Sustainable Procurement Policy For Godrej Consumer Products

GCPL sustainable procurement objectives

Describe about the Sustainable Procurement Policy for Godrej Consumer Products.

Godrej Consumer Products Limited (GCPL) is one of the largest and biggest home-grown personal and home care company in India. The company is focused on becoming a leader in fast-moving consumer goods (FMCG) particularly in the emerging markets and thus company has continued to substantially grow in the sector. One of the GCPL critical pillars is the Godrej Group’s Vision 2020 which is founded on environmental sustainability “Good & Green.” Furthermore, the company’s vision is based on a shared value principle; the vision has been instrumental in promoting the operating practices and policies that are key in improving the company’s competitiveness while also enhancing social and economic conditions in communities within which the company operates. In accordance with the Good & Green vision, the company aspires to establish a more employable Indian workforce, innovate for good and green products as well as build a greener India. The company also believes that business firms have the capacity of helping to solve social issues that are critical in the community whereas improving their competitive advantage in the marketplace.

Sustainable procurement is defined as a process through which public organisations accomplish their needs for services and goods, works and utilities in a manner that satisfy value for money on an entire life-cycle with regard to benefit generation not only to the business firm, but also to whole society and the economy while at the same time significantly reducing negative effects to the environment (Meehan & Bryde, 2011). This paper critically analyses Godrej Consumer Products Limited’s sustainable procurement policy in terms of its objectives, comprehensiveness, potential effectiveness, practical implementation and measurability.

GCPL sustainable procurement objectives

The company’s sustainable objectives are grouped into four broad categories, including:

To be ethically driven: the company strives to conduct its business operations in a transparent and fair manner while upholding integrity, honesty, high moral and ethical standards as well as respecting human rights (Singh, Bakshi, & Mishra, 2015). The company has a strong belief that maintaining high ethical standards across the company is vital for establishing sound business relationship. In this regard, the company requires its suppliers to share a similar commitment as they conduct their trade.

To be socially focused: GCPL is also strongly committed to supporting and ensuring sustainable development as well as business practices. For instance, the sustainable practices encompass the social performance criteria (Pai, 2013). The organisation also believes that it should play an important and profitable role within the larger society and the local community. As such, GCPL contributes towards economic and social development of the communities within which they operate and hence they also expect their suppliers pursue a similar course (Pai, 2013).

Comprehensiveness of GCPL Sustainability Policy

To be green inspired: GCPL fully understand that environmental concerns are issues of today and thus they are real challenges that must be addressed in the now rather than later. For this reason, the company aims to making its value chain environmentally responsible and friendly. GCPL is robustly committed to complying with local environmental laws and regulations that are associated to the environment particularly in regions and countries that it has its operations as well as where they source products, services and materials (Singh, Bakshi, & Mishra, 2015). The company operates with full knowledge of the scope and nature of operations of their suppliers varies and hence strongly emphasise on sustainability principles (Walker & Philips, 2008). 

To be quality centred: the company is also committed to ensuring that quality is adhered to and manufacturing and product standards are relied upon is it is of great importance to the company.

Comprehensiveness of GCPL Sustainability Policy

Each of the company’s sustainability objectives is expansively comprehensively defined to tackle various sustainability issues. For instance, the ethically driven principle encompasses business integrity and ethics that significantly addresses issues of conflict of interest; bribery, corruption, gifts and donations; confidentiality; restrictive and anti-competitive trade practices (Force, 2006). Business integrity in this regard ensures that the company as well as its suppliers undertake their business operations ethically. Similarly, the ethically driven objective also addresses human rights issues whereby GCPL prohibits forced and child labour; compensation and working hours; and discrimination (Ghoshal, 2011). GCPL suppliers must make sure that there is no discrimination in their hiring practices together with employment based on gender, race colour, nationality, sexual orientation, marital status and religion. The objective also encourages transparency and accountability, compliance with the laws and regulations of the land (Brammer &Walker, 2011).

In accordance with the above discussion, the social focus objective is also comprehensively elaborated to encompass various operational guidelines that ensure sustainable procurement. For instance that company works to ensure that it has responsible conduct with stakeholders in that it deals fairly with suppliers/vendors, encourage diversity in the workforce, and engage and involve local communities (Rimmington, Carlton Smith, & Hawkins, 2006). Furthermore, under the social focus objective, GCPL is determined to ensure employee health and safety, and local community development. Accordingly, to be green inspired GCPL has holistically defined whereby the company has positioned itself to offer green products produced through green processes through reduction of water intake and carbon emission, efficient systems and processes, minimising the usage of toxic and hazardous substances and materials, toxic waste disposal, and using renewable energy. Consequently, the green inspired objective encourages the company reduce, reuse and recycle; this is specifically employed to ensure zero waste to landfill, responsible resource consumption, and packaging material that reduce environmental impact. GCPL works to Adopt green initiatives and practices to help in the monitoring of the environmental performance with a singular of becoming environmental friendly.

Potential Effectiveness

GCPL sustainable procurement is centred on quality whereby the company has installed quality management system that makes sure that company suppliers develop quality objectives, procedures, policies and have implemented certified Quality Management System by ISO authority. The company also expects its suppliers to give utmost significance on facility and machinery design, installation as well as maintenance and ensure verification of the same. Significantly important, suppliers are expected to have good manufacturing practices together with quality controls. Additionally, through quality centred GCPL has made strides in material management whereby the company requires its suppliers to have established practices for storage, handling and transportation of raw materials together with maximisation of risk prevention measures through proper handling of rejected items and good warehousing.

Potential Effectiveness

With regard to the comprehensiveness of GCPL sustainable procurement policy, the policy has effective potentials. The policy address all areas of sustainability and thus if fully implemented and adhered to, it will ultimately ensure sustainable procurement across the organisation. Ethical procurement practices that are defined with the policy expressively ensure that company suppliers adhere to the company’s sustainable requirements. The social focus widely helps the company as well as its suppliers to be socially responsible to the localities within which they operate. Based on this, the policy has the potentiality of being effective when fully implemented.

Practical Implementation and Measurability

Policy applicability and implementation

GCPL fully understands that their suppliers can be categorised differently based on their scale, services/products they supply, the type of raw materials they use, the corporate culture and their modes of operation. Taking this into consideration, the company has designed the procurement police in a way that it is fully acceptable and works for all suppliers; however, levels and types of compliance differ with regard to the supplier type together with the principles applicable to them. Given this understanding, GCPL requires its suppliers to establish internal policies, structures of governance, systems, and processes while also implementing any other sustainability measures that will ensure they fully adhere to the company’s sustainability policy. Additionally, suppliers are required to disclose to GCPL their sustainability goals together with the measures they have put in place to meet the various principles stated within the policy. GCPL also is ready to work with their suppliers to unearth any sustainability issues that are not in line with the company’s expectations whereas helping them in addressing the identified gaps.  

Practical Implementation and Measurability

Measuring/Monitoring and Reporting

In accordance with GCPL sustainability policy, the company requires suppliers to monitor and report the steps made by them in ensuring their adherence to the policy. Furthermore, GCPL recommends that their suppliers install management systems and monitoring and reporting mechanisms wherever needed to effectively implement as well as manage sustainability objectives.  As such, suppliers are expected to focus on a continual enhancement of their performance in order to comply with the sustainability policy.

Conclusion

Godrej Consumer Products Limited (GCPL) is regarded as the India’s biggest personal and home-grown care company. The company is focused on becoming a leader in first-moving consumer goods market. With regard to this broad objective, the company has established a sustainable procurement policy aimed at propelling it towards achieving the stated objective. This paper has critically analysed GCPL sustainable procurement policy by comprehensively analysing its sustainable objectives, the comprehensiveness of the policy, potential effectiveness of the policy, practical implementation and measurability of the policy. In accordance with the analysis, GCPL sustainable procurement policy is sound and essential for it to satisfy its sustainable procurement goals and objectives.

Sustainable development is increasingly attracting massive attention and recognition from all corners business spheres as well as in governments and non-governmental organisations regardless of it being new for many business executives. In essence, sustainable development leave alone sustainable procurement is remains abstract to many. From a conventional setting, business organisations seek practicality and precision as the source for their planning efforts; sustainable development is a new concept that is not agreeable to simple and universal definition. It is dynamic and continually changes over time while responding to the society’s evolving priorities as well as increased information. The business’s contribution to sustainable development role remains indefinite. Regardless of all businesses playing a role in sustainability agenda, their abilities vary by organisation size and sector. Many are times where some business executives consider making money as the principle objective of a company; however, in the current business environment, business expatriates recognise the broader significance of sustainability and social responsibility. There is no consensus among business executives as to how to achieve the best balance between the broader good of the society and the narrow self-interests. In this regard, business organisations are unendingly confronted between what they need to trade off what they would like to do and what they must do in pursuit for financial survivability.

Sustainable procurement is a process through which public as well as private organisations accomplish their needs for services and goods, works and utilities in a manner that satisfy value for money on an entire life-cycle with regard to benefit generation not only to the business firm, but also to whole society and the economy while at the same time significantly reducing negative effects to the environment. Following this understanding, this individual case study report, using “Finland-Helsinki: Business Services: Law marketing, Consulting, Recruitment, Printing, and Security (Tender Notice)” discusses how to present the business case to the decision maker, procurements strategies for sustainable development, and how to design the specifications and tender documents to enhance the tender. Similarly, the report also brings to light how to prepare contracts to ensure sustainability and strategic outcomes, designing contract administrations and management regimes to make sure that sustainable outcomes are achieved, and terms of monitoring, governance, audit and reporting on the project are also discussed.

Presenting Business Case Involving Significant Sustainability aspects to the Decision Maker

A business case is a tool that advocates and ensures that an investment is justified with regard to the strategic direction of the organisation together with the benefits it delivers. In essence, a business cases generally provides the context, costs, benefits and a set of options for key funders and decision makers. Furthermore, a business case also defines how the company’s success will be achieved and measured thus guaranteeing the promised improvements are delivered. This section is a business case for Finland-Helsinki: Business Services decision makers in their pursuit to make sustainable decision making (Epstein & Roy, 2003).

Sustainability Business Challenges

Despite managing downside risks, business value creation by inclusion of sustainable business solution or through identification of innovative ways for sustainability financing, it is important for business organisations to be drivers for competitive solutions to sustainability to help financing and addressing sustainability challenges in the future (Wu & Pagel, 2011). From a global perspective, sustainability challenges are continually increasing and thus compelling business organisations to come up with long-term strategies to meet the needs of their customers as well as external stakeholders (Farrel & Fraedrich, 2015). This includes the ever growing demand for natural resources to disparities in economy, and to the changing climate which has exposed business organisations to more complex and sophisticated array of trade offs as well as risks across their value chain.

The exponential growth in population, the rising middle class, and economic growth coupled with rapid urbanisation are all exacerbating an increase in food demand, water use, energy, land use together with other resources. Over the last decade for instance, emerging markets have seen a 80% growth in per capita income that in turn is a recipe for increased consumption. It is expected that by 2030 more than three billion middle class consumers will further will drive up the demand for natural resources (Farrel & Fraedrich, 2015).

Climate change is another key stumbling block that business organisation must address in their value chain. For instance, understanding climate risks together with adaptation is vital in supporting clients for an extended period of time. The impacts of climate change are real and are experienced by business organisations as changes in rainfall patterns, rising temperatures, and storm conditions demand for new adaptation strategies (Epstein & Buhovac, 2015). Given this understanding, there is public pressure to companies to cut on their greenhouse emissions. For this reason, many companies across the world are coming up with strategies to cub climate change effects through assessing their internal and supply chain emissions whereas also examining their approach to the changing climate through their entire operations and value chain (Epstein & Buhovac, 2015).

Business environment volatility and uncertainty have massive impacts on both consumers and business organisations. Across many countries, the rising food prices have already driven millions into destitution while disproportionately affecting the vulnerable. Significantly important to mention, high resources price, including energy, food, and water have the capacity of fuelling civil unrest especially in emerging markets (Carroll & Buchholtz, 2015). In this regard, the volatility of recourse prices causes uncertainty for business organisation and thus creating risks associated with productivity investment while potentially distorting the efficiency of the supply chain.

Sustainability Challenges Create Value for Businesses  

Sustainability is a significant factor in business organisations’ strategies; large multinationals as well as mid-sized firms are increasingly focusing on long-term strategies for managing sustainability risks. As such many companies have come to the realisation that through addressing sustainability issues that can achieve extended and better growth that is cost saving, brand and reputation improvement, stakeholder relations strengthening, and boosting their own bottom line (Sourani, 2011). By strategically integrating sustainability goals into the company’s corporate strategy, the firm prepares itself for better understanding of long-term trends and the impacts of using resources and hence help in addressing the expectations of stakeholders. Furthermore, companies capitalise on local conditions in shaping their corporate strategies to accommodate constraints on natural resources in a manner that enables them to develop innovative products, services and business models. Accordingly, it provides unlimited opportunities for bolstering their profitability, growth as well as adds on societal value (Haaske, Seuring, 2009).

Investors and Customers value Strong ESG Performance

Consumers and investors are growingly demanding for sustainable products and services, and increased scrutiny and reporting on corporate responsibility are compelling companies to strictly take into consideration to their ESG (environmental, social and Governance) performance. Accordingly, investors are considering social and environmental issues when selecting investments. In line with this observation, various sustainability frameworks, including Global Reporting Initiative (GRI) and Carbon Disclosure Project (CDP) are significant tools that investors use in making informed decisions for investment (Haaske, Seuring, 2009). Moreover, the social responsible investing (SRI) market is another vital tool that enables to have a positive return on investments whereas bringing positive impacts to the society. In a similar way, environmental together with social evaluations plays an imperative role in the investors’ decision to allocate their capital to SRI funds (Stevenson & Sum, 2002).

Procurement strategies for sustainability

There are several sustainable procurement strategies; however this section significantly discusses product-based and supplier-based sustainable procurement strategies.

Product-Based Sustainable Procurement Strategy

A product-based sustainable procurement strategy is basically designed to guide the procurement staff in making sustainable choices when procuring goods and services for the company. In this regard, a product-based procurement strategy is aimed at outlining the environmental and sustainability principles that a company must consider when making procurement decisions (Stevenson & Sum, 2002). Demonstrate the current market good practices while identifying the opportunities available for pursuing sustainable procurement whereas staying within the framework of the public procurement law as well as obtaining value for money. Furthermore, it provides resources for finding knowledge and information related to sustainable development, and providing a rubric for judging the sustainability of products and services.

Value for money requires that goods and services that the company purchases should take into consideration holistic life costs, quality and long terms savings. Sustainable procurement practices are in line with this requirement. In essence considering costs of a product or service for its entire life cycle including how the most environmentally, socially, and environmentally sustainable choices that can be made will result into long term savings (Adetunji, et al., 2003).

Advantages of product-based sustainable procurement strategy

Achieving best value for money

Carbon footprint reduction

Stimulate the market for sustainable technologies

Improving and maintaining global living standards

Environment health and improvement

Save money.

Disadvantages

Despite the above identified advantages, product-based sustainable strategy has the following disadvantages:

Loss of product uniqueness

Loss of responsiveness

Unsuited for some business aspects

Stifles creativity and response time

Supplier-Based Sustainable procurement Strategy

The corporate world is continually focussing on social issues especially in supply chains including forced labour, human trafficking and slavery. In supplier-based procurement strategy, business organisations set up procurement policies that are essential in leveraging procurement and sourcing functions with a singular objective of making the supply chain sustainable coupled with long term success through minimising product’s environmental features, or lack thereof in the upstream supply chain (Hamza & Greenwood, 2009). Accordingly, in the supplier-based sustainable procurement companies are becoming more active in evaluating, monitoring and influencing suppliers’ sustainability performance that leads to costs savings that are then passed on to the buyer.

Furthermore, through supplier-based sustainable sourcing organisations also help in enhancing supplier disclosure together with risk management capabilities as well as anchoring information verification and exchange. Similarly, the business organisation is empowered to evaluate the supplier capabilities by addressing sustainability practices which on the other hand, drives internal and external standards improvements while facilitating disclosure and transparency (Hamza & Greenwood, 2009). These organisational sustainable procurement practices in turn supports compliance with any environmental regulations which are essential in enabling the capacity to better comprehend and minimise risks associated to specific suppliers. The supplier-based sustainable procurement function credibility together with collaborative dialogue with suppliers favours the building of a sustainable supply chain that has the effect of increasing brand reputation and company value.

Advantages

Reduction of operational costs

Management of risks and compliance with environmental regulations

Disadvantages

Difficult to achieve

Supplier-based sustainable procurement can be perceived for larger organisations only

Time and resource consuming (Fewing, 2013).

Designing Tender Document for Sustainable Outcomes

Also known as project scoping which involves the following attributes:

Need identification: this is the initial and first stage of procurement process. The procurement decision is derived from existing contracts expiring or completing, new aims and objectives setting and the business aims and objectives review.

Business Case: after the identification of the need, then the business must be prepared. Hence, when pursuing procurement that is sustainable, it is vital to include all stakeholders in the business case development (Evans & Jones, 2008).

Market Analysis: it is significant to assess what sustainable products, services or works are available. In many cases, these alternatives are not easily identifiable. The market analysis process gives staff more information and knowledge with regard to how the market could potentially meet the organisation’s needs, the available alternatives and the price that the firm will be expected to pay (Evans & Jones, 2008).

Risk Assessment: there are always ethical and environmental risks related to the procurement of suppliers, works, and services. The company is called upon to think about these risks prior to any procurement taking place.

Aggregation: contract aggregation must be done by staff. Not only is this good for the procurement process but also is in line with procurement regulations. Aggregation provides the firm with commercial leverage together with terms for accomplishing sustainability (Need, 2006).

Preparing contracts to ensure sustainability and strategic outcomes

Preparing contracts is a vital phase in sustainable procurement. The specification for sustainability is placed on where the most impact can be achieved in relation to sustainable procurement. For instance, procurement staff members can specify the type of products they need to purchase such low carbon emission for a vehicle or purchasing recycled papers. It is significantly important that when preparing procurement contracts to incorporate specific sustainability to ascertain sustainable contribution. The following are the key steps that must be adhered to when preparing sustainable procurement contracts (Kenvward, et al., 2011).

The specifications: defining the company’s procurement requirements while at the same time asking suppliers to how they will meet the organisation’s requirements.

Purchasing specific materials: the organisation can also insist that any products procured are made from specific materials. When preparing the contract thus, a range of materials can be specified that the company prefer using or specify that none of the procured materials are harmful to the public health as well as the environment (Kenvward, et al., 2011).

Production methods: In a similar way, the organisation can specify the production methods or process use in the contract as long as they are contract relevant. For example, requirements that are not directly associated to the producer/manufacturer and do not add to its characteristics cannot be use, such as asking suppliers to use recycled paper in their offices. However, the organisation can specify for characteristics such as green electricity, sustainable timber, and food grown locally or organically (Kenvward, et al., 2011).

Setting the Evaluation criteria: during procurement contract preparation it is vitally important to set the evaluation criteria. The tender can either be evaluated by the lowest price or by most economical advantageous tender (MEAT). However, in order to achieve sustainable procurement, tenders must and should be evaluated using the MEAT criterion (Dunleavy, et al., 2006).

Method Statement and Case Studies:

The organisation has an obligation of asking suppliers to complete a method statement of cases as part of the tender documents. Method statements and case studies help suppliers to demonstrate their deep understanding of sustainability issues in a manner that they would deal with then in a contract. For instance, how the suppliers will be able to address or minimise environmental impact (Dunleavy, et al., 2006).

Alternatives or Variants: these are essentially useful way of accomplishing improved environmental performance of a contract because it empowers suppliers to be innovative. It should be understood that suppliers are experts in their own field thus by using alternatives or variants, ideas are generated and put forward that the business organisation may not be aware of or may not have thought about. Using variants and alternative is acceptable in procurement process but only when the contract document defines the minimum requirements (Dunleavy, et al., 2006).

Local Labour:  suppliers are encouraged to use local labour within their procurement process; nonetheless, it would discriminatory and non-transparent if the business organisation insists on the use of local workforce (Dunleavy, et al., 2006).       

Buying ethically: this is the process of buying goods produced ethically from companies that fairly trade in the marketplace; an attribute that must be considered at the contract preparation stage. This practice gives users various choices while eliminating discrimination against suppliers.

Designing the contract administration and management regime

Also referred to as letting the contract and involves the following elements:

Advertising: contracts adverts are issued through electronic means or in print media. Electronic means is mainly advocated because not only does it save on paper, but also minimises the timescale (Osborne, 2010).

Pre-Qualifying: after returning all the pre-qualification questionnaires have been returned, the business organisation can begin their evaluation. There are various ways of evaluating suppliers based on their sustainability, including, past experience, technical capability, environmental technical competence, and educational and professional qualification (Osborne, 2010).

Evaluation of the tender: there are specific rules that must be observed when evaluating the tender. It is highly recommended not to duplicate the assessment criteria used at pre-qualification phase but rather MEAT and lower prices should used to assess bids. Sustainability tender evaluation can be achieved when:

MEAT is the evaluation criteria

It is directly linked to the contract’s subject matter

The environmental award criteria

A non-discriminative criterion (Osborne, 2010)

Whole life cost: the tender can also be evaluated through whole life costs; an essential way for securing sustainability. The cost incurred by the organisation mainly from production to disposal and they may include:

Costs for running the project

Efficiency

Effectiveness costs

Direct running costs

Spending to save

Product maintenance

Disposal and recycling (Christensen & Laegreid, 2010)

Local Buying: through tender evaluation, it is important not to consider whether or not a product or the supplier is from within the locality.

Awarding the Contract: when the contract has been awarded, it is important to provide suppliers with feedback on their tenders, not only is a good procurement practice, but also acceptable by law. With respect to sustainability, it is a useful tool in creating supplier’s understanding of the organisation’s needs (Christensen & Laegreid, 2010).

Monitoring terms, governance, audit and reporting on the project, the tender and its outcomes

Meeting sustainability through procurement does not come to an end after awarding the contract. However, it is highly recommended for the organisation to work closely with suppliers in order to achieve the company’s objectives for sustainability. By incorporating a development plan into the tender is critical for encouraging suppliers to be innovative, providing solutions to social and environmental problems that can then be translated into future procurements.  Suppliers are always keen to enhance their sustainability, and when the organisation is a big customer that provides security together with renewable, high value together with long duration contracts. Contract review or monitoring is done when the contract has been finished in good practice to share all or any successes and failures through the Organisation sector which may include sustainable issues (Bertelli & Smith, 2010).

Conclusion

Private companies as well as public institutions are increasingly focusing on sustainability in order to increase their competitiveness in the marketplace. In accordance with this, they are streamlining all their business operations to conform to environmental sustainability. In this regard, they are turning to sustainable procurement. Given this understanding, this report has significantly explored different aspects of sustainable procurement, including how to present a business case to decision makers, different sustainable procurement strategies, designing specifications and documents to improve the tender, sustainable contract preparation, contract administration and management regime that ensures sustainability, and monitoring, governance, audit and reporting on the project. The report has exhaustively discussed sustainable procurement.

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