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Circular Procurement for Not-For-Profit Sector

While the Covid-19 pandemic is reminding us every life-being is interconnected and interdependent, the threat of global climate change is continuing. Some of the not-for-profit sectors, as essential service providers are still running the services during the Circuit Breaker period. Human activities, such as switching on the air conditioners in the office and ordering food deliveries with disposable packaging, have contributed carbon dioxide emissions and driving up temperatures.

According to the IPCC report, “Global sea-level will rise around 10cm higher for a global temperature 2˚C increaseby the year 2100. The increase could cause up to 10 million fewer people exposed to the risks of rising seas.” As such, the sector needs to switch to a Circular Procurement mind-set.

A body of water with a city in the background

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Importance of Circular Procurement

Circular procurement is both an idea and system focused on maximising the utilisation of the resources and minimising waste. The closed-loop approach is to consider the requirements of the products/services and the consequences of the products/services after the end of its life. It is also considering the hidden costs and to identify the risks and impacts. It delivers multiple benefits to the organisation:

  1. To allow the purchasers to focus on need fulfilment and consider whole life costs with potential savings.
  2. To provide a framework for a more holistic consideration of environmental impacts and waste creation across the entire lifecycles of goods and services.
  3. To turn the not-in-use products into profit with lower costs than making a new product from scratch instead of throwing them away at the end of their lifecycle.

In this article, we will be focusing on discussing the challenges and possible enablers of switching the procurement model to Circular Procurement for the not-for-profit sector. We can classify the challenges into seven categories: Economic and financial viability, Product characteristics, Standards and Regulations, Supply chain management, Technology, Users’ behaviour, and cultural and internal process.

Economic and Financial Viability Challenges and Enablers

Not-for-profit organisations cannot succeed without a strong core of funding which comes from donations, grants, fundraising as well as volunteers. Hence, every single cent counts for each expense. To switch the procurement model into Circular Procurement, it will need high upfront, and long term investments, especially when it comes to the management and planning processes due to the complex practices.

Most investors are still having a linear economy mindset. Hence, they will be focusing on short term value creation and selecting the raw materials which prices are relatively low.

One of the enablers to short term value creation is to emphasise the importance of Total Cost of Ownership. Whole life costing and new techniques incorporating environmental, social and governance dimensions shall be taken into considerations. Whole life costing is to access the total cost of a product or service over its lifetime, from purchasing, operating, maintaining and managing the end of its lifecycle.

Instead of purchasing and owning the products, we can look for a product-service system, e.g. leasing, pay-per-service, sharing, etc. For instance, the social workers and volunteers have to organise home-visit to the patients/care recipients timely. Some of the volunteers who own a car can offer car-sharing to others who are heading to the same location to minimise the carbon footprint generated per ride. Otherwise, they can also share a taxi to the same area.

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How Kha Keat, ADPSM
How Kha Keat has substantive years of experiences in multiple industries, from shipbuilding, manufacturing, trading to the not-for-profit sector, with leadership roles in project, operation and procurement management. He holds a Master of Procurement and Supply Chain Management from University College Dublin, as well as Bachelor of Mechanical and Production Engineering (Honours) from Nanyang Technological University. He is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). Kha Keat completed the Advanced Diploma in Procurement and Supply Management (ADPSM) on July 2020 at SIPMM Institute.

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