Procurement provides a valuable leverage point for CH2M HILL to lessen its environmental impact and influence supplier behavior, and we are committed to working with partners throughout our supply chain to reduce impacts and create markets for sustainable goods and services.
CH2M HILL’s procurement organization separates management of direct (client) project enterprise agreements from indirect (overhead) procurement enterprise agreements. This separation allows us to assess the environmental performance of our key suppliers more robustly and improve our sustainability decision-making for the goods and services that we purchase for ourselves (indirect), such as paper, office supplies, and furnishings. This method also allows us to assess the robustness of the sustainability programs of our suppliers and subcontractors, and it provides our engineers and construction design professionals with tools to use with clients in selecting more sustainable construction materials, equipment, and services.
In a global supply chain consisting of hundreds of supplier relationships, we start by focusing on those suppliers who are willing to partner with us to reduce our environmental impact. These suppliers work with us to establish meaningful, effective, and industry-relevant contractual metrics that define specific sustainability objectives. The Indirect Procurement group segments suppliers into four tiers:
- Tier 1 – Strategic: Long-term, high-volume agreements
- Tier 2 – Preferred: Long-term but lower-volume agreements
- Tier 3 – Value Add: Shorter-term, lower-volume agreements with infrequently used suppliers
- Tier 4 – Tactical: Typically a one-time procurement with no ongoing relationships or expenditures
Tier 1 and Tier 2 agreements reflect those supplier relationships with significant spend, transaction volume, and business impact. Accordingly, these are CH2M HILL’s most important indirect supply chain relationships and have become the focus of the Indirect Procurement group’s sustainability program.
In 2010, we began requiring suppliers to respond to questions about their sustainability programs and demonstrate continuous improvement. We use four sets of sustainability metrics of increasing rigor with our Tier 1 and Tier 2 suppliers. We measure their performance against the contracted metrics as part of our supplier performance management system. In 2012, we plan to evaluate the performance of six such suppliers.
In 2012, our indirect spend with Tier 1 and Tier 2 suppliers with sustainability metrics in their agreements was US$61.1 million, an increase of US$16.9 million over the previous year. Out of our total indirect spend, about 19 percent is with Tier 1 and 2 suppliers with sustainability metrics. Sustainability metrics are added to new and renewing Tier 1 and Tier 2 supplier agreements so that, over time, we move toward a majority of our indirect spend with sustainable suppliers.
When procuring office products and other supplies, the Indirect Procurement group places a priority on selecting green products (“eco” mark products). CH2M HILL purchased US$557,000 in recycled products in 2012. Our percentage of recycled purchases decreased from 40 percent in 2011 to 38 percent in 2012 because we brought a new, global supplier online that displaced other regional suppliers. This created some confusion among staff over what items to purchase; part of this result is reflected in the decrease in recycled paper purchasing as well. In 2013, we will continue to work with our supplier to improve the sustainability program by making sustainable purchases the default selection and tracking the results of our purchases.
In addition to indirect procurement activities in North America, our London office worked with a local stationary provider to increase the range of green office products. The Dubai office integrated a sustainable procurement procedure into administration department processes; employees now purchase most office items from local markets to reduce their carbon footprint.
In 2011, CH2M HILL’s Direct Procurement group began incorporating sustainability into the design, procurement, and construction of our projects by promoting the selection of suppliers and subcontractors who consider sustainability to be important. In 2012, we established a supply chain sustainability strategy for evaluating and selecting products, complete with procedures, tools, communications, training, and metrics for reporting implementation progress.
Because no industry standard is currently available, CH2M HILL pioneered developing a direct procurement sustainability solution for the environmental consulting industry. Our concept for direct procurement addresses factors promoted by authorities such as the World Business Council for Sustainable Development, Pollution Prevention Resource Center, World Resources Institute (WRI), and the Electric Utility Industry Sustainable Supply Chain Alliance, as well as CH2M HILL’s own sustainability program. Our solution is integral to our standard procurement process, permitting sustainability to be implemented with minimum additional effort.
We have enhanced our supplier qualification system to allow us to rank suppliers and subcontractors based on their response to a set of sustainability questions. The sustainability aspect of our qualification system is still relatively new, but over 39 percent of our registered supply chain base has now completed the sustainability questionnaire. Our toolset and these data now permit us to establish a graded rating from A through E, with which we can prequalify suppliers and subcontractors and select potential bidders who have a more robust sustainability program. As we gather more information, we plan to identify areas where it makes sense to set targets for working with suppliers and subcontractors to improve performance.
Our toolset is now also configured to enable our staff to work with clients in selecting more sustainable products from our suppliers. As an integral part of our standard procurement process, sustainability data requirements can be obtained for quoted products as part of the bid solicitation process and then captured and considered as part of the product evaluation and selection process. Our standard bid solicitation includes a mandatory questionnaire that addresses recycled content, the presence of hazardous and polluting materials, natural resource conservation, embodied carbon, and product performance. Each question has a range of answers that allow us to rate the answers on a graded scale from A through E. The ratings of each question are then averaged to establish an overall rating for each quoted product. Our toolset permits us to collect and report sustainability metrics for purchased products on projects that have sustainability as an objective.
In 2013, our focus will be on implementing the direct procurement sustainability solution, enhancing our toolset based on lessons learned, incorporating any newly emerging concepts, improving our metrics, and modifying our automated tools to further enhance data transfer efficiencies, enterprise data collection, and reporting capability.