The Challenge of Sustainability in Procurement

The DNB manages the Joint European Tender (JET) on behalf of nine national central banks (NCBs) in the Eurosystem ¹. The European Central Bank (ECB) receives data from the NCBs on their issuance and withdrawal of notes and determines the production volume of new notes. The volumes are allocated to NCBs for production or procurement of finished notes in line with the capital key ².

The DNB has a sustainability strategy that is aligned with that of the ECB. For the cash cycle, the focus is on risks related to bio-diversity and the reduction of the environmental impact of activities such as electricity consumption of ATMs, greener waste disposal methods, increasing the durability of notes etc. The DNB has been pursuing these goals for 15 years.

Sustainable cotton

For the banknote itself, the JET tender has been working on a tranistion to using 100% sustainable cotton. This has been phased in over time as both the DNB and suppliers have had to learn what is possible and how to adapt to source sustainable cotton.

Organically farmed cotton employs nature-based solutions to manage pests and to build healthy soil, instead of synthetic pesticides, herbicides and genetically modified organism seeds. Fairtrade cotton is cotton that meets improved social and environmental standards. The Better Cotton Initiative (BCI) is the largest cotton sustainability programme in the world.

Although this has taken a few years, the JET has been able to demonstrate that sustainable cotton is worth using and is available. As a result, from 2023 onwards, all euro banknotes will be printed on 100% sustainable cotton.

Sustainability in procurement

The 2021 JET framework agreement for the supply of finished banknotes included a change in award criteria. For the first time, the criteria used to score quality in the tender included the use of energy from renewable sources and a CO2 footprint calculation, with the goal of achieving more sustainable production of banknotes.

Bidders were required to produce a certificate or contract as evidence of how much of their electricity was supplied from renewable sources for the production of the order.

The methodology used to measure the CO2 emissions came from the greenhouse gas protocol for the bidders’ scope 1, 2 and 3 emissions.

• If the carbon footprint was supplied but there was no estimation of the carbon footprint calculation, one point was awarded.

• If there was a substantiated estimation of the scope 1 and 2 carbon footprint for the euro banknotes to be delivered, two points were awarded.

• If the carbon footprint of the paper was also included along with the print calculation, three points were awarded.

• If print, paper and a substantiated estimation of the full upstream scope 3 carbon footprint (activity prior to production such as material acquisition and pre-processing) relating to the supply of the order, then four points were awarded.

At this stage DNB are learning from the tenders and it is making small adjustments to the JET tender to stimulate the print works to move to greener production. At the moment it is not possible to compare the different calculations made by each bidder and the points awarded are for making and sharing the calculation.

Challenges

Apart from working out how to compare the calculations and, therefore, assess the different carbon footprints of suppliers, this approach is not measuring items such as waste and water.

What is the right way to assess the fall out of the energy crisis? What is the right weighting to give to sustainability compared with pricing and other criteria?

Future work

DNB and its JET partners are now looking at a new framework agreement and whether it should include new sustainability criteria. Should it use the Product Environmental Footprint methodology to compare carbon footprints? Should a water calculation, or other criteria, be integrated into the quality/sustainability criteria?

DNB hopes to learn in the same way as it learnt with sustainable cotton. It hopes the JET group can share its experience with the ECB so the new Eurosystem wide sustainability criteria can be included.

1 - Cyprus, Estonia, Finland, Ireland, Malta, Netherlands, Luxembourg, Slovakia, Slovenia

2 - The capital key is the weighting system used by the ECB to determine the distribution of capital among the central banks of the European Union (EU) countries. It is based on the relative size of each country’s economy, as measured by its gross domestic product (GDP) and population.