|June 15, 2004
CC File No.:
|June 22, 2004
||Vancouver City Council
||General Manager of Corporate Services
||Implementation of a Sustainable/Ethical Procurement Policy
A. THAT Council direct staff as Phase I of the development of a Sustainable and Ethical Procurement Policy, to prepare and present a draft policy to Council on the purchase of apparel and fair trade agricultural products. The policy is to be based on best practices of similar organizations and to be implemented by December, 2004. Staff will also report on resources required to implement the policy.
B. THAT Council direct staff, on a Phase II work plan to report back by December, 2004 including resource requirements for developing and implementing a comprehensive Sustainable and Ethical Procurement Policy that incorporates environmental and social objectives as well as aligns with other sustainability initiatives including the Downtown Eastside Economic Revitalization Plan, the City of Vancouver Sustainability office objectives and objectives of the Inner City Inclusive Commitment Statement for the 2010 Winter Games.
On April 8, 2004, Council resolved that The City of Vancouver will have a Sustainable and Ethical Procurement Policy in place by December, 2004. Council directed appropriate staff to report back with answers to six specific questions in relation to the resolution.
CITY MANAGER’S COMMENTS
The City Manager concurs with the recommendations in this report.
The scope of a Sustainable and Ethical Procurement Policy is very large, potentially affecting all City operations and affecting every purchasing decision of all goods and services. The development of a Sustainable and Ethical Procurement Policy must be aligned with values of other initiatives such as the 2010 Olympics Sustainability Objectives, the City of Vancouver Sustainability office objectives and the Vancouver Agreement’s DES revitalization program. The City will need time and resources to build internal capacity to implement and administer a sustainable procurement strategy.
At the same time, organizations have just begun to develop procurement practices that address sustainability issues so there is limited experience and knowledge to draw upon. Existing experience indicates that implementation of a Sustainable and Ethical Procurement Policy is a long term undertaking. A well developed strategy that is meaningful and effective will require that the City take an incremental approach establishing clear objectives, realistic targets and achievable time lines.
The implementation of a Sustainable and Ethical Procurement Policy over two phases starting with a focus on Ethical Procurement as defined in this report. This approach is consistent with the strategy of other municipalities that have only focused on purchasing apparel and related products that have been manufactured in a way that does not violate standards set by the International Labour Organization.
There will be a need for additional staff resources to assist with the implementation of an Ethical and Sustainable Procurement Policy. The resources will be used to develop mechanisms to monitor compliance and for working collaboratively with suppliers to ensure there is no disruption of goods and services critical to the City’s operations.
One year after implementation, staff will report back to Council on the financial and service impacts of the policy on City purchases.
Council policies indirectly related to the issue of sustainable and ethical procurement include:
· Corporate Climate Change Action PlanThat staff report back on opportunities to establish an Energy Efficient Purchasing Policy by September 2004, and in the interim purchase Energy Star rated equipment and appliances where applicable;
· Contracts Goods and Services Policy – Environmentally Sound Purchasing
In order to contribute to waste reduction and to increase the development and awareness of environmentally sound purchasing of goods and services, contracts and tender specifications should be reviewed to ensure that wherever possible and economical, specifications provide for expanded use of durable products, reusable products, and products that contain the maximum level of post-consumer waste and/or recyclable content or that minimize environmental impacts.
This Report is submitted in response to Council direction to report on questions related to implementation of a Sustainable and Ethical Procurement Policy.
On April 8, 2004, Council declared “its intention to implement a Sustainable and Ethical Procurement Policy for the City of Vancouver before the end of the 2004 calendar year”, and resolved that “appropriate City staff be directed to report to Council within two months of the passage of this resolution on questions related to implementation of such a policy for City purchases of apparel, coffee and related items”.
This report answers the questions asked by Council. It is understood that the intention of Council is to adopt a Sustainable and Ethical Procurement Policy “that will ensure that all items, including apparel, coffee and related items, purchased by the City are manufactured or grown in accordance with established international codes of conduct regarding wages, workplace health and safety, forced labour, child labour and freedom of association, as embodied in the United Nations Declaration on Human Rights and International Labour Organization Conventions”.
2. Staff Investigations and Research
As a part of the context for drafting a response to the Resolution of April 8, 2004 the following actions were taken:
On April 27, 2004, the City purchasing department convened a panel consisting of representatives from Vancouver Fire and Rescue, Vancouver Park Board, Vancouver Public Library, the Office of Sustainability, the Office of the Mayor, Purchasing, Central Stores, and Business Support Services. The purpose was to provide administration staff with increased awareness and sensitivity directly from a diverse set of stakeholders on the subject of ethical procurement and sustainability.
Presentations were made by local and national apparel suppliers, along with the Vancouver Fair Trade Coffee & Network, the BC & Yukon Building & Construction Trades Council, the BC Ethical Purchasing Group, the Social Purchasing Portal, Mountain Equipment Co-op, Vancouver City Savings Credit Union, and corporate social responsibility advisors.
Policies and practices of other local governments have been reviewed including Seattle’s innovative Copernicus model for local economic, environmental, and social development and policies of Toronto, Thunder Bay and Nanaimo as specific Canadian-based references. Experiences of Canadian universities were analyzed as well.
City Staff also attended the Simon Fraser University Ethical Purchasing Conference on May 7-8, 2004 to discuss the issues related to ethical purchasing policy development and implementation.
Discussions were held with other City departments regarding complimentary initiatives that related to ethical and sustainable purchasing to identify common interests, potential alliances and operational synergies.
There is no single definition of Ethical Procurement. Ethical Procurement has been defined by the Ethical Trading Action Group as practices that “promote humane labour practices based on accepted international labour standards.” Usage varies, but ethical purchasing policies consistently include “no sweat”, often extend to “fair trade” and sometimes include sustainable practices.
The Canadian Labour Congress has described “no sweat” as follows: “Retailers and manufacturers are increasingly outsourcing the manufacture of their apparel products, searching the globe for the lowest waged production facilities and the most lax enforcement of labour regulations; and this race to the bottom is negatively affecting the jobs and bargaining power of Canadian organized garment workers and encouraging the spread of sweatshop practices in Canada; and employers purchase a significant amount of apparel products, including staff uniforms, and could therefore help eliminate sweatshop abuses by requiring that those products are made under humane working conditions, preferably in union shops.”
Fair Trade principles address the purchase of agricultural products, primarily coffee, tea, cocoa and sugar grown in Latin America, Africa and Asia. Transfair Canada states that “Canadian importers and distributors must follow certain criteria: pay a set minimum price that covers the costs of production, advance payments or extend credit to producers to help avoid debt while financing next year’s production, agree to longer term trading relationships that provide producers with added security to plan for the future and promote sustainable production practices.” Sustainable practices would include “shade grown” coffee plants grown with organic farming methods.
Sustainable Procurement has been defined by the United Nations Environment Programme (UNEP) as “the process in which organizations buy supplies or services by taking into account: the best value for money considerations such as, price, quality, availability, functionality, etc.; environmental aspects (“green procurement”: the effects on the environment that the product and/or service has over its whole lifecycle, from cradle to the grave); the entire Life Cycle of products; social aspects: effects on issues such as poverty eradication, international equity in the distribution of resources, labour conditions, human rights.”
Environmental/Green Procurement means goods and services purchased must be evaluated by environmental criteria that address recycled content, efficient use of resources, use of renewable rather than non-renewable resources, energy efficiency and waste and emissions in their manufacture. Food products purchased must be healthy – without biological or chemical contaminants, environmentally beneficial or benign in their production, and compliant with animal welfare standards.
Social and local procurement considerations state that ethical, fair trade and environmental principles apply most directly at home – within and around the City of Vancouver. Effective procurement can stimulate economic development in City communities such as the Downtown Eastside by integrating supply chain economics with corporate social responsibility to achieve community benefits.
Answers to Council Questions
The April 8 Council Resolution asked staff to report back with answers to six specific questions:
i) “What is the extent, purpose and value of city procurement of items that may be affected by this policy?”Annual apparel purchases are about $1.4 million – 48% by Vancouver Police Department, 39% by Fire and Rescue, and 9% by Engineering Services.
The City purchases about $3.7 million in food each year. The principal corporate buyers of food are Parks and Recreation, which sells food products through park concessions and golf courses, and the Community Services Group, which provides meals at Carnegie and Evelyn Saller Centres and at Gathering Place.
A comprehensive sustainable and ethical procurement policy could potentially apply to all City purchases, of all commodities, across all City Boards and Departments, amounting to between $150 million to $200 million each year.
ii) “What information does the City have now on the place and conditions of manufacture of these items?”
Current information is very limited. A few direct suppliers of apparel and apparel-related products (Claymore Clothes (1982) Ltd., Logotex Mfg. Ltd. and Tristart Cap & Garment Ltd.) have voluntarily provided information. The information provided by the suppliers gave no indication of any problems related to ethical purchasing. This information has not been verified because the City does not currently have a mechanism to do the verification.
The number of companies that report voluntarily is growing. The feasibility of obtaining third-party verification of these reports has yet to be determined. Mountain Equipment Co-op uses inspectors to review the manufacturing processes of suppliers, but such a commitment from the City would be extraordinary and likely not practical given the relatively small scale and scope of City procurement.
iii) “What would be the procedures under which a Sustainable and Ethical Procurement Policy for the City of Vancouver could be implemented?”
A policy addressing “no sweat” and “fair trade” can build upon the work of other organizations and adopt generally accepted standards. Existing policies of other organizations, such as the Maquila Solidarity Network’s “Model No Sweat Municipal Purchasing Policy” or Mountain Equipment Co-op’s “Sourcing Policy” can be customized and adapted to meet specific City of Vancouver requirements.
Initial implementation steps include requiring suppliers to sign off on the policy to create awareness and secure consent, obtaining disclosure of subcontractors and manufacturing locations and resolving related issues, establishing principles for monitoring and verification, defining reporting requirements, establishing complaint and investigation processes, and defining corrective action plans.
A policy cannot reasonably extend to every product and every supplier in every area of the City simultaneously. Effort must be initially concentrated on those procurement areas where worthwhile results may be achieved directly and immediately. These areas are to ensure that apparel purchased by the City is manufactured in conditions compliant with International Labour Organization conventions1, and that coffee and other food purchased by the City is produced under Fair Trade conditions.
Legal review and participation is an essential element in procurement policy formulation.
A broad policy that additionally encompasses environmental and green procurement and social and local procurement would require a more sophisticated development process, featuring extensive consultation and participation among both internal and external City stakeholders.
iv) “What mechanisms, if any, are in place now to ensure that suppliers to the City of Vancouver are in compliance with International Labour Organization standards?”
The City purchasing department primarily focuses attention on direct suppliers, ensuring that where required they have a local business licence and have WCB clearance. No mechanisms are in place to ensure suppliers and any foreign or domestic subcontractors or distributors in the supply chain are in compliance with international labour standards.
v) “What other relevant factors or costs might be involved in the implementation of such a policy?”
A measured and cautious approach and carefully phased implementation will be necessary to address the sheer scale and distributed nature of City procurement activities adequately, and ensure that the critical supplier relationships essential for effective service delivery are not disrupted.
Also time must be given and assistance provided to help suppliers develop policy and reporting capabilities. City suppliers generally express willingness to comply with an ethical procurement policy, but request a notification period to give time to prepare. Suppliers caution that a too-sudden policy introduction could leave the City without sources of fully-compliant products. An additional supplier concern is the cost of compliance, particularly if certification must be purchased from third-party compliance auditors.
Cost may be incurred by the City as assistance may be required from auditing agencies, if feasible, to ensure that products supplied from third world countries meet international standards.
Leading organizations such as Mountain Equipment Co-op have begun to address the full range of ethical practices of their suppliers. The scope of this industry scrutiny is evolving, but so far is applied to few suppliers, and across a narrow range of products. However, a City effort could potentially gain considerable leverage by coordinating policy implementation phases with the steadily developing efforts of other organizations.
In addition to a phased approach, a second essential implementation requirement is pro-activity – working incrementally with a deficient supplier to encourage and reward improved practices. This approach can prevent disruption of the supplier relationships essential for City service delivery, and is ultimately more effective in achieving policy goals. Otherwise, if the City takes its business elsewhere, supplier practices will probably remain unchanged.
An illustration of the difficulty in applying a broader scope policy is purchase of jackets. Jackets must be manufactured under conditions compliant with International Labour Organization conventions. Embroidered crests must be similarly ILO compliant. But additionally, the jackets include components such as zippers, manufactured by another supplier. Fabric involves yet another supplier. Each individual supplier must be identified and evaluated not only on an ethical “no sweat” basis.
An ethical procurement policy could potentially have financial consequences. Cost of purchases may increase, and so may the time required to obtain those purchases. Additional administrative staff resources may be required, and it may be necessary to purchase third-party verification of vendor reports.
vi) “How are other municipalities/cities, such as Nanaimo and Toronto, and universities, such as Simon Fraser University, implementing a similar policy?”
Ethical procurement policies of Toronto, Thunder Bay and Nanaimo focus exclusively on banning the purchase of sweatshop-manufactured apparel. Policies are generally applied by requiring vendors to certify, when tendering, that apparel products are not produced under sweatshop conditions. The policies do not contain enforcement mechanisms beyond the legal principles that underlie any contract. Similarly, the policies do not provide for audit, verification or inspection of vendor certification. The policies were recently introduced, mostly in the past year, and infractions have yet to be encountered. Presumably any future complaints will be reviewed with the vendors by the municipality, with further escalation to legal avenues if required.
Nanaimo City Council passed a policy in 2003 which states that the City will “place a
term in its tenders, specifically for apparel for City employees. This term will advise suppliers that the City of Nanaimo does not wish to encourage the purchase of products manufactured in factories where children are used as slave labour or other exploitive circumstances that impede child development. This term holds the supplier to the commitment by asking the supplier to confirm in writing, compliance of this term in the bid response.”In 2002, Toronto City Council approved “a purchasing policy that will require the City to buy its uniforms and other apparel items from “no sweat manufacturers” that respect the rights of their workers regarding working conditions and pay”. The Toronto policy similarly depends on pledges signed by vendors.
Also in 2002, Thunder Bay Council passed a resolution requiring a “condition of contract” with respect to No Sweat Procurement. This condition of contract would advise suppliers that the City of Thunder Bay does not wish to encourage the purchase of products manufactured in factories where children are used as slave labour or other exploitive circumstances which impedes child development. The recommended condition of contract holds the supplier to this commitment by asking them to confirm in writing, compliance of this directive in their bid response. The City of Thunder Bay requires bidders for the supply of linens, textiles, uniforms, shoes or any product where possible exploitation of children in sweat shops exist to sign the “condition of contract” as part of their bid.
As of May 2004, ten universities across Canada have adopted ethical procurement policies. The majority of policies apply to retail book store operations only. Simon Fraser University has appointed an Ethical Purchasing Policy Task Force to work towards adopting a “No Sweat” and Fair Trade purchasing policy for products bought and sold at the university.
The University of Toronto became one of the first Canadian universities to develop a code of conduct for trademark licensees to ensure that manufacturers and suppliers of trademarked merchandise for resale through retail operations meet minimum employment standards regarding wages and benefits, working hours and overtime compensation. The code also has specific prohibitions on child labour, forced labour and harassment and requires licensees and their contractors to recognize and respect the right of employees to freedom of association and collective bargaining. The University of Toronto’s code, and the parallel efforts of McMaster University took more than three years to develop. The University adopted an approach that engages with current suppliers and uses the code for future contracts, once current contracts expire. Compliance and disclosure requirements have been implemented throughout the acquisition process. The university places an emphasis on working with non-compliant suppliers to address concerns and issues.
The City can, as a first phase, adopt the same approach as other organizations to focus first on an Ethical Procurement policy. This policy requiring vendors to certify that apparel is “no sweat” can readily be extended to certification that agricultural products are “fair trade”, and enforced in the same manner.
Such a policy would be “sustainable” as well as “ethical” in the sense that fair trade practices are not just fair to growers but also environmentally-friendly, and sweatshops may abuse not just their workers but the environment as well.
Council has resolved that the City will have a Sustainable and Ethical Procurement Policy in place by the end of 2004. It is evident that the policy must address the basic principles of ethical purchasing, by ensuring that apparel is not purchased from sweatshops and that coffee and other agricultural products are acquired from fair trade suppliers.
It is suggested that Council direct staff to prepare and present a draft policy for Council review to address the purchase of apparel and fair trade agricultural products in a manner similar to that of other local governments. Staff can report back at the same time on resources required to implement the recommended policy. After the policy has been in effect for one year, staff will be in a better position to assess the financial and service impact the policy has had on City purchases and report back to Council.
Council can direct staff, as a subsequent phase to prepare a procurement policy that includes not only sweatshops and fair trade, but goes much further to integrate a comprehensive range of environmental and broad social objectives. Such a policy is a considerably more complex undertaking, and will require a coordinated effort with other ongoing City initiatives and organizations.
The City will also need time and resources to build the internal capacity necessary to develop, implement and optimize a comprehensive sustainable and ethical policy. Efforts must be cautious and aim at making steady incremental change in supply chain relationships over time.
Key stakeholders must be engaged in policy development and implementation and suppliers must become partners in solutions. A stakeholder approach to policy development will ensure that the complementary and competing interests of key groups will be considered and that an approach to implementation can be agreed upon that will ultimately be both administratively practical and meaningful.
A Sustainable and Ethical Procurement Policy will be complimentary to other City initiatives such as the Sustainability strategic action plan, green building policy and Corporate Climate Change Action Plan. Therefore, the development and implementation of a comprehensive procurement policy will depend in part on coordination with the work being done on these other initiatives.