Development of sustainability in public sector procurement

Abstract

Public organizations are increasingly adding environmental and social aspects in their strategic agendas. This paper focuses on the actors and factors that influence the speed of implementation of sustainability initiatives. Four healthcare organizations in The Netherlands were studied. Semi-structured interviews were conducted with top management, budget owners and procurement professionals. Although top management assigned strategic importance to sustainability initiatives, budget owners had the final say in implementation. Procurement professionals had very little influence on the implementation process of sustainability.

Keywords:

• Healthcare
• public procurement
• stakeholder theory
• sustainability

There is an increasing recognition that organizations must address the issue of sustainability in their operations. Sustainability is usually defined as utilizing resources to ‘meet the needs of the present without compromising the ability of future generations to meet their own needs’ (WCED, 1987). Given the ambiguities and vagueness of this definition, complications frequently arise when attempting to apply the principles of sustainability in practice. The term ‘sustainability’ has been interpreted in a variety of ways, ranging from an inter-generational philosophical position to a multi-dimensional term for business management. Sustainability is conceptualized within the concept of the triple bottom line (Elkington, 1998). The concept involves simultaneous consideration of the economic, environmental and social effects of business activities (Elkington, 1998; Sikdar, 2003).

Many studies have focused on the drivers for and barriers to the implementation of sustainability initiatives. The majority of these studies were conducted on sustainability within private sector organizations (Bansal and Roth, 2000; Berns et al., 2009; Giunipero et al., 2012). In today’s public sector, sustainability is an important topic (Walker, 2015). The potential contribution of public procurement to sustainability is evident considering the size and impact of the public sector in terms of its percentage share of the GDP of a country (Preuss, 2009). It is difficult to assess whether the focus on private sector studies indicates a lack of sustainability initiatives in the public sector, or whether the public sector is just being under-researched. A limited number of studies has investigated the role of the public sector in the development of sustainability initiatives (Warner and Ryall, 2001; Swanson et al., 2005; Thomson and Jackson, 2007; Preuss, 2009; Walker and Brammer, 2009; Brammer and Walker, 2011; Gelderman et al., 2015).

Most commonly, research has been on leading public sector organizations and successful implementations of sustainability, limiting the generalizability of the findings (Walker et al., 2008; Gelderman et al., 2015). More research could usefully be conducted on the public sector organizations that lag behind in developing sustainability initiatives. Managers in public agencies are faced with procedural, legal and political constraints. In addition, many internal and external stakeholders have an impact on the success of sustainability initiatives. These stakeholders can have conflicting goals. A study into the development of sustainability in the public sector should therefore include an investigation of factors (drivers and barriers) and actors (multiple stakeholders). This paper answers the following research question: ‘What actors and factors influence the speed of implementation of sustainability in the public sector?’

We looked at public sector organizations that were both successful and not so successful in implementing sustainability initiatives. Our case study organizations were non-profit healthcare organizations specializing in mental care, elderly care and care for disabled people. Data were collected by document analysis in order to learn how the decisions on sustainability were being made. In addition, interviews were conducted with policy-making management, procurement professionals and budget owners. The procurement portfolio of healthcare organizations has a broad and diverse character, ranging from medical supplies to facility services and from contracting contractors to contracting for the maintenance of public infrastructure.

Literature review

Sustainability in the public sector

The triple bottom line (Elkington, 1998; Carter and Rogers, 2008) includes social fairness and economic achievement. It is an effective and powerful concept to convey what sustainability means for an organization. Sustainability initiatives must be linked to organizational strategy instead of several individual projects and programmes that are controlled independently of each other. Sustainability needs to develop in the whole organization in order to become a part of that organization. Transparency provides the active connection with internal and external stakeholders to improve processes, ensure co-operation, and encourage a wider vendor base competes for public contracts. Brammer and Walker (2009) concluded that most public organizations do include sustainability criteria in their purchasing, although many aspects of sustainability are not being properly addressed.

The integration of sustainability initiatives into a firm’s purchasing strategy needs partnership and joint value creation methodologies with selected actors in the supply chain (Carter and Carter, 1998; Crespin-Mazet and Dontenwill, 2012). Drivers and barriers could be both internal and external to the organization (Walker et al., 2008). Preuss (2009) argued that indirect initiatives for sustainability development are also necessary. Such initiatives include the compilation and dissemination of sustainability-related information. A first step in this direction can be to draw up a ‘sustainable procurement policy’ with clearly stated goals and policies (Thai, 2001; Warner and Ryall, 2001).

Drivers and barriers

Different types of non-business actors and factors have been identified as influencing sustainability activities and legitimacy in the field; labeling organizations, technical experts, ecological foundations, the government, the media as well as standardization and regulatory agencies (Crespin-Mazet and Dontenwill, 2012). Sustainability initiatives and corporate strategy must be closely interwoven, rather than remaining independently-managed programmes, and top management support is often a key driver for successful implementation (for example Zhu et al., 2008). Specific motives were found in regulatory compliance, competitive advantage, stakeholder pressures, ethical concern and top management initiatives (Bansal and Roth, 2000; Berns et al., 2009; Ates et al., 2012). Barriers in profit-driven organizations were connected to a lack of top management support, the cost of sustainability, inappropriate standards and regulations and a lack of understanding among business leaders (Giunipero et al., 2012). Internal barriers include cost and lack of legitimacy, whereas external barriers include regulation, poor supplier commitment and industry specific barriers. Organizations seem to be more influenced by external than internal drivers (Walker et al., 2008).

Policy-makers face difficult decisions when they have to assess trade-offs between conflicting procurement goals and policies, for instance between costs, quality, timeliness, risk, economic goals, social goals, competition, environment protection and green procurement (Thai, 2001). Barriers are likely to occur, considering the complexity and variety of public procurement in combination with multiple stakeholders and conflicting goals (Uyarra and Flannagan, 2010).

Stakeholders

Stakeholder theory attempts to articulate a fundamental question in a systematic way: which groups are important for a matter and therefore needs appropriate management attention, and which are not (Mitchell et al., 1997)? Managers need to be aware of all of their stakeholders (Freeman, 1984), not just the groups where there is a financial dependence (Kamann, 2007). A key point in the debate on sustainability is the inclusion of stakeholders and the integration of their respective demands. Stakeholder analysis can reveal which stakeholders are able to have an impact on the implementation and success of sustainability. In the case of public sector bodies, a single political actor often represents the interests of a large group of other, relatively powerless, stakeholders. Stakeholder pressures and respective reputational and legal risks are usually seen as a key driver toward the implementation of standards and codes of conducts. Stakeholder management is crucial for driving sustainability performance (Asif et al., 2013).

In the context of sustainable sourcing, little research has explicitly included stakeholder concerns (Ehrgott, 2009; Foerstl et al., 2010). Internal stakeholder pressure, particularly from middle managers, can be a strong force behind sustainability initiatives, particularly middle managers (Ehrgott et al., 2011). Purchasing departments are characterized by a distinct interaction with a broad set of stakeholders, including buyers, suppliers, contractors, the community and internal employees in most of the other functional areas of the company (Carter and Jennings, 2004). Stakeholder management is a key success factor for both environmental management and social sustainability (Ehrgott, 2009).

Stakeholders can be represented in a matrix using ‘power’ and ‘level of interest’ as axes (Johnson and Scholes, 1989). This matrix differentiates four types of stakeholders—see figure 1. Stakeholders in sections ‘A’ and ‘B’ have high levels of power. Powerful actors with a low interest need to be kept satisfied; actors with a high level of interest should be viewed as key players. A minimal effort is required for stakeholders in section ‘C’ (low on interest, low on power), whereas stakeholders in section ‘B’ should be kept informed, because of their high level of interest.

Figure 1. Types of stakeholders (Johnson and Scholes, 1989).

Mitchell et al. (1997) identified three major attributes of stakeholders:

• Power to influence the organization—coercive, utilitarian or normative.

• Legitimacy of the relationship with the organization—individual, organizational or society.

• The urgency of a stakeholder’s claim on the organization—calling for immediate action, either time-sensitive or critical to the stakeholder.

It is important not to focus on just one of these attributes but, rather, to categorize stakeholders based on an investigation of all three attributes. Nevertheless, stakeholders without or with less presence of one of the attributes could be important to an organization. Mitchell et al. (1997) suggest that ‘salience’ it is needed to evaluate stakeholder–manager relationships systematically, both actual and potential, in terms of the relative absence or presence of all or some of the attributes. Stakeholders require different degrees and types of attention depending on their attributed power, legitimacy and/or urgency. Levels of these attributes can vary from issue to issue and at different times (Mitchell et al., 1997). Establishing salience with stakeholders is a dynamic process that needs recognition of situational uniqueness and managerial perception to gain insights into how relationships need to be prioritized (Neville et al., 2004).

Stakeholder theory is a promising foundation for analysing which actors influence the speed of implementation of sustainability initiatives. Top management set the policy and goals for developing sustainability and the implementation is delegated to the purchasing department. The elements needed for successful implementation are a formal policy with clear goals (Thai, 2001; Warner and Ryall, 2001) and a clear dissemination within the organization (Preuss, 2009). Gelderman et al. (2015) report that in municipal organizations three internal actors are important in relation to sustainability initiatives: party-political executives, procurement managers and department managers. Similarly, the three important internal actors with a relationship to sustainability initiatives in our study were the top management of the institution, the procurement professionals and the budget owners.

Research model

According to Preuss (2009), public organizations must collect and disseminate sustainability-related information. Organizations with successful sustainability initiatives are likely to have a sustainable procurement policy (Thai, 2001) and will be providing good training to their procurement officers (Brammer and Walker, 2011). Including all stakeholders in making decisions about sustainability initiatives can make the difference between success or failure.

To answer our research question, we developed a framework that recognizes the relationships between actors, factors and sustainability initiatives (see figure 2). The ‘actors’ are the top managers, procurement professionals, and budget owners. ‘Factors’ are related to management support, information/ communication, organization and external pressure. Both actors and factors influence sustainability initiatives—the actors influence each other and they also influence the factors. The factors have either a stimulating or a countering effect on the implementation of sustainability initiatives and are divided in four subdimensions: management support; information/communication; organization; and external pressure.

Figure 2. Relations between actors, factors and implementation.

Methodology

Research design

We used a case study approach because it is best suited for an explorative study (Yin, 2009). The case study was designed so that we could investigate the actors and factors that speed up or hinder the implementation of sustainability. By comparing the results of successful and less successful implementations of sustainability initiatives, we identified which actors and factors made a difference to the speed and effectiveness of implementation. The cases were divided into two groups based upon the status of sustainability implementation in the organization: progressive organizations; and less progressive organizations.

Our sample of case study organizations is shown in table 1. Dutch healthcare organizations are mainly funded with public money and are therefore subject to some government regulation. However, they are not required to comply with all tendering legislation. Two healthcare organizations were selected, because they were leaders on sustainability development. These organizations had a clear sustainability agenda and sustainability had a strategic position. Another two healthcare organizations were selected because their sustainability agenda was lagging. They considered sustainability important, but implementation had not been successful. Degree of sustainability was measured with a limited number of questions which were submitted to the case study organizations before the interviews. Questions were selected from a Dutch municipal sustainability ranking.

Table 1. Case study organizations.

Semi-structured interviews were held in order to cover the topic, while remaining open to the broadness of the subject. The interviews were conducted with pre-selected members of the top management of each organization, procurement professionals and budget owners. Prior to the interviews, we studied and analysed the policy documents published by the case organizations. The information from these documents was used in the interviews. Before any interview took place, we were informed about the sustainability initiatives in each specific organization.

Operationalization

Indicators were identified for each dimension as actual empirical measures. The interviews tried to capture the participants’ perceptions of the specific cases and position the outcome under the headings of either actors or factors. Transcripts from the interviews were coded. We labeled relevant pieces that were repeated, or surprised us; and we created categories based on these labels: organizational incentives, knowledge (sharing), role of actors, influence of actors, drivers, barriers and origin of sustainability projects.

Results and discussion

Sustainability was on the agenda of all of our case organizations. We found that the development of sustainability was a result of internal motivation or had a more external focus. The case organizations all had comprehensive purchasing portfolios, from products to services, like hiring external expertise, software applications, utilities, automobiles, greening, cleaning, office supplies, wound care etc. The organizations had developed many different sustainability initiatives, including environmental protection, social affairs and economic (regional) topics.

Organization of sustainability

Table 2 shows the scores of each organization on the selected features of successful sustainability initiatives. Each selected feature was scored on a five-point scale: 1–2 meant that this feature was either not very present or absent; and 4–5 meant that the feature was very present or completely present.

Table 2. Evaluation of sustainability progress in the four case organizations.

Organizations 1 and 2 were found to be leading in the implementation of sustainability initiatives. These organizations had a structural sustainability budget, they had achieved their goals, and they were keeping the most important stakeholders well informed. Organizations 3 and 4 lagged behind in these respects. One organization had developed sustainability guidelines but they were not made an integral part of the strategic agenda.

Actors

Top managers in all organizations are the most powerful actors because they accumulate all three stakeholder attributes: power, legitimacy, and urgency (see Neville et al., 2004). Top management influences all other parties in an organization. Top management in our organizations leading sustainability was a facilitator and involved budget owners and procurement professionals in the development (Brammer and Walker, 2011). Top management had actively participated in some initiatives, which had inspired employees to start new initiatives: ‘Development of sustainability gives our institution a unique selling point towards the government and our funders and puts us in the position to create extra value for our stakeholders’.

Top management in organizations 3 and 4 made sure that they had a policy on sustainability, but they did not facilitate implementation. Sustainability initiatives were developed as small local projects in business units, but were not developed into corporate projects.

In our progressive organizations, budget owners were committed and supportive of sustainability initiatives, and offered incentives. The active participation of both top management and budget owners generated strong internal pressure for sustainability initiatives (Ehrgott et al., 2011).

The budget owners in our lagging organizations had a negative impact on the implementation of sustainability initiatives. Their main focus was on finance.

Procurement professionals have an important role in linking the external knowledge to internal needs. Procurement professionals are able to influence sustainability initiatives but they have to be very subtle in doing so. Their knowledge of sustainability and organizational awareness are important instruments in the support of sustainability initiatives (Preuss, 2009; Brammer and Walker, 2011; Bowen et al., 2011; Paulraj, 2011). The procurement professionals in our progressive organizations had the right knowledge and tools to facilitate this process, in contrast to the procurement professionals in our lagging organizations. The challenge for all procurement professionals in our study was to be aware of all perspectives within the organization, including the different interests and goals of actors (Uyarra and Flannagan, 2010).

Factors

The factors influencing the implementation of sustainability were related to the actors—see figure 2. The results of our study show that the leading organizations had good management support. Management also demonstrated the appropriate leadership (Ates et al., 2012) and created the right incentives (Walker and Brammer, 2009). The lagging organizations were more focused on short-term financial profits and had difficulty changing this point of view (Berns et al., 2009). Top managers in the leading organizations made sustainability very visible and transparent, both internally and externally; the marketing aspect of sustainability is extremely important (Walker et al., 2008).

The top management in the lagging organizations were not very active promoters of sustainability initiatives and did not inform their own organization about this topic. Top management in these organizations was often unaware of local sustainability initiatives. Another driver in the progressive organizations was the education of employees on sustainability (Bowen et al., 2011; Paulraj, 2011). Educating employees makes them more concerned about sustainability, especially when successful initiatives are celebrated.

Leading organizations developed sustainability together with their most important stakeholders. Goals were evaluated jointly and adjusted after consultation. Regulatory compliance in these organizations was very high (Ates et al., 2012). Lagging organizations did not seem to be able to develop sustainability after setting a policy.

Healthcare organizations are subject to external pressure to think sustainability. However, the leading organizations developed sustainability from internal motivation and were less concerned with external pressure. Sustainability was an ethical concern in these organizations. In contrast to the findings of Walker et al. (2008), we found that organizations are influenced by internal drivers rather than external drivers. Knowledge-sharing was an important driver of sustainability.

Conclusions and recommendations

Public and private organizations need to address the issue of sustainability in their operations. Only a small number of studies has investigated the role of the public sector in the development of sustainability initiatives; to begin to address this we investigated the factors and actors which might impact on the speed of implementation of sustainability.

Top management and budget owners were the most influential actors. Top management was the main driver for the implementation of sustainability initiatives. Support from budget owners was necessary to create successful initiatives in business units. In the lagging organizations, top management did not prioritize sustainability and budget owners were not very interested in the development of sustainability. The limited role of procurement professionals was painfully apparent—they acted in a purely advisory capacity. Procurement professionals were only able to use their knowledge on the topic to influence other actors. Management support appears to be very important for the development of sustainability. Good information and communication are also vital. Good education and training on sustainability, as well as celebrating successes, were critical. Our progressive organizations had sustainability policies that were continually adjusted in co-operation with stakeholders.

Recommendations for further research

A limitation of our study was the number of healthcare organizations involved and the number of respondents we were able to interview. Based on stakeholder theory, our framework identified actors and factors with an impact on the implementation of sustainability initiatives. However, our study was limited to the perspectives of institutional top management, budget owners and procurement professionals. A promising line of research would be to focus on external stakeholders and their impact on sustainability initiatives. Future studies could also examine how small project teams manage successful initiatives. It would be useful, too, to replicate this study with larger number of healthcare organizations and more internal respondents.

We agree with Walker (2015) who identified sustainable procurement, along with healthcare purchasing, as a priority for both practitioners and academics.

Additional information

Notes on contributors

Cees J. Gelderman

Cees J. Gelderman is Associate Professor of Marketing and Purchasing Management in the Faculty of Management, Science and Technology, Open University, Heerlen, The Netherlands.

Janjaap Semeijn

Janjaap Semeijn is Professor of Supply Chain Management in the Faculty of Management, Science and Technology, Open University, Heerlen, The Netherlands.

Rob Vluggen

Rob Vluggen is Procurement Manager at Koraal Groep, The Netherlands.