About Environmental Spend Analysis
Environmental spend analysis helps organizations calculate the climate impact of their consumption and focus on reducing purchases with the greatest impact. Interest in this method is high among Swedish municipalities, and IVL has mapped initiatives and examined how the method is used in the project “Public Procurement as a Climate Policy Tool.”
What is an Environmental Spend Analysis?
Environmental spend analysis is a method for quantifying the environmental impact of purchases within the public sector. It provides an indication of the environmental impact of purchases and compares the impacts of different procurement categories. The results help prioritize which categories should be targeted in strategic purchasing to reduce environmental impact.
Combining Economic Spend Analysis with Environmental Factors
In environmental spend analysis, purchases are combined with environmental factors. Each purchase is assigned a CPV code, which identifies the type of goods or services. This code is linked to an environmental burden per unit of currency, measured in terms of land area, particle emissions, or climate-impacting gases. The environmental burden is calculated by multiplying the amount spent in SEK by the environmental burden per unit of currency.
This project focuses on climate impact, expressed as carbon dioxide equivalents. Each purchase is linked to a climate indicator expressed in carbon dioxide equivalents per currency unit. These indicators are based on life cycle analyses, converting climate impact per mass/volume into climate impact per currency unit.
For more details on environmental spend analysis, visit the Procurement Agency’s website here
External link, opens in new window.. The Link is to a Swedish website
How to Use Environmental Spend Analysis
Carolina Hoffenback, environmental specialist at the City of Gothenburg, and Jens Johansson from the Procurement Agency, provide the following advice:
Remember the Purpose of the Method
- Jens: It is important to remember that this is a method to provide indicative comparisons between different procurement categories in order to prioritize the right category in strategic procurement work. The method is not intended to provide exact climate calculations.
- Carolina: Remember that the results will not give exact values of the climate impact of the purchases. Instead, it provides an idea of what is large, small, and similar in terms of climate impact. The results provide a basis for understanding where to prioritize efforts to reduce the climate impact of purchases.
Conduct an Economic Spend Analysis and Develop Your Category Tree
- Jens: Make sure to keep track of your category tree and create an understanding of what you are actually purchasing, to more easily match the purchase with the correct climate indicator. If there is no category tree, one needs to be established, and it is also a task that adds value to the procurement and purchasing work.
- Carolina: Having a good spend analysis to base the calculations on is a very important part of getting the most reliable results possible. If you do not have it in place, you should prioritize developing it.
- Carolina: Relate the results to the spending. Visualize climate impact and economic spend in the same diagram to directly see the relationships and climate impact per krona for the different categories. If spending increases in a category where climate impact per unit of currency is high, the climate impact will likely increase significantly as well.
Focus Efforts in the Right Direction
- Jens: Develop a strategy for how you will handle a category. What opportunities do you have to influence within this category? It does not only involve setting better environmental requirements, but it can also involve strategic and tactical procurement issues. What authority or capability do we have within each category? Can we change internal processes or routines that lead to reduced or altered procurement needs? Do we need to purchase as frequently? Can we reduce the number of delivery points? Can we extend the depreciation period? Can we improve reuse? Prioritize efforts within the right category.
- Carolina: When you have your distribution of climate impact from purchases, conduct your own analysis. It is not necessarily necessary to start working on reducing climate impact from purchases where the impact is greatest. It is important to consider how the spending is distributed, where the climate impact per unit of currency is high or low, where you have the greatest and least opportunity to influence purchases, which purchases you can influence, etc.
Collaborate and Discuss
- Jens: Discuss with suppliers what opportunities there are to improve your analysis of purchases from an environmental perspective. Can the supplier provide EPDs for the most purchased items in the assortment? Note that different organizations may have different category trees, which complicates the comparison of results from environmental spend analyses. Be aware that it does not look the same even in every municipality. A spend analysis reflects what has been paid out over a period (for example, a year), and the presence or absence of various payments, such as for construction contracts, can significantly affect the analysis results.
To Do or Not to Do
- Carolina: Are you considering whether to conduct an environmental spend analysis or not? Do it! You can adapt it to your own conditions. Investing resources in calculating the climate impact of your purchases is a smart and long-term investment. It is a method that allows you to work strategically with your purchases from a climate impact perspective. Even if you do not have the perfect conditions at present, it is important to start where you are and work actively on the issue in the long term.
If you are a beginner in this area, it is recommended to check the National Agency for Public Procurement’s website External link, opens in new window.(website is in Swedish External link, opens in new window.), where they have mapped the climate impact of public procurement.