R E P O R T
Previous Council Direction
At the September 13 meeting of Council, in response to Motion 2004-31, Administration was directed that a priority be assigned to the development by the Administration of a comprehensive proposed Sustainable Environmental and Ethical Procurement Policy for Council’s review and approval before the end of the 2005 calendar year. The Administration was directed to work with the City’s network of suppliers and the public including community-based non-governmental organizations (such as the ‘Calgary No Sweat Coalition’), in the development of the aforesaid Sustainable Environmental and Ethical Procurement Policy (SEEPP) and to ensure that items – including but not limited to garments, coffee and related items purchased by The City – are manufactured or produced in accordance with established international environmental standards and applicable codes of conduct regarding wages, working conditions, safety, forced labour and freedom of association as embodied in the United Nations Declaration of Human Rights and International Labour Organization Conventions. City Administration was also directed to report to Council through a Standing Policy Committee prior to the end of 2004 on the policy development process and engagement strategy for the aforesaid Sustainable Environmental and Ethical Procurement Policy for City purchases of garments, coffee and related items. The report is to include:
*The conditions and business practices that could apply to the purchase of goods and services for compliance with the policies.
*Procedures under which a Sustainable Environmental and Ethical Procurement Policy could be implemented.
*Mechanisms The City may use to verify suppliers are in compliance with established labour conventions or fair trade certifications.
*Best procurement practices used or under consideration in other municipal jurisdictions in Canada.
Estimated costs to implement this policy.
Finance and Supply were scheduled to review procurement policies relative to the Triple Bottom Line (TBL), in 2005. The directive from Council from Motion NM 2004-31 advanced this preliminary review of policies relative to ethical and environmental procurement, only. The continuation of the review including, all other TBL related policies, will be addressed in 2005. The cost to develop the policy has not been included in the 2005 budget. These costs will be included in the 2006 budget request.
In response to this directive, City staff were assigned to:
*Research the standards, conditions and practices that are currently being practiced in North America, as well as Internationally.
*Identify programs and guidelines that are currently in place at the City of Calgary that will support development of a proposed Sustainable Environmental and Ethical Procurement Policy (SEEPP).
*Conduct a survey of other Canadian municipalities to identify the practices, procedures and issues that they have experienced with Environmental and Ethical Procurement Policies.
*Identify and make contact with NGO’s (Non-governmental organizations) for input and information
*Research and identify potential legal and procedural mechanisms that could be used to ensure policy compliance
*Establish an development and engagement strategy
*Estimate the cost of developing a Sustainable Environmental and Ethical Procurement Policy.
With respect to environmental considerations, The City has an administrative Green Procurement Policy that supports green procurement. Environmental Management and Supply staff are actively pursuing green purchasing initiatives. These collaborative efforts have resulted in many successful supply agreements. It must be noted, however that the green procurement policy has not been approved by City Council and has not been comprehensively implemented across the City. There is a need to enhance the policy, as well as develop an effective implementation strategy, which includes discussions with vendors and communication/training with City staff. An effective Environmental Procurement Policy is critical if the City is to achieve its goals with respect to the Sustainable Building Policy.
Background
Environmental Procurement
In 2003, The City of Calgary became the first municipality in North America to achieve official registration to the ISO 14000 Environment Management standard. As part of our Environmental Management System (EnviroSystem), Supply and Environmental Management have been actively pursuing Green Procurement initiatives on an opportunity basis. Product specific criteria and contract conditions are now part of several purchasing agreements. The efforts of The City and industry stakeholders have resulted in numerous successful supply agreements that are considerate of the environment without paying a premium for preferred products. Work on Green Procurement to date has proven to be a valuable first step to better managing the City’s impact on the environment. City staff have identified opportunities to strengthen the policy. These enhancements will be built into the Sustainable Environmental and Ethical Procurement Policy as it is integrated with the Triple Bottom Line Policy.
Ethical Procurement
Even though City of Calgary suppliers are required to comply with Canadian laws and legislation, which includes labour laws, we do not have an all-encompassing Ethical Procurement Policy.
The Ethical Trading Action Group has defined ethical Procurement as practises 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 “No Sweat” International labour standards are spelled out in the Declarations of the United Nations (UN) and the Conventions of the International Labour Organization (ILO). These standards form the basis for most policies and include:
*No forced labour
*No child labor
*No harassment , abuse or discrimination
*Maximum hours of work
*The right to organize and bargain collectively
*Payment of a living wage
*Health and safety protections
*Public disclosure of factory locations
*A written commitment by companies to work with suppliers to achieve compliance
*Public annual reporting by suppliers on progress
*Third party investigations of complaints and corrective action plan if violations occur.
“No Sweat” has typically applied to the international garment industry, but it has recently expanded to employment activities by North America retailers, like Wal-Mart.
Fair Trade principles address the purchase of agricultural products, primarily coffee, tea, cocoa and sugar grown in Latin America, Africa and Asia. Transfair Canada, a fair trade certification organization, has set the standard for fair trade in Canada. The standard 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 gown” coffee plants grown with organic farming methods.
The City of Calgary is not alone in their endeavor to enhance this area of social responsibility. In addition to sharing information with other municipalities that are developing policies, there are organizations with information and experts that can support the development and implementation of a policy. Some of the organizations are:
*Maquila Solidarity Network – a labour and women’s rights advocacy organization promoting solidarity with grassroots groups in Mexico, Central America, and Asia working to improve conditions in Maquiladora factories and export processing zones.
*TRANSFAIR is Canada’s only independent certification organization for fair trade coffee, tea, cocoa and sugar.
*Worker Rights Consortium – The Worker Rights Consortium (WRC) is a non-profit organization created by college and university administrations, students and labor rights experts. The WRC’s purpose is to assist in the enforcement of manufacturing Codes of Conduct
*The Fair Labor Association (FLA) is a non-profit organization combining the efforts of industry, non-governmental organizations (NGOs), colleges and universities to promote adherence to international labor standards and improve working conditions worldwide.
The development and implementation of a Sustainable Environmental and Ethical Procurement (SEEPP) policy will be a large undertaking. The first challenge is to incorporate both environmental and ethical standards into a SEEPP that is practical, enforceable and considerate of the thousands of items purchased by the City.
Depending on the extent of the policy it could apply to all products, in all commodity groups, for all departments, amounting to over $200 million in purchases annually. The impact could expand if the policy is extended to Sub-suppliers and sub-contractors.
Over the past few years there has been considerable focus on social aspects in the garment and agricultural industries, however, as supply chains change to meet international demands, suppliers of offshore product, like steel, oil and fuel, could fall under the direction of the policy.
Apparel purchases at The City are about $3 million annually distributed to departments as follows:
*Police 23%
*Transit 16%
*EMS 10%
*Fire 16%
*Utilities 3
*Others 32%
Food purchases amount to about $1.5 million annually. The principle buyers of food products are the Parks and Recreation business units.
The following are some of the issues that will have to be considered during the development of a policy.
*How to handle agreements that are currently in force?
*How will non-compliant firms be handled? Will the City need to restrict supplier access to business if they are unwilling to carry out the investigation required to comply with the standards. If so, what is the impact?
*How do we avoid paying too much for the good or service?
*What will be done if there are no compliant firms – do we refuse to purchase the items?
*What are the legal ramifications of restricting supplier access to City opportunities? February 24, 1994 the Canadian Supreme Court ruled (Shell v. City of Vancouver) that it is constitutional for municipalities to pass” selective purchasing” laws, provided the by-law promotes the “good governance, health and welfare of the City or its citizens”
*Policy must have language that demonstrates how it will benefit city residents.
The Triple Bottom Line initiative will integrate these corporate policies to build sustainable social, economic, and environmental objectives into the decision making process to maintain high standards of living, social harmony and environmental quality.
Investigations
Conditions and Business Practises
Legal Conditions
An effective SEEPP should ensure that all products and services purchased by the City of Calgary, whether produced in Canada or abroad are manufactured in accordance with local labour laws and International labour standard of the international Labour Organization (ILO) Conventions and United Nations (UN) Declarations regarding wages, hours of work, workplace health and safety, discrimination, forced labour, child labour and freedom of association and collective bargaining and other relevant Conventions and Declarations. In addition, it should ensure that the products are always considerate of the environmental impacts and international environmental standards.
The Policy Development Team will need to work closely with the Law Department to construct contract clauses that will ensure compliance with the policy standards.
Working Conditions
The following are some topics related to working conditions that should be part of the contract or referenced policy.
*Forced labour
*Child labour
*Harassment and Abuse
*Discrimination
*Women’s rights
*Hours of Work
*Freedom of Association and Right to Bargain
*Wages and Compensation
*Health and Safety
*Employment Relationship
*Homeworker Protection
*Commitment to communicate standards to effected workers.
Business Practises
The following are some of the business practises that have applied in other organizations and could form part of The City of Calgary practises.
1.Legal conditions and declaration documents form part of the purchase agreements to ensure suppliers are aware of and commit to compliance with the policy guidelines.
2.International standards form the basis for the policy guidelines.
3.The onus is on the supplier to provide evidence that they are compliant with the policy as opposed to The City monitoring and investigating supplier activities.
4.Third party auditors are used by the supplier to verify compliance and investigate practises.
5.Cities work closely with suppliers to develop compliance as opposed to immediately finding alternate sources when non-compliance is discovered.
6.Set reasonable goals for extending the coverage of the policies, rather than expecting that all products will be covered simultaneously.
7.Include outside stakeholders in the development, implementation and assessment of the policy.
Procedure for SEEPP Implementation
All research indicates that the onus should be on the supplier to provide evidence of compliance to the policies. This approach is no different than current City – Supply processes that relate to environment, workman’s compensation, health and safety or legal compliance. During the selection process suppliers are required to provide evidence of compliance with their response in order to be eligible for consideration for the work. If they are not compliant for these mandatory items, their offer is disqualified. This approach is supported by legal precedent. With respect to environmental procurement a number of well established and respected certifications may be utilized for verification. These environmental certifying bodies include Environmental Choice, Energy Star, and Green Seal.
Once the contract is in place, the supplier would be required to provide updates regarding their practises related to human or environmental aspects in their supply chain, including the location of their manufacturing plants. In the event that a claim of non-compliance is made or suspected, the claim would be brought to the attention of the supplier for validation or investigation, for which the supplier will bear the cost. City staff could be involved in the validation and complaint process.
Third party audit firms can play a key role in ensuring policy compliance and developing compliance. Many of the organizations like the Worker Rights Consortium, Transfair Canada and Fair Labor Association not only investigate and validate claims, they will also work with firms to become compliant to international standards. In most cases they post non-compliance information on the web along with the action items that are required to move to compliance. This approach strongly encourages the supplier to take the necessary action to comply. It also benefits the supplier in that other customers or potential customers are able to see that they are serious about social responsibility they have to their customers, suppliers and employees.
The procedure and contract conditions should focus on compliance or developing the supplier, with termination being a last resort. The policy and procedures need to afford the supplier, time to report non-compliance, develop corrective action measures and, if necessary, the time to resource new suppliers.
Mechanisms
As mentioned above Supply already uses mechanisms to ensure that Suppliers comply with policies and standards. These mechanisms include:
*Standard request documents to solicit offers for the supply of goods and services. These documents will include clauses that stipulate the requirement to comply with all aspects of the “Triple Bottom Line Policy” adopted by City Council for the City of Calgary.
*Declaration forms will form part of the request documents including, Children Used for Slave Labour Form, and the Declaration of Non-Discrimination.
•Third party auditors can be used to review submissions from potential Suppliers.
*In cases where suppliers are proposing to supply items such as coffee, tea, cocoa, sugar, bananas, orange juice and cut flowers, a certification logo by Transfair Canada may verify the supplier’s compliance to standards.
*Verite (Verification in Trade and Export), audit group provides audit reviews for suppliers of clothing and textiles.
*The ILO (International Labour Organization) and The United Nations Economic & Social Development policy typically forms the basis for Ethical Procurement Policies. This policy was ratified at the 86 session, Geneva, June 1998 ILO Declaration on Fundamental principles Rights at work.
*International third party environmental certification bodies.
Best Practices
It is difficult to determine best practices for ethical procurement since many Canadian municipalities are only in the early stages of developing ethical procurement policies. There is somewhat more information and experience with environmental procurement. According to Maquila Solidarity Network there are no municipalities in Canada that have “No Sweat” policies, however, cities like Toronto and Vancouver are in the development process. Vancouver is the closest to implementation after spending more than a year in development. Universities lead the implementation of “no sweat” policies for institutions in North America with over 200 universities in the U.S. and 12 in Canada with active policies. U.S. governments have also taken an aggressive approach to Ethical Procurement practices. The following provides a snapshot of the Environmental and Ethical policy activities with municipalities and organizations worldwide.
Canadian Municipalities
City of Ottawa does not have a specific policy per se but their terms and conditions for contracts as well as various clauses within their overall procurement policy relate to such practices as low wages and environmental considerations. In their tender documents they stipulate they will give consideration to products that use recyclable materials although it is not a pre-requisite and certification is not required. Costs have not increased since the lowest bid is still the priority for award.
City of Toronto has an environmentally responsible procurement policy that is working well according to procurement personnel; however, they do not have a policy referring to Ethical Procurement. Essentially, Toronto’s policy opens up the bidding to suppliers that are environmentally sensitive. Their costs have not increased as a result since they do not have a price preference.
City of Vancouver was directed by their Council to prepare and present a draft policy to Council on the purchase of apparel and fair trade agricultural products. Council further resolved that the City of Vancouver would have a Sustainable and Ethical Procurement Policy in place by December 2004.
In Canada, it is generally recognized that resources are limited in most cities, so the onus is on the suppliers to provide evidence that they are complying with the policy.
U.S. Municipalities
City of Albuquerque has included environmental and ethical practices within their procurement policies that address areas such as low wages, working conditions and child labour. The onus is on the supplier to meet policy standards and they are required to accept, be willing and able to provide the product or service that complies with the City’s policy. Albuquerque also has geographic and local preferences that have been approved by their Legal Department. Should it be found that the supplier has violated the provisions of the contract, legal action can be taken. Supplier’s competitors are the most likely source to identify violators. Where Federal funds are involved, Albuquerque’s procurement language changes to fit the requirements of the Federal government.
City of Los Angeles conducted considerable research to develop a Sweat-Free Procurement ordinance, which is now in place. The ordinance directs their administration and suppliers on No Sweat related procurement, including the application of the ordinance, mechanisms for compliance, enforcement and remedies, and exceptions. Their ordinance is becoming a recognized model for municipal governments.
International
The European Union (EU) and its member states are at various stages of developing environmental and ethical procurement policies. In 2003, EU adopted an Integrated Product Policy (IPP) as a voluntary approach to greener products. IPP uses a life-cycle approach to seek to minimize environmental degradation caused by products. In 2005, EU will be issuing a practical handbook on best practices with Life-Cycle Assessment (LCA). In 2006 they will develop an action program for ‘greening’ its procurement. In 2007 they will have an identification of products having the greatest potential for environmental improvement. The EU has an extensive environmental agenda that includes classification and labeling of certain products and substances.
Sweden, a member country of EU, has realigned their legislative framework to be consistent with the EU agenda. They approach the environmental issues using voluntary agreements. Voluntary agreements cover specific priority sectors and most deal with one specific issue at a time such as phasing out lead paint. Sweden has also developed targets in various environmental areas.
The City of Sendai, Japan promotes green purchasing as starting with an assessment of the need for a product or service in order to purchase only what is necessary. Environmental and ethical preferred goods and services are chosen from environmentally conscious businesses taking into consideration quality and price. Best practices are considered to be the policies, strategies, regulatory frameworks, incentive plans and relevant education programs. Sendai is currently organizing the International Green Purchasing Network (IGPN) to share information on purchasing principles, product guidelines, good practice and know-how amongst NGOs, business and public organizations.
Corporate Industrial
The Corporate Industrial sector has been involved with developing ethical procurement policies over the past decade. Companies like Shell, Nexen and Suncor have been identified as top companies that practice economic, environmental and social responsibility. Others include Trans Alta, Amoco and Weldwood. The Dow Jones Sustainability Index provides a list of criteria for identifying top companies.
Mountain Equipment Co-op has developed an extensive Code of Conduct, which outlines practices that is focused on safe and healthy work environments for people who make their products. Human rights and civil liberties are respected in the code.
Estimated costs to implement a policy
Acceptance of a policy and the success of the rollout are highly dependent on the participation of stakeholders throughout the development process. The complexity and impact of a SEEPP will necessitate gathering input and acceptance from a large contingent of stakeholders. While we cannot ascertain at this time the stakeholders that will participate, the Potential Stakeholders and Resources list (page 10) shows potential participants for policy development or training. Stakeholder participation will be costly, especially as stakeholders will need to participate in workshops for training, input and development of a policy.
Preliminary estimate of policy development costs
| Item | Cost |
| Two additional FTE’s for a one year period to support and manage project – one FTE for environmental and one FTE for ethical | $180,000 |
| Audit or consultant cost | $10,000 |
| Outside stakeholder participation costs (public, NGO or other) | $15,000 |
| Misc. expenses – training facilities, databases etc. | $5,000 |
| Total Estimated Cost | $210,000.00 |
The FTE cost is considerate of candidates that have the knowledge and experience of environmental and ethical issues as they relate to corporate procurement activities. They must also have the skills and competencies necessary to lead a project of this nature. There are numerous decisions that need to be made by the Policy Development Team that will change the impact of the policy and the effort and cost of implementation. For example, we cannot determine if premiums will apply to goods until the Policy Development Team determines which products will be assessed during implementation of the project. The costs to Supply and Environmental Management shown relate only to development of a SEEPP, integration of that policy with the TBL initiative and preparation of an implementation plan and related cost estimates. Policy implementation will be in conjunction with implementation under the Triple Bottom Line initiative. The cost for implementation will be determined as part of this review.
The City of Vancouver is hoping to receive approval for their Sustainable Ethical Procurement policy is December 2004, after spending over 18 months developing the policy. The City of Calgary’s scope is larger, taking into account both environmental and ethical considerations, which will require more support for a full year.
The Maquila Solidarity Network has not received reports that the cost of goods or services are increasing due to the implementation of social policies. The Policy Development Team will need to conduct additional research on this topic.
Engagement Strategy
Stakeholder engagement and the involvement of NGO’s (Non-government Organizations), supplier representatives, City representatives and Council participation are critical to a successful implementation of a Sustainable Environmental and Ethical Procurement Policy. Even though the policy should be developed to impact a broad range of products and industries, it is not practical to expect that all products will be covered by the policy simultaneously. It is more reasonable to expect that the policy will be applied to products and industries relative to their environmental and social impacts. Apparel and agricultural are good examples of industries with high potential for social impact. The policy directives can be extended to other industries as time and resources permit.
The following steps should take place in the development of the policy. Additional tasks may be required as determined by the Policy Development Team.
1Policy Development Team formation
•Assign a Project Leader to the project.
•Establish a Policy Development Team. The team should include representatives from Environmental Management, Law, Supply, Finance, Community Strategies and an NGO.
•Develop a Project Charter that state goals, targets, objectives, and project phases, benefits, risks, team member roles and time commitments.
•Determine the time commitment required for team members.
•Develop a project plan.
2.Procurement Analysis
•Assess the impact of the policy considering inventory, non-inventory and capital requirements
•Analysis of existing contracts that could present opportunities and determine if we have the ability to adjust the contracts to include environment and ethical considerations.
•Identification and assessment of environmental and ethical labeling and certification programs.
3.Stakeholder Engagement
•The size of the project necessitates participation from a variety of stakeholders to provide input and guidance on developing a practical and effective policy. The Policy Development Team will need to establish and engage a stakeholder committee that will be able to cooperatively develop an ethical policy and help to integrate it with the environmental and economic components of the TBL policy. It is important the stakeholder committee contain members that will be able to provide input from a wide range of perspectives; however, there must be a common goal for all of the committee members. Potential stakeholders a listed in Appendix A.
•Design and deliver stakeholder workshops to inform stakeholders about the initiative and gather input and advise.
4.Prepare a draft policy based on information gathered from stakeholder and best practice research.
•Develop mechanisms to support the policy
•Present draft policy to stakeholders for final opportunity for input.
•Integrate policy with TBL initiatives
•Prepare an implementation strategy and plan.
5.Obtain final policy for approval from City Council to implement the policy.
Appendix A
Potential stakeholders and resources
*Administration support
•Finance & Supply (Strategic Procurement)
•Environmental Management
•Law
•Community Service
*City of Calgary Council members
*Union representatives wearing City uniforms:
•Police
•Fire
•Transit
•Parks
•Enmax
•Roads etc.
*Unionized garment worker representatives
•Union of Needletrades, Industrial and Textile Employees (UNITE)
*Third party verifiers and auditors – what do they cost.
•Transfair
*Fair Trade Groups
*Local retailers and manufacturers that are committed to fair labor practices in the garment industry.
•Nike, Jansport and Gear for Sports, Mountain Co-op.
*Universities and colleges
*Factory auditors
•Ministry of Labour
