Key messages

  • There are a number of strategies for improving sustainable procurement of products and services.
  • Products and services can impact on the environment during all stages of their lifecycle.

Victorian public healthcare services procure goods and services directly, as well as through panel arrangements with Health Purchasing Victoria (HPV).

Products can impact on the environment during all stages of their lifecycle. Some of these impacts can be managed through procurement strategies and processes that focus on sustainability.

Sustainable procurement is when organisations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole-life basis. This generates benefits for the organisation, society and the economy while minimising damage to the environment.

Strategies for sustainable outcomes

There are a number of strategies for improving sustainable procurement of products and services.

Lifecycle stage

Procurement action

Raw materials

  • Consider environmental preference in purchasing (for example, recycled or lower impact materials used).
  • Consider suppliers’ management of supply-chain issues.
  • Consider source of raw materials.

Manufacture

  • Consider suppliers’ environmental management and social and ethical practices.
  • Consider the environmental profile of manufactured products (on the basis of its functional use and alternatives).

Operation and maintenance

  • Include specifications on operational performance (for example, energy and water use).
  • Consider contract monitoring and performance standards.
  • Implement a continuous improvement regime involving robust contract management and relationship development with suppliers to achieve specified environmental objectives.

Product use

  • Consider the need for the product or alternative processes to achieve the same outcome.
  • Consider energy and water usage and waste generation during the use of the product.
  • Consider demand-management initiatives to reduce consumption and shift demand to more environmental sustainable goods and services.

Disposal

  • Include specifications on disposal and recycling requirements.
  • Consider supplier management of this (for example, whether the supplier can take back the product and packaging at end of use).

Context - procurement in healthcare

The Victorian public healthcare sector spends more than $1.6 billion per annum on procurement activities, with approximately $1 billion of this being spent on products.

This equates to about 20 per cent of Australia’s total public healthcare spend but is less than 0.5 per cent of the global healthcare spend.

Graph

Figure: Reported public healthcare expenditure on goods and services (2004-05) from a total of $1.6 billion Source: Procurement practices in the health sector, Victorian Auditor-General's Office, 2011

The multinational character of the supply chain for healthcare products means that effective strategies require influencing a global supply chain extending from raw materials suppliers, through product manufacturers and distributors, to the health services.

A study of Southern Health in 2010 found that close to 60 per cent of its carbon footprint was related to the procurement of goods and services. However, it is more difficult to reduce the carbon intensity of procurement when emissions are indirect. For example, they are emitted during the manufacture and transport of pharmaceuticals.