Sustainable Procurement in the Public and Private Sector - A Case Study in Malaysia

1. Sustainable Procurement in the Public and Private Sector - A Case Study in Malaysia Global Cities Institute Research Grant Project Adela J. McMurray, Mazharul Islam, Chamhuri Siwar, John Fien

2. Research Objectives: • Explore the nature and extent of current sustainable procurement practices in Malaysia • Identify opportunities to implement sustainable procurement • Identify barriers that have been encountered • Discover the thinking of executives’/senior managers’ about the challenge of sustainable procurement School of Management

3. Introduction • Sustainable procurement is a fast-growing field of interest in corporate and government organizations across many parts of the world. Similarly, Commercial organizations are becoming increasingly aware of its importance, partly due to a growing demand from customers who ask for sustainable products and partly to the mainstreaming of Corporate Social Responsibility (CSR) practices. • Sustainable Procurement (SP) policies and strategies in both private and government organizations are important to sustaining social capital, economic growth and environmental benefits which, in turn may promote sustainable development more widely [European International Contractors (EIC) 2004]. Indeed, EIC (2004) argues that for sustainable development to be achieved, “sustainable procurement” is indispensable in both theory and practice. • Sustainable procurement is the process through which the social and environmental costs of products and services are considered along with issues of price in organizational purchasing decisions. School of Management

4. Introduction • Like most other countries, Malaysia has committed itself to sustainable development practices and has generated procurement policies and practices which encourage the development and dissemination of environmentally sound goods and services. Although procurement policies exist, very little is known about the extent to which SP policies and practices are embedded within the practice of both public and private sectors executives/senior managers. • This study examines sustainable procurement practices in Malaysia and provides an insight into the thinking and practice of sustainable procurement within Malaysian public and private sector organizations in order to address such concerns. School of Management

5. Introduction Currently there are no published studies in Malaysia addressing the following three research questions: • Q1. What is the existing nature and extent of SP practices across both public and private sectors in Malaysia? • Q2. What are the executives/senior manager’s experiences regarding the opportunities and barriers in implementing SP in Malaysian organizations? • Q3. What are the SP experiences and perceptions of executives/senior managers, employed in Malaysian organizations in their own personal lives? School of Management

6. Method • Sample size • As a pilot study, a survey of 200 staff in both the public and private sector organization in Malaysia (response rate = 24%). Hair et al. (2006) suggests that a response rate of 20 per cent for postal surveys is acceptable. • Sample Locations • Sample were drawn from the eight sectors of General Public Services, Education, Defence, Justice and Public Order, SMEs, Business Construction, Others. • Method • A mixed method used to analyse collected data. Both the qualitative and the quantitative data were collected through a survey questionnaire. has been used. Descriptive statistical analysis have done to see the level of existing sustainable procurement practices and the attitude of the respondents. Independent Sample T Test has done to see the difference between organizations and sectors. School of Management

7. Measures • SP Practices and Barriers We adopted of the Walker & Brammer (2009) scale that was utilized in a study of UK public sector procurement. • Opportunities to Implementing SP We used scale items complied from the literature review analysis. School of Management

8. Demographics • 85 per cent of sample was drawn from public sector organization. • Occupational sector included general public service sector (52.5%), Others (14.6%), Education (10.4%), Defence (6.2%), Construction (6.2%), Justice & Public Order (4.2%), SMEs (2.1%), and Business (2.1%) • 62.5 percent of the organizations increased their number of suppliers in last 10 years • Majority of respondents (33.3%) were employed for 1-5 years. • Majority of the respondents held university degree (95.8%) qualifications. School of Management

9. Reliability of Constructs used in the Study School of Management

10. Findings • There are three major finding of this study • More emphasis on purchasing from small and local suppliers, and worker health and safety, rather than environmental practices. • Significant variation between public and private organizations in the nature of sustainable procurement practices. For example, participates in the design of products for recycling or reuse practice of SP is given more emphasised by private while visits suppliers’ plants to ensure that they are not using sweatshop labour practice is given more emphasised by public organizations. • Financial pressures were the most significant barrier to implementing sustainable procurement while issues of organizational efficiency and transparency were found to provide the best opportunity for implementing sustainable procurement.   School of Management

11. Findings • Majority of the organizations adopted few aspects of sustainable procurement e.g. ensuring the safe incoming movement of product to an organization’s facilities (83.3%), purchasing from local suppliers (79.2%), ensuring suppliers’ location are operated in a safe manner (75.0%), purchasing from small local suppliers (70.9%) and Ensures that suppliers comply with child labour laws (62.4%). • SP practices were mostly adopted by the public organizations. The public sector organizations had a significantly higher mean than private sector organizations on visiting their suppliers to ensure sweatshop labour is not being used (p = 0.03); participating in the design of products for disassembly (p = 0.08); ensuring that the supplier is operating in a safe manner (p = 0.03); ensuring that suppliers comply with child labour laws (p = 0.05); reducing packaging materials (p = 0.05) and purchasing from minority and women owned business (MWBE) (p = 0.01). In contrast, the private sector organizations had a significant higher mean than public sector organizations on participating in the design of products for recycling or reuse (p = 0.09). This finding could be due to the small private sector organization sample size. School of Management

12. Findings • Interestingly both public and private organizations adopted the same aspects of SP purchasing practices as priority basis i.e. they purchased from small (73.2% public organizations and 57.1% private organizations) and local (75.6% public organizations and 100% private organizations) companies and ensured that the supplier is operating in a safe manner (76.5% public organizations and 88.3% private organizations). • Our results show that SP practices in Malaysia are characterised by the adoption of purchasing from small and local suppliers, and their worker’s health and safety while most other countries around the world emphasised their SP practices on environmental orientation policy. • The general public services sector placed a particularly strong emphasis on ensuring suppliers comply with child labour laws, reduces packaging materials, suppliers commitment to waste reduction goals, and suppliers to pay a living wage greater than a country’s or region’s minimum wage aspects of procurement relative to other sectors though the difference was not significant. The SP practices vary across the sectors according to differences in the particular constraints faced by organizations and emphasis of policy School of Management

13. Findings • Regarding opportunities of SP, Malaysian organizations agreed with the list of SP opportunities that are included in our questionnaire and ranked ‘improving efficiency and transparency’ as the number one opportunity factor with the second opportunity factor being ‘improve compliance’. Though mean scores of these two factors are close (4.19 and 4.17, respectively). In addition, these organizations strongly agreed with 6 of the 15 SP opportunities. • Malaysian organizations placed significantly more importance on the ‘performance’ of their companies rather than ‘environmental benefits’ which is ranked below 6. This is a significant finding as comparatively the literature indicates ‘environmental benefit’ is an important SP opportunity in other countries. • Regarding barriers to SP, Malaysian organizations more or less agreed (as mean value is more than 3) with the list of SP barriers that were included in the questionnaire with the perceptions of financial viability of SP being clearly identified as the main factors. The barriers frequently cited by the respondents are cost, the lack of a sufficient budget to accommodate SP, and the greater use of resources to accommodate SP. The Malaysian organizations also stated that lack of knowledge and top management commitment, support and accountability are barriers to SP. School of Management

14. Findings • Lastly, the study confirmed that the majority of the executives/senior managers do not posses adequate SP knowledge was and they were not concerned about the present state of SP in their personal lives. These results confirmed that the Malaysian government, as well as private companies, need to engender greater awareness raising activities through a simple and clear SP National Policy agenda that can be easily understood by the general public, wider publicity in the form of conferences, books, journals, and assistance in the implementation of SP procedures and practices so as to generate stronger commitment and involvement to SP. School of Management

15. Theoretical and practical implications • Based on the results of analysis, we suggest that there are several practical implications for the Malaysian policy makers. Policy makers should focus more on “buy from small and local suppliers” as well as retain an environmental focus and address future policy iterations. The Malaysian government should provide sufficient financial support and should introduce, SP guidelines and awareness raising programs about SP opportunities. Finally, the study assists the Malaysian Government in continuing to develop and refine policy responses to the SP challenges ahead. School of Management

16. Limitations and future research • Small sample size that may not represent the population. • This cross-sectional sample provides us with a snapshot of SP practices in the organizations. we studied, at that one point in time and whether the level of SP practice is increasing or decreasing can not be ascertained. We may only describe the current situation. • In addition, all data were drawn from employee surveys, posing risks of method variance or response biases. Since we could not directly compare respondents with non-respondents, we also cannot rule out the possibility of a selection bias. • A more detailed and international study is recommended to remedy these limitations. Future research should incorporate a longitudinal analysis of changing SP practices to extend our analysis, which may add considerably to our understanding of the processes by which such practices become more embedded within organizational cultures. School of Management

17. Benefits of the Study: • This study provides a benchmark with which we can measure Malaysian progress as a country and will provide useful information in prompting further organizational discussion and action. It will also assist the Malaysian Government in continuing to develop the policy response to the SP challenges ahead. School of Management

18. References • EIC[European International Contractors](2004), EIC BLUE BOOK ON SUSTAINABLE PROCUREMENT, http://www.eicontractors.de/doc/tc/eic_document_tc_0016.pdf (accessed 6 January 2009). • Walker, H., Brammer, S. (2009). Sustainable procurement in the United Kingdom public sector. Supply Chain Management: An International Journal, 14(2), 128-137. • Hair, Jr. J. F., Anderson, R. E., Tatham, R. L., Black, W. C. (2006). Multivariate Data Analysis. New Jersey: Prentice-Hall School of Management

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