, ethical and social issues. A public body must take all reasonable steps to ensure that all goods supplied under a contact/framework agreement “are produced in accordance with all International Labour Organisation (ILO) conventions that have been ratified by the country of their origin, in particular, in relation to labour standards, working conditions and the use of child labour”.^[90]

Types of action taken by public bodies

To demonstrate the use of ethical supply chains, some public bodies provided a policy statement in their annual report. In many reports this is the only information the public bodies provided with no further details.

“Procedures are also in place to ensure that regulated procurements are only awarded to businesses that are capable, reliable and, where relevant, meet high ethical standards and values in the conduct of their business”^[91] (Abertay University)

“Ensure that supply chain conditions and the potential for worker exploitation are taken into account where appropriate and mitigate risk through rigorous contract management” (public body annual procurement report, 2017-18)

"Where relevant, tender specifications make use of appropriate standards and labels to ensure fair and ethical trading is a consideration in suppliers’ offers"^[92] (Scotland’s Rural College)

“Where ethically traded goods and services are available, the Council will work with all relevant stakeholders and take a Best Value approach when applying fair and ethically trading principles in procurement activities”^[93] (South Ayrshire Council)

“NES has established a Sustainability Code of Practice, which aligns to the Ten Principles of the United Nations Global Compact for Responsible Business Practice. This is made available to all staff and suppliers on the NES website”^[94] (NHS Education for Scotland)

Universities and colleges referenced using the APUC Supply Chain Code of Conduct in order to ensure the use of ethical supply chains. Two examples of these are given below:

“All suppliers to contracts let by Procurement are required to agree to the APUC Supply Chain Code of Conduct. The code requires suppliers to operate in an environmentally, socially, ethically and economically responsible manner and covers specific areas such as employee working conditions, the eradication of corruption and bribery in the supply chain as well as ensuring the supplier’s operations have minimal impact on the environment” (public body annual procurement report, 2017-18)

“Where appropriate, we include social and environmental criteria in our tender processes. We use the APUC Supply Chain Code of Conduct where suppliers are required to confirm that they, and their supply chains, do not use forced, involuntary or underage labour, that they do provide suitable working conditions and terms and treat employees fairly” (public body annual procurement report, 2017-18)

The following example shows the steps the Forestry Commission took to incorporate the Scottish Government’s sustainable procurement tools into their procurement process to ensure ethical trading.

“In order to ensure proportionate application of ethical trading standards by our suppliers we will ensure we consider the use of lifecycle costing where this is relevant and proportionate to do so. We will complete a Life Cycle Impact mapping exercise before any regulated tender process. We will incorporate contract conditions to our terms and conditions to ensure suppliers comply with relevant environmental, social and employment law”^[95]

Given the relatively low number of public bodies that referenced ethical supply chains in their annual procurement reports, this suggests that there remains room for improvement. However it is not possible for us to identify whether the gap is in information provided in reports or whether there are gaps in practice. This may be something to explore with public bodies in future years.