Involve internal stakeholders
Circular procurement not only provides a challenge for the procurement department, but it also requires the commitment of various parts of the organisation. This makes it important to be aware of the needs and concerns of the different stakeholders for each procurement project. After all, only if their needs are catered for and their concerns are addressed, will they be using the procured product in a circular way in the long term.
Find out who the internal stakeholders are and what their interests are. Next, determine how you want to work together with these stakeholders during the procurement process. Also make sure that senior management of your organisation is on board. Find high-level ambassadors within your organisation who are willing to win over other internal stakeholders.
Perform a stakeholder analysis of the various parties involved in your procurement project. The first step is to make a list of the parties involved. Next, determine for each party what their interests are. Find possible conflicting interests and try to reconcile them by making clear agreements. In this way you can ensure that the circular ambitions will not be frustrated by other interests. The general interests of various stakeholders are identified below.
Various internal stakeholders and their interests
Clearly define how you want to cooperate with the various internal stakeholders. One way to determine a stakeholder's commitment is to look at his or her interest in a good result and the influence this stakeholder has on the project or product group concerned. This results in a matrix with four different modes of cooperation:
- Satisfy stakeholders that have a lot of influence but little interest (e.g. senior management). This can be achieved with progress reports.
- Cooperate with stakeholders that have a lot of influence and a high interest (e.g. project managers). This can be achieved by making them part of a project team.
- Inform stakeholders that have little influence but a high interest (e.g. end users). This can for instance be achieved with a newsletter but also by involving them in the evaluation process (e.g. pilots with furniture or uniforms).
- Monitor stakeholders that have little influence and little interest (e.g. communication). This can be achieved by involving them at specific points in the process and allow them to approve those parts for which they carry responsibility.
By identifying the interests and influence of the stakeholders it becomes clear how best to involve them. Source: Johnson, Whittington & Scholes (2012) Fundamentals of Strategy
A circular economy creates value by closing value chains. The higher the value being achieved by closing the chain, the less value is lost. No market player is able to achieve that on its own (as no one controls the entire value chain) and neither can any department within the internal organisation.
It is therefore important to align the different interests within the internal organisation. To do this, you may need to question and discuss the assumptions and principles of various departments. For example:
- Internal and external clients that make the switch from focussing on time and money to focussing on ambitions (and make time and money preconditions).
- The financial department that makes the switch from focussing on investment costs to focussing on Total Cost of Ownership – possibly including other values, such as the health of employees.
- The legal department that leaves enough room in a contract to accommodate continued development that supports the sustainability ambitions.
So, suppose that a sustainability manager wants to achieve a high sustainability impact. The financial controller wants to keep the procurement costs as low as possible. You could set a ceiling amount or a fixed amount that includes maintenance, while challenging market players to fulfil your ambitions. This would reassure the controller (who will know the expenditure in advance), while the sustainability manager gains the highest possible sustainability level achievable within that framework.
Circular procurement requires a different approach compared to a traditional procurement process. It is important to involve the various stakeholders as early as possible. This could be the end user, to help you determine the actual need. It could be the legal expert, to ensure the contract contains the right incentives. Or it could be the financial department, to make their calculations based on Total Cost of Ownership (TCO).
Circular procurement of a product does not necessarily increase costs compared to traditional procurement. However, this is based on the assumption that you calculate based on TCO. You also need to realise that as a result, the preparation of a circular procurement project will take more time, which may increase process costs on the part of the client.
To successfully complete a circular procurement project, it is important to have the support of senior management, especially in public organisations. If a procurement project requires additional steps (e.g. dialogue with the market) or different decisions (e.g. strong emphasis weighting of quality), managerial support will help to get the other internal stakeholders on your side. A senior manager acting as ambassador for the project often plays a crucial role in convincing the departments involved.
- Do not underestimate the importance of involving the internal organisation! It turns out that lack of internal support is one of the biggest obstacles to a successful circular procurement project.
- Perform a stakeholder analysis to reveal the interests of the various parties involved.
- Define the common interest of the internal organisation for your procurement project and make sure it is shared by all internal stakeholders.
- Determine in advance how you want to cooperate with the various internal stakeholders. For instance, who will join the project team, and who will only receive progress reports?
- Find an ambassador who operates at high level within your organisation and who is able to support your circular procurement project where necessary.
The eBook Circular Procurement in 8 Steps (pp.57-65) details how to involve the internal organisation.
Publication - Amsterdam Economic Board: getting started with circular procurement and tendering (Dutch)
The Amsterdam Economic Board provides tips on increasing support within the organisation.