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Master thesis

Word count: 11652

The role of Public Purchasing in

Sustainable City Logistics

28-01-2019

Master thesis Supply Chain Management

The University of Groningen, Faculty of Economics and Business

By

Veerle Wortelboer S2475405

Supervisor dr. ir. P. (Paul) Buijs

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Abstract

Purpose – This thesis is primarily motivated by the need for more environmentally friendly city logistics and the indispensable role that public organizations can play by reconsidering their purchasing for facility good and services. This raises the urgency to understand sustainable public purchasing process to ultimately realize implications for sustainable logistics.

Design/methodology/approach – Empirical evidence was gathered by means of exploratory single case research, which primarily consisted of 14 conducted semi-structured interviews within the procurement process of the municipality of Groningen.

Findings – This research presents a dynamic model indicating interdependencies in public procurement processes towards sustainable logistics. A major barrier indicates that public procurers have no insight in the transport flows associated with their purchases.

Research limitations and future work – This study highlights the importance of further research to ultimately come up with solid and broadly applicable guidance for SPP. Important barriers that have been discovered concerning the realization of sustainable logistics through public purchases are not directly applicable to every municipality in the Netherlands, hence the findings mainly hold for this research context.

Practical implications – This study proposes that policymakers should focus on specific policy and communication roles in order to improve SPP performance for sustainable logistics. This can be achieved by setting challenging but especially consistent guidelines for public purchasers when assessing the most sustainable supplier.

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Table of content

Introduction 4

Literature review 6

2.1 Sustainable Public Procurement 6

2.2 Sustainable City Logistics 8

2.2.1 Logistic initiatives 9

2.3 Barriers towards sustainable logistics 10

Methodology 12 3.1 Research design 12 3.1.1 Research setting 12 3.2 Data collection 13 3.3 Data analysis 15 Findings 17

4.1 The procedure of public purchasing 17

4.2 Ambiguity on sustainable procurement 18

4.3 Lack of coordination between policy and purchasing 20

4.4 Difficulties for the implementation of sustainable logistics 22

4.4.1 Overview of barriers 24

4.5 Need for guidelines and policies 24

Discussion 26

5.1 Key insights 26

5.2 Implications for policymakers 28

5.3 Limitations and future work 30

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Preface

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1. Introduction

Large public organizations take up a considerable proportion of transportation in city centers (City Logistics Outlook, 2017). These transportation flows possess a deteriorating effect on the environment and society, making it one of the greatest challenges facing cities today (Wiśniewski and Tundys, 2018). As a response, public organizations aim to contribute to improved city centers by supporting the sustainable development of city logistics (Balm et al., 2016; den Boer et al., 2017). The purchasing power of public organizations appears to have an indispensable character concerning sustainable outlooks for the future, known as sustainable public purchasing (SPP) (Testa et al., 2016; Cheng et al., 2018; Liu et al., 2018). However, public organizations seem to have an incomplete understanding on how SPP can contribute to improved city logistics (Balm et la., 2016). Resulting in a gap in which the need for clarity on ‘how’ SPP relates to the application of sustainable logistics is of growing interest.

The population of urban areas will be doubled by 2050, which will contribute to an increase in transportation flows that proportionally adds to greenhouse gas emissions (Bektaş et al., 2018; Gružauskas, Baskutis and Navicka, 2018). In the Netherlands, road traffic has contributed greatly to the current emission level1. For urban areas, 11% of this emission level is associated with the logistics of

facility goods and services (City Logistics Outlook, 2017). These transportation flows include the provision of goods and services that fulfill the needs of buildings in cities, such as cleaning services or office supplies. Generally, to cope with these environmental issues, logistics need to be complementary to sustainable criteria (Testa et al., 2016; Wiśniewski and Tundys, 2018; Zissis, Aktas and Bourlakis, 2018), by means of electric vehicles, truck sharing and the expansion of bicycle lanes for example (City Logistics Outlook, 2017; Neghabadi, Espinouse and Samuel, 2018). Public organizations have a large share for the purchase of facility goods and services in city centres (City Logistics Outlook, 2017), and have therefore been considered as a relevant stakeholder to comprise towards the organization of sustainable logistics (Bektaş et al., 2018; Balamurugan et al., 2018).

However, a significant amount of research that elaborates on the role of public purchasers, identified resistance factors that hamper the adoption and implementation of greening initiatives (Guenther et al., 2016). A commonly faced dilemma is that sustainable public purchasers on the one hand strive for low costs purchases, while on the other hand seeks for sustainability (Goebel et al., 2018; Cheng et al., 2018; Gružauskas et al., 2018). This is possibly fed by the absence of flexible budgeting to obtain sustainable efficiency on the long-term (Brammer and Walker, 2011). Also, whenever asymmetry exists between principals and agents (e.g. policy makers and procurers), there is a chance that irrational behavior occurs, by for example making incremental sustainable actions as a public purchaser to avoid the underlying truth of not procuring sustainable at all (Shevchenko, Lévesque and Pagell, 2016; Wilhelm et al., 2016). Furthermore, inefficient city logistics is the results of the inadequate

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5 focus on logistics during SPP (Balm et al., 2016). Some aspects that enhance the root causes of this problem are a lack of insight in better alternatives, conflicting objectives of stakeholders involved during SPP and task dependencies within municipalities (Neghabadi et al., 2018). A final important finding in the literature that complicates SPP is pointed out by Brammer and Walker (2011) stating that a lack of regulatory support, which can be typified by an informal working atmosphere, is contrary to the necessity in order to implement sustainability.

In essence, public organizations fulfill an indispensable role towards sustainable logistics (Balm et al., 2016). Surprisingly, most sustainable logistic studies do not take the role of public purchasing into account (Dekker, Bloemhof and Mallidis, 2012; Neghabadi et al., 2018). Furthermore, the literature on SPP is mostly focused on the purchasing of sustainable goods and the barriers that play an obstructive role (Guenther et al., 2016; Montabon, Pagell and Wu, 2016). Balm et al. (2016) tried to bridge the knowledge gap of the effect of SPP on sustainable city logistics. This study indicated a lack of standardized logistics information in SPP and highlighted the inadequate anticipation on sustainable initiatives by public organizations. However, it does not address the implications for SPP to ultimately realize sustainable logistics. Based on this, the aim of this study is to provide insight into the SPP process with particular regard to the logistics associated with the purchased facility goods and services. The research questions answered are the following:

1. How is sustainable logistics for facility goods integrated in the purchasing processes of public organizations?

2. Why do public organizations fail to implement sustainable logistics for facility goods?

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2. Literature review

2.1 Sustainable Public Procurement

Sustainability has manifested as a trending topic over the last few decades. In our complex and interconnected world, the essential purpose of sustainability is to progress towards economic benefits, social equity and environmental honesty, which is commonly referred to in literature as the triple-bottom-line (Ni and Sun, 2018). In literature, sustainable public procurement is considered to have the most promising potential to pursue sustainability within public supply chains (De Giacomo et al., 2018). As such, expertise on sustainability by public procurers will have a determined effect on the a successful implementation (Preuss, 2009). Sustainable public purchasing can be defined as “‘the acquisition of goods, services and works whereby public institutions consider sustainable external resources2 in order to manage primary and supportive activities as such that they are beneficial to both the organization as the triple-bottom-line” (Ni and Sun, 2018).

Recent public procurement literature has suggested two main barriers for lacking behind of incorporating sustainability. Firstly, there is a lack of financial support for sustainable projects (De Marco, Mangano and Zenezini, 2018) and secondly, sustainable goals need to be crystal clear in order to trigger purchasers willingness-to-pay (Goebel et al., 2018). As such, this first barrier confronts purchasing managers with short-term economic interest which have the tendency to conflict with sustainable decision making (Goebel et al., 2018). Such tight budget constraints environmental conscience purchasing (Brammer and Walker, 2011). Also, the ambiguity of return on investment makes purchasers doubt about their odds to obtain a win-win situation (Brammer and Walker, 2011). Moreover, the return on investment should be measured. This requires an understanding of economic terms as well as figures related to society and environment impacts (Pagell and Wu, 2009). Performance criteria methods can be a helpful implication for such situations in order to unravel links between cost and sustainability objectives (Dekker et al., 2012). However, the applicability of such methods has shown some limitations in practice (Montabon et al., 2016). In essence, the right compromise between beneficial economic outputs and environmental advantages are hard to find as policy tools are incompetent (Marcucci et al., 2017). Consequently, methods and tools that supports sustainable purchasing to become measurable in order to debate on its financial impact should be embedded in public organizations (Balm et al., 2016). As such, in order to perceive this dual beneficial situation for organizations where both sustainability and economic aspects can be taken into consideration, policies and procurement standards must be in line with the triple-bottom-line objectives that encourages innovation, and consequently a competitive networks (Montabon et al., 2016).

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7 The second barrier merely goes beyond the inclusion of sustainability in public purchasing procedures. The perceived benefit of sustainability must be clear in order for public purchasers to act on it, as this benefit can have an effect on the willingness-to-pay (Grandia, 2016; Cheng et al., 2018). The willingness-to-pay has shown to be highly affected by social dimensions rather than environmental dimensions, as self-enhancement and commitment to authorities show to be high valued concepts for public purchasers (Goebel et al., 2018). In other words, public purchasers do not directly act sustainable in an organizational context when there is no personal reward or development. In addition, the behavior of a public procurer has an influence on the eventually application of sustainability (Grandia, 2016), which is therefore a promising aspect to be influenced. More specifically, SPP practices do not seem to have a direct relation with the structure of the organization but rather be influenced by the values and beliefs of human beings (Testa et al., 2016). Furthermore, by analyzing public organizational attempts to operationalize SPP practices, it seems to be of frequent occurrence that whenever the path towards sustainability development is not completely implemented on an operation level, SPP practices cannot be met. A convincing cause for this misfit could be the lack of an incentive system. Besides, also a lack of interest and knowledge is likely to augment this misfit (Guenther et al., 2016). Therefore, it has come to the understanding that enabling a properly arranged incentives system can assure a public purchasers to act more sustainable (Günther and Scheibe, 2006; Montabon et al., 2016).

Besides the previous described impeding aspects for SPP, the power of public purchasing has been acknowledged on their influential effect for sustainable future prospects (Cheng et al., 2018). The power enhanced with procurement allows organizations to sharpen policies and create more sustainable markets (Cheng et al., 2018). Once a local government, such as a municipality, has agreed to play a central role for encouraging sustainable development, it has been shown that the execution of such objective is reflected in their willingness for achievement (Evans et al., 2006). This is congruent to earlier findings that confirm that governments enable purchasing power to forward their social and environmental policy goals (Brammer and Walker, 2011). However, significant change is hard to accomplish as the economic aspect of the triple-bottom-line has a great influence on political discussions (Montabon et al., 2016). Moreover, the integration of sustainability into public procurement strongly depends on embedded standards (Cheng et al., 2018). As such it can be stated that in order to unite sustainable aspects in the public purchasing process, changes on the guidance of SPP must be provided.

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8 the inclusion of sustainability in public purchases (Guenther et al., 2016). Consequently, making use of a neither formal or informal governance structure but rather a combination where strict contracts can be alternated for more trustworthy relationships is preferred (Evans et al., 2006). In general, from an economic perspective, public organizations influence transportation growth in cities. However, at the same time, due to their proper amount of steering capacity towards triple-bottom-line objectives, public organizations can make cities and societies grow by promoting sustainability and reducing CO2 footprints. This is where sustainable logistic solutions come in.

2.2 Sustainable City Logistics

As the population of the cities has been proportionally increased over the last decades, the need for urban logistics development has risen (Bektaş et al., 2018). Traffic in cities are primarily hindered by spatial constraints causing vehicles to not pursue at an optimal emission speed level, causing pollution (Bektaş et al., 2018). Besides, the performance and input of a supplier has a great influence on a fortunate execution of sustainability (Goebel et al., 2018). This raises the urgency to focus on sustainable city logistics and its prospects for the future when enabling more environmental friendly transport modes. Sustainable logistics, however, can be defined as follows “The reduction of external environmental negativities to create a sustainable balanced triple-bottom-line for logistics practices” (Dekker et al., 2012; Neghabadi et al., 2018).

Urban logistics is, among others, brought about by public purchasing (Balm et al., 2016). Currently, the interest of implementing environmental friendly measures has been recognized in both local governments and private firms (De Marco et al., 2018). An all-encompassing definition of city logistics provided by De Marco et al. (2018) is the following “City logistic lends the opportunity to efficiently revise the transport flows in urban areas while considering environmental and economic aspects”. As a sign of growing awareness of public organizations towards the contribution of more sustainable city logistics, some public organizations in the Netherlands join “Green Deals” to get involved in the possibilities for smarter and cleaner city logistics. In this way, public organizations make their concerns explicit, and show a sign of recognition for their key function for getting is done. Smart regulation, stimulation and experimentation will be required to achieve more sustainable city logistics in the future (City Logistics Outlook, 2017).

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9 Within this concern, sustainable public procurers are inclined to shift to low or non-fossil fuel consuming vehicles (Balamurugan et al., 2018).

On a strategic level, long-term agreements should be aimed for, as mutual efforts can be achieved in every phase of the supply chain (Wiśniewski and Tundys, 2018). For instance, a more efficient use of truck capacity reduces the chance of running empty for reverse logistics, which is known as backhauling (Bektaş et al., 2018). At an operational level, a well-performing purchasing procedure can benefit from, for example, attaining suppliers that wishes to contribute to collaborative performances (Montabon et al., 2016; Ni and Sun, 2018). Collaboration with suppliers is a progressive way to contribute to sustainable public procurement (Neghabadi et al., 2018; Wiśniewski and Tundys, 2018). Collaboration in terms of bundling products from suppliers is considered an exemplar of sustainable performance (City Logistics Outlook, 2017). This offers opportunities for public decision makers to realize sustainability by efficiencies of scale through collaboration (Dekker et al., 2012). The concept of collaboration for this study is referred to as “a common possibility to decrease environmental disruption in competitive markets” (Gružauskas et al., 2018) and (Ni and Sun, 2018). By enabling shared effort in a supply chain, stakeholders are more secured when making sustainable investments (Ni and Sun, 2018).

2.2.1 Logistic initiatives

To act on the negative externalities towards SPP without penalizing the triple-bottom-line is still a challenging process (Marcucci et al., 2017). This specific section will therefore focus on alternatives to create more sustainable city centres in terms of logistics. First of all, as a common initiative for both private as public literature, horizontal logistics collaboration in the form of an urban consolidation center (UCC) contribute to less city emission (Zissis et al., 2018). This is a logistic city initiative that contributes to an efficient distribution system by reducing urban freight movements (Björklund and Johansson, 2018). The function of an UCC is to exactly distribute the required demand in a time efficient manner (Balamurugan et al., 2018). This logistic initiative of an UCC consist of smaller, more environmentally friendly, vehicles that take responsibility for the last mile fulfillment (Bektaş et al., 2018), such as electric vehicle technology. This vehicle contributes highly to a more sustainable environment as its combustion engines does not emit any greenhouse gas and is totally silent (Bektaş et al., 2018). As a result, suppliers become unburdened of small freight deliveries in city centers due to the drop off possibility at the edge of the city which satisfies downstream stakeholders due to less emission (Dekker et al., 2012).

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10 efficient. By making use of such bicycles, or even electrically-assisted bicycles, delivery in urban areas can be pursued in a sustainable and economically competitive way (Schliwa et al., 2015). This non-motorized approach can be a good variant for transporting everyday goods to city centers. Encompassing, a collaborative approach with all parties involved should gain an understanding of the dynamics of urban areas in order to foster sustainable city development (Marcucci et al., 2017).

2.3 Barriers towards sustainable logistics

It is noteworthy that literature is supportive to the fact that the purchasing process of public organizations should contribute to a more sustainable future, while they do not incorporate one of the largest polluting aspects, namely transportation. As such a certain irony evolves where public organizations seem to be satisfied when fair-trade and sustainable products can be purchased while leaving the transportation aspects out of sight. As such, this section has the purpose to address certain obstructing aspects that have so far contributed to the current state of affair of logistics in city centers due to the purchasing of public organizations.

The delivery of goods are associated with risks and uncertainties like; last-mile fulfillment (Bektaş et al., 2018), time to collect cargo (Dekker et al., 2012), transportation and delivery times. Despite these complexities, certain strategic considerations should be made by purchasers in order to stay competitive in this innovative market (Cezarino et al., 2016). This has been viewed as a challenging task for public purchasers. Furthermore, as public organizations in urban areas are considered an important customers to local suppliers, they are able to exert some specific requests concerning logistics (Balm et al., 2016). Supplying companies will, to that respect, have an increased incentive to comply with the requested requirements in order to not lose their customer (Balm et al., 2016). Yet the execution of such strategic management can be concluded as inadequate.

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11 al., 2016).

Literature seems to focus more on the result of public regulation instead of the design. For example, sustainable public purchasers should set more strict regulations regarding loading and unloading for suppliers in city centers (De Marco et al., 2018). To this extent, policy makers should become more embedded in the opportunities and potential improvements for sustainable city logistics (De Marco et al., 2018). Ultimately a more equally proportioned amount of sustainability is targeted to be included in various SPP projects (Grandia, 2016). However, as stated by Grandia (2016) there seems to be ambiguity in order to achieve this. Consequently, agreements on a governmental level should be made for logistic contexts (Balm et al., 2018).

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3. Methodology

3.1 Research design

This research is primarily motivated by the need for sustainable city logistics in which the purchasing of facility goods by public organizations play a substantial role. This simultaneously raises the urgency to understand ‘how’ the public procurement processes are currently organized, in order to find out why there are so little sustainable logistics initiatives implemented so far. Since it is yet unclear how SPP can implement sustainable logistics, a qualitative approach is applied. By adopting this approach, rich and comprehensive anecdotal data is obtained within the unit of analysis which is the procurement process of public organizations (Mintzberg, 1979). This unit of analysis entails the entire process from the ‘need’ to tender to the determination of a contract with a tenderer.

A single case study has been preferred as an empirical tool for this research as it is a rich way of getting engaged with various theoretical interpretations (Langley, 1999). As sustainability in public procurement has been thoroughly investigated in recent literature, this single case study has an innovative character as it focuses on the logistics associated with purchased facility goods by public purchasers (Yin, 1984; Rowley, 2002). Due to the exploratory character of a case study, dependencies between public procurement towards sustainable logistics are identified (Preuss, 2009). Moreover, this research complied to a systematic inductive research approach which used personal thoughts and experiences to come up with ‘active’ overarching themes (Gioia, Corley and Hamilton, 2013). Due to the development of these themes, a dynamic inductive model has been created. This model elaborates on the cohesion of the specific themes and their influences on each other (Gioia, et al., 2013).

3.1.1 Research setting

The empirical context of this research comprises the logistics associated with the supply of facility goods and services for the municipality of Groningen. The city of Groningen is the economic heart of the Northern part of the Netherlands. As the city of Groningen has been spared from devastating bombing and bonfires throughout history, the city center has managed to remain its historical structure3. Over the years multiple modifications have been made to the city and more emphasis has been put on shaping public spaces. Nowadays the city of Groningen consists of many shops, restaurants, governmental buildings and prioritized roads for cyclists and pedestrians. However, these changes have led to a decrease in space for road traffic in the city center of Groningen, while the increased amount of facilities in the city center requires more and more freight and package delivery fulfillment every day. This led to an increased amount of vehicles in the urban center contributing to congestion and pollution.

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13 As a response, the municipality of Groningen engaged in a joint plan with the government, transporters, shippers, car manufacturers, research institutes, industries, and other interest groups by signing the Green Deal Zero Emission Stadslogistiek 4. This represents an emission free supply of goods towards the city center as a common goal for the year 2025. Considering all emitting city logistic activity in the Netherlands, 11% is accounted by logistics for facility goods. Whereat large offices and public buildings act as the primary customers of facility movement in city centers (City Logistics Outlook, 2017). From a local municipality perspective, everything which is inevitable for running a large facility can be assigned to facility logistics, for instance, maintenance equipment, sanitary services, catering- and office supplies which are fulfilled by means of facility logistics. Currently, much governmental buildings are located in city centers leading to an increased demand for facility products and services which this lends the ultimate opportunities to consider innovative solutions to reduce the transportation and simultaneously CO2 emissions.

3.2 Data collection

The main source of qualitative data was gathered through structured interviews. By pursuing semi-structured interviews, a relatively complete capture of the bottom-line and complexity could be researched (Yin, 1984; Eisenhardt, 1989; Voss et al, 2002). This approach also offered the flexibility to ask probing questions to gain new insights. The data gathering took a multilevel research approach to unravel unforeseen aspects in different functions at the municipality of Groningen, such as the management, purchasing, contracting and policy department. This multilevel approach brought about a better understanding of the values that the employees of municipalities of Groningen attach to inefficiencies and impediments of sustainable procurement. Enabling semi-structured interviews therefore offered on the one hand objectivity by using predetermined questions while on the other hand leaving space for spontaneous and personal completion (Myers and Newman, 2007; Rowley 2012).

The selection of interviewees has been executed in a transparent and consistent way to enhance the replicability of the research (Eisenhardt, 1989). First contact was established with a facility advisor within the municipality of Groningen. In cooperation with this employee, individuals from the management, purchasing, contracting and policy department within the unit of analysis have been selected for interviews. This selection was based on the perceived degree of knowledge and experience the facility advisor had of the employees. In order to broaden the sample, an opportunistic non-probability strategy known as ‘snowball sampling’ was being used as a sequential step (Brammer and Walker, 2011). By enabling this method, informants spoken to in the first selection round led to other potential informants. This was a very useful method as it avoided reliance on the perspective of one single individual (Eisenhardt, 1989). When the saturation of information occurred, the data had been distilled to the fullest and no more interviews needed to be performed (Gioia et al., 2013). Eventually,

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14 14 interviews have been conducted. Table 1 provides an overview of the positions held by the interviewed employees of the municipality of Groningen with their job description.

Function Job description

Purchasing director ❖ Manages the purchasing department ❖ Mediates when escalating

❖ Responsible for decisions that have a political impact Category manager ❖ Authorizing officer

❖ Make agreements with the council ❖ Exert a transparent procedure Contract managers (x3) ❖ Make the program of requirements

❖ Monitors the 'commitment' with contracts ❖ Operates as a product specialist

(Senior) purchasers (x6) ❖ Concerned for the smooth running of the public procurement ❖ Project manager

Advisor ❖ Boosts policies

Policy makers (x2) ❖ Lobby at the government for financial support

❖ Implements efforts on a strategic, tactical and operational level

Table 1: Anonymous overview of the interviewees and their job description

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15 To gain more understanding about the role of public procurers, policy makers and the sustainable opportunities for the facility department at the municipality of Groningen, five topic-related meetings have been attended. Results from these meeting were drawn together to yield an overall idea of the public procurement procedures. Table 2 represents the timespan in which these meetings have taken place together with their discussed contents.

Date meeting Topic

September 14th ❖ Introduction of the Goederen Hub Groningen Eelde (GHGE) by Hub owner. Followed up by a discussion about the scope and the opportunities for the delivery of facility goods to the municipality of Groningen. September 17th ❖ Discussion about the business plan of the GHGE with Hub owner and

policy makers of the municipality of Groningen.

October 9th ❖ Session to raise awareness within the facility department about the status quo and the sustainable opportunities.

November 28th ❖ A presentation on interview results by me followed up by a discussion about current SPP procedures within the facility department of the municipality of Groningen.

January 15th ❖ Workshop and brainstorm session regarding the vision on sustainable logistics at the municipality of Groningen.

Table 2: Overview of the content of the five attended meetings at the municipality of Groningen

Lastly, the data gathering was completed with archival documents regarding two successful contracts in which the facility department managed to incorporate sustainable logistics. The corresponding quotation request and the program requirements have been obtained to create an in-depth understanding of how they managed to include sustainability while awarding tenderers on the price aspect too during the motivation round in a public tender. The use of different sources of data contributed to both the overall understanding and triangulation of evidence, which increased the construct validity of the research (Eisenhardt, 1989; Voss et al., 2002).

3.3 Data analysis

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4. Findings

From the interview data, five main themes emerged namely (1) the procedure of public purchasing, (2) ambiguity on sustainable procurement, (3) lack of coordination between policy and purchasing, (4) difficulties for the implementation of sustainable logistics and (5) need for guidelines and policies. A dynamic model is created and provided in Figure 1, which gives insight on how the themes relate to each other. The relations in this dynamic model will be discussed in the finding section that follows.

Figure 1: Dynamic model of overarching dimensions

4.1 The procedure of public purchasing

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18 advantaged or disadvantaged position at the moment that a tender takes place5. As such, in the preliminary process of public procurement “... we depend on our subject matter experts from the market” [6C]. In general, everything which is put on the market by the public procurement of the municipality of Groningen will result in a commitment, a contract. On annual basis, this accounts for approximately 230 contracts which arise from either category plans, based on expiring contracts, or ideas that pop-up for new tenders. Whenever a tender has to be created from scratch, the main input is derived from the demands of society, politics or business life. A good public tender is one that is enriched with market-specific knowledge in order to formulate the most appropriate request.

At the municipality of Groningen goods and services are procured in projects teams carried out by dedicated professionals, such as procurers. Giving substance to strategic decisions comprises the role of the purchase director and policy makers as procurement teams perform at an operational level. To assure a certain level of compliance for sustainability, a tender is dependent on input and direction. This requires internal communication efforts from multiple perspectives. However, policy makers implicate a deficiency. "There is so much going on, you are always structurally understaffed" [8D]. During public procurement, policy makers are often typified by the absence or inadequate input. A lot is asked of the policy makers and there are only a few tools for prioritizing relevant projects. “I do not get to 85% of the tasks and the 15% that I do pursue, must have the most effect with the least effort” [8D]. Proving propper input and clear guidance is a very demanding task for policy makers. This influenced their opinion about communication which has made a switch from “being engaged” into “help yourself” in most procurement projects. “Nevertheless, confrontation is also a way of communication” [8D]. Furthermore, contract managers are included in the procurement team and can realize steering prior to tendering, which is where sustainable initiatives are taken into consideration. However, some department view contract management as a small role within a function. Others state that the involvement of contract managers in tenders are inconsistent. Because of this inconsistency, the sharing of contract specific information between project teams has been a subordinated priority. This lack of involvement of contract managers and communication municipality wide has been identified as a barrier.

4.2 Ambiguity on sustainable procurement

A complete understanding of the set policy pillars within the municipality of Groningen, an up-to-date awareness of the developments in the market or having specific knowledge on the possibilities for adjustment in a contract will add to a better and clearer understanding of SPP. On the other hand, financial debates about the return on sustainable investment, seem to strengthen the perceived ambiguity on the integration of SPP. This logic is illustrated in Figure 2.

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19 Figure 2: Factors that influence the integration of policy objectives

The main goal of SPP is to make the tender request as conform and realistic as possible for the intended market. However, every public procurement process and thus contract is different. Hence, requirements and influences exerted from the policy department vary per contract. The leading policy pillars pursued at the municipality of Groningen are “innovation”, “SMEs”, “social return”, “sustainability” and “business management”. In order to act on those pillars, a fundamental base of experience, guidance and understanding are required in order to examine what to request. "When a lot of 'hands' are involved in an assignment, more emphasis can be placed on social return" and “That is why the choice on which pillar we will rely on the most depends on the product or service” [6B]. Getting engaged with the policy pillars is perceived as an urgent field of tension where public purchasers must try to reach an optimum. Also, in order to procure sustainably, an effective understanding of the developments in the market by means of market consultations will contribute greatly to the knowledge public procurers.

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20 of sustainability, a growth model can impose requirements for the future. However, the more you add as requirements, the more extensive the contract gets, resulting in a greater demand for regulation and monitoring. It is therefore key to “find a balance for this per occasion” [6C]. It can thus be stated that when there is more understanding about the possibilities for adjustment in a contract, public procurers can more adequately act upon the policy objectives.

While the main focus of the municipality of Groningen is no longer exclusively on costs savings, creating more sustainable contract while keeping costs low is still one of the key objectives today. However, there is an overall perception that the implication of sustainability raises costs.“If there is a strategic product then there is often a big trade-off” [3C] and “When the price is under pressure, it is hard to add sustainable aspects” [8D]. A purchasing director argued that “We want to pay a little more if that contributes to our objectives” [1B]. In part, this depends on the intentional support of a municipality to achieve sustainable goals and consequently support SPP. On the other hand, ambiguity on the integration of the policy objective “sustainability” seems to initiate a financial debate. As financial efficiency for sustainability differs between contracts, public procurers in charge have problems with their considerations. As such, the main barrier is that public procurers often face financial viability issues. Policy makers and purchasers are expected that they argue on the costs of going green, known as the ‘payback period’. Yet this is very difficult. It is time-consuming and rather impossible for municipalities to express sustainability in financial terms.

4.3 Lack of coordination between policy and purchasing

About 26 to 30 employees are involved in the execution of public tendering processes. They are divided into three domains namely social, shared service center and physical, which are in their turn subdivided into smaller divisions. Every domain has their own agendas and project teams. During projects, public purchasers fulfill the role of guiding and executing, contract managers, however, guarantee the professional knowledge and create the program of requirements, other stakeholders with functions such as category managers, policy makers, and clients, complete the project team content-wise. “A projects team is always a mix between purchasing and content” [2B]. These different functions, interests, and responsibilities allow objectivity to be achieved within the SPP process. Moreover, as a European municipality, you have to tender objective, transparent and just. “A contract must be legitimate which means that we as a municipality spend government money derived from our taxpaying society who owe a justification on government procedures” [6C].

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21 lot of knowledge and own a very innovative and sustainable fleet. Also, very useful insights can be obtained from the market which evolves at a very fast pace. Yet the internet is a good place to keep yourself informed. Interestingly none of them explicitly mentioned the policy area “sustainability” of the municipality of Groningen as a valuable source of input. The purchasing director, however, did mention the policy department of the municipality itself as the main source of input but made an immediate side-note arguing that “Policy comes from the right angle, however, it could be expressed more internally instead of externally” [1B]. This feeds the impression that public procurers have insufficient contact and idea about the objectives of policy makers. This lack in coordination can be identified as a great inefficiency as input is essential for SPP “...what we do is not making up our own policies”[2B].

Inadequate forwarded input from the policy area “sustainability” towards purchasing seems to trigger dissatisfaction. “I am equally informed as any other citizen” [4A], “I am less aware then wanted” [6A] and “Too little input” [1B]. As sustainable public procurement is a joint effort, it is not perceived as being widely supported within the municipality of Groningen. “This might not be the answer you hoped for, but I have no knowledge of all the deals signed by the policy department” [4A]. On the one hand, this can be derived from the tendency of governments to not comply with their agreements, “Don’t start what you can’t finish” [6B]. As well, there is a lack of support from the policy area sustainability as there is no representative, which induces public purchasers to fill up this knowledge gap for themselves. On the other hand, there is a perceived irrelevance of input originating from policy makers which makes people averse for open-information sessions. Whenever people sense that the information is not appealing to them, they seem to avoid such meetings. Leaving voluntary in-depth sessions unattended and newsletters unread. This results in a lack of well-informed, aware and competent sustainable public procurers.

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22

4.4 Difficulties for the implementation of sustainable logistics

Public organizations have various economic, environmental and social objectives. That is why the public purchasing department is expected to create as much sustainable value as possible. "We all have some sort of intrinsic motivation as public purchasers to obtain the optimal price-quality ratio” [6C]. Accordingly, at the municipality of Groningen, there are two clear cases in which requests for sustainable logistics were successfully met during tendering. For ‘sanitary services’ and ‘moving services’ several sustainable requirements have been asked for. "By playing with the award criteria, everyone ultimately contributes a little bit to make the policy of the municipality in 2025 a reality" [6C]. A reason for this success is that the contracts contained a large transportation aspect, which allowed public procurement to exert emphasis on sustainability. Apparently, a municipality can use its power to set bars in the market, however, this does call for effective cooperation with all the parties involved. For example, “Lately I checked a tender which was mainly focused on sustainability, but what really missed to my opinion what the question on how that particular supplier was going to contribute to sustainable logistics” [2B]. It is therefore desired for SPP to enhance performance based or functional specifications to provide suppliers the flexibility to propose smarter solutions. “Transporters really want to think along and cooperate” [8D].

Furthermore, some public purchasers are still unaware to what extent sustainable procurement can contribute to conceiving policy objectives. Particularly for sustainable logistic initiatives, where the polluting alternative still seems to dominate in tenders. It has been acknowledged as the task of policy makers to ‘policy-wise’ make the sustainable alternative more attractive. This by awarding sustainable providers more, to eventually entail a more competitive business model. The role of SPP is to enhance those policies and integrate those criteria in the procurement process. However, even though some sustainable award criteria are included in public tenders they do not signify a structured procedure. As such that opportunistic behavior is a common assessment mechanism for supplier selection. This has been recognized at the municipality of Groningen as suppliers with the best motivation speech get chosen. A lack of clear guidelines in terms of sustainable supplier assessment has so far led to this status quo. This barrier has been perceived as urgent for change. “I hear different chatters around me, that is why I support the initiative to get together to share opinions. Just sharing knowledge” [7B]. This gives the impression that there is more to learn and improve.

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23 request. As such, a category manager mentioned that the “frequency of delivery” is also included in their program of requirements, “We decide how often a supplier must deliver” [2B]. Neither quotations nor contract management, who is in charge of the creation of the program of requirements, mentioned delivery frequency as a standard condition. It can therefore be stated that there is confusion within the project team about what can be requested as tender conditions considering sustainable logistics. To give an illustration, table 3 provides the quotation request for the ‘moving services’, where a tenderer who used an electric vehicle won the tender. This is the most recent and successful tender in which the aspect sustainable logistics have been taken into consideration. As can be read, only the means of transport and some proposals that aim for sustainable improvements are being requested.

8.2.7 Award criteria for the sustainable execution of moving services

8.2.7.1 Introduction on sustainability

… Sustainability is a starting point in everything we do. In 2025, the municipality of Groningen wants to be energy-neutral and therefore wants to focus firmly on sustainability. The client also wishes to contract a supplier in this tendering proces s, who is ahead in the sustainable handling of materials and the environment. With regard to the aspects of transport movements, the supplier of the contract reduces CO2 and NOx emissions when using vehicles running on alternative fuels such as CNG,

bio-CNG (green gas) or hybrid version. The use and deployment of vehicles that run completely electric is still seen as the most optimal for the time being. The ambition is 'the city center emission free'.

8.2.7.2 Requested description

The tenderer is requested to provide a description that explains why his approach contributes to achieving the sustainability ambition of the Municipality of Groningen. In other words, which (innovative) measures will you apply to carry out the

Assignment to carry out relocation services for the Municipality of Groningen as sustainably as possible.

Description of sub-award criteria Score

The deployment of the transport - Means of transport 125

Developments, proposals on relocation resources to be used (recyclability) and their own organization and business management that lead to sustainability.

75

Total 200 Table 3: Award criteria for the sustainable execution of moving services6

A possible reason for the confusion on what to request in terms of sustainable logistics might stem from the ambiguity of the concept of sustainable logistics. What comprises this term exactly? “It has something to do with CO2 reduction” [1B]. In order to understand this vague concept, solutions for sustainable logistics have to become more tangible. As such, an all-encompassing understanding of sustainable initiatives such as electric vehicles, freight bundling and usage of a goods hub can ease SPP. However, there is a current lack of insight on the influence of SPP for sustainable logistics. “We have no insight in logistic movements of delivered goods or services for the municipality of Groningen” [2B, 4B, 8D]. This can be traced back to the fact that not all suppliers view logistics as their core business.

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24 They commonly outsource their logistics. This constraint public purchasers to gain insight into logistics flows through suppliers. Ultimately it is a matter of thinking logically in order to receive a clear understanding of the limitations of sustainable logistics. This can be obtained by requesting what you think is feasible. “It is a matter of challenging a supplier” [4B].

4.4.1 Overview of barriers

The barriers to SPP gives valuable insights into the status quo of public organizations. In total thirteen barriers have been identified. Table 4 provides a comprehensive overview of the barriers being either indicated or perceived by the interviewees subordinated per overarching theme.

Themes Barriers

4.1 The procedure of public procurement

❖ The pursuit of an objective and transparent process ❖ Absence of contract management during SPP

❖ Communication municipality-wide by contract management ❖ Perceived workload

4.2 Ambiguity of objectives 
for SPP

❖ Trade-off between costs and sustainability ❖ Measuring the payback period

4.3 Lack of coordination between policy and purchasing

❖ Lack of input and presence of the policy area ‘sustainability’ ❖ Ambiguity on responsibilities by applying sustainability ❖ Ambiguity on how to act on sustainability

4.4 Difficulties for the implementation of sustainable logistics

❖ Lack of guidance on, ➢ what to request ➢ how to assess

❖ Lack of definition for sustainable logistics ❖ Lack of insight in transport flows

Table 4: Overview of identified barriers

4.5 Need for guidelines and policies

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25 Moreover, the key question is ‘how’? As there are so many different points of interest to meet, one single improvement in order to optimize will not be suitable. It will be a joint improvement, in which perhaps from an external perspective other governmental institution should be attracted and included. Internally, guidelines and policies should attain an increased focus as more people must feel responsible for the performance of it. Looking at the future of improving sustainable logistics, it is believed that a considerable amount of effort and work is needed to fully tackle the number of barriers identified in the previous sections. As such, from the perspective of the interviewees, this section reflects on implication for improvement of the sustainable purchasing process.

A desirable working method could be that within every domain there is at least one representative for the policy area sustainability. This could be either a contract manager, advisor or category manager. “This could be very valuable for either information sharing and useful for accountability” [3C]. This new role comprises time to communicate things, a comprehensive approach and a persuasive vision. It is therefore crucial to find an optimum in content and the amount of information shared. Furthermore, as a municipality, you have quite some steering capacity. Through this promising claim and the protracted experiences of municipalities, public procurers should establish innovatively sustainable criteria within the contours and boundaries of their field. This allows public procurement to be more dominant in challenging the market. For example, when executing a market consultation, more sustainable transport conditions such as collaboration can be requested.

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26

5. Discussion

This research complements previous studies by providing an in-depth understanding on the organization of SPP and identifying barriers that hamper the fulfillment of sustainable logistics. This research suggests that clearer policies and communication guidelines should be taken into account for SPP, as public organizations can pursue great innovation regarding environmental city logistics with their purchasing decisions. This discussion section reflects the essence of the dynamic model, which explains how a combination of factors lead to limited progress of sustainable logistics when purchasing facility good and services.

5.1 Key insights

Lack of knowledge on sustainable logistics

This study suggests that when it comes to the purchasing of goods and services containing a large transportation aspect, public purchasers during tendering lack formal procedures on how to act sustainably. In particular, this study discloses that the contracts being pursued at public organizations do not provide insight into the logistics flow of the purchased good and services. Therefore, the established barrier replies on current dispute by Balm et al. (2016) about the lack of insight in sustainable logistics, by elaborating on the underlying cause. Furthermore, from the interviews it came to the understanding that there is an urgency for input from the policy department for more sustainable transportation requirements during tendering. This corresponds with the study of Balm et al. (2016) who states that the shortage of standards and policy tools impedes sustainable procurement. However, based on these empirical findings, the concepts “what to request” and “how to procure sustainably” discussed by Balm et al. (2016) and Cheng et al. (2018) can be considered as incomplete as they focus on sustainability as a whole without focusing on sustainable logistics.

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27 Explicit indicators that affect SPP

In correspondence with the study of Evans et al. (2006) who states that a combined governance structure, neither formal nor informal, offers the opportunity to alter strict contracts for valuable long-term relationships, empirical findings presented in this study indicate that the municipalities of Groningen enhance such governance approach by providing suitable interpretation to contracting. For example, they allow addenda and growth models to be incorporated in their quote request in order to stimulate the growth of relationships and offer greening inputs to be implemented later during the contract period. As another explicit indicator regarding SPP, a relation between stakeholders involved during tendering and objectivity has been made, which lacks in previous literature. This study offers an addition insight regarding the composition of a SPP project team by proposing that the presence of diversity in stakeholders enhance objectivity. Additionally, this contributes to a successful procurement process as public organizations must be able to assure an objective and just process.

Implicit indicators that affect SPP

An extant study states that a sustainable procurement process is dependent on the knowledge and expertise of a procurer in order to, in day-to-day tasks, successfully implement sustainability (Preuss, 2009). Also, the path towards implementing sustainability for public procurement is a determined aspect for public procurers to act sustainable (Montabon et al., 2016). The findings of this study support that the application of sustainable procurement is indeed reliant on the familiarity of the SPP processes by public procurers together with an understanding of the policy pillars. It is therefore common practice that contract managers, the ones with the most in-depth knowledge, get involved in this public procurement process. However, this study proposes a lack of clear communication on final responsibilities regarding the implementation of sustainability. Detailed insights about final responsibilities, provide an explanation for this ambiguity as everyone is individually trying to give an interpretation to this which creates ambiguity.

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28 The justification for sustainability in financial terms

This study offered interchangeable results with theory about the trade-off between costs and sustainability for sustainable public purchasers (Goebel et al., 2018; Cheng et al., 2018; Gružauskas et al., 2018). The findings offer a reason why public organizations do not incorporated sustainable initiatives to the fullest yet. For example, public purchasers state to always opt for the most sustainable alternative, however practice proves that this is often done in a more cost-conscious than environmentally conscious way. Supported by Dekker et al. (2012), a lack of performance criteria methods derived from the findings, which negatively affect this trade-off. Additionally, in accordance with Brammer and Walker (2011), ambiguity about the potential benefit of purchasing responsibly makes public purchasers doubt about including sustainability. An important contribution made in this study is the acknowledged barrier towards greening for public organizations, better known as payback period. This contribution implies that public purchasers are demanded to argue on the return on sustainable investment which has been proven to be very difficult yet impossible. So far, no literature indicated this aspect as a barrier towards SPP.

Challenging the market

In an addition to Cheng et al. (2018) who argued that high public purchasing powers could potentially sharpen policies in order to encourage more sustainable markets, this study exposes that the steering power of public organizations, like municipalities, are likely to challenge the market by setting bars and executing pilots. Moreover, as prior literature by Balm et al. (2016) showed that public organizations are the foremost important customer for most local suppliers, this study suggest that the inclusion of sustainable logistics can benefit from this relation. The presence of two successful projects of sustainable procurement in which the logistics are performed by an electric vehicle is empirical evidence for this. Recent literature also presents that public organizations have recognized the need to become engaged with sustainable measures (De Marco et al., 2018). As an empirical reaction, the results concerning the SPP of the municipality of Groningen shows that public procurers “in light of the set goal for 2025” try to play with award criteria to attain a maximum sustainability fulfillment per contract. Nevertheless, the findings implicate that in general there is still too little understanding for the implementation of sustainable logistics by means of SPP. Even though much is known about sustainable logistics in the literature, such as collaboration (Ni and Sun, 2018) and freight bundling (Dekker et al., 2012; Björklund and Johansson, 2018), this subject deserves to be investigated more thoroughly in future research.

5.2 Implications for policymakers

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29 I. Policies

A. Establish criteria for the purchasing of sustainable logistics. A good attunement between the understandability and operability of the criteria would benefit on the long-term. As not every contract allows the same criteria, try to take into account these different requirements. Eventually, this will enable SPP to become a feasible policy tool.

B. Provide performance assessment guidance for the selection of sustainable suppliers. Come up with a standard requirements in line with the sustainable ambitions of the municipality. By doing so, suppliers are likely to become more active in implementing sustainable logistics to enhance their competitiveness. Through this state of affairs, the extent of sustainability can be largely determined by SPP. To arrive at a win-win situation, environmentally but also financially, public purchasers must consider assessment criteria by which they benefit. For internal purpose, stimulate a consistent obligation to those assessment guidelines to limit non-compliant behavior of purchasing managers.

C. Challenge the market by formulating an encouragement policy which includes higher rewards for the execution of sustainable logistics, e.g. electric vehicles, supply fulfillment by means of an UCC or collaboration with other public organizations. With this proactive governance approach a more visionary view can be obtained allowing policymakers to become more embedded with the potential developments for sustainable logistics.

II. Communication plan

A. Stimulate information sharing. Raise awareness by developing sustainable procurement programs, with specific focus on the inclusion of sustainable logistics during SPP, and generate wide publicity in the form of meetings and workshops. After some time, this can attain a somewhat more standardized form such as a continuous training sessions which can be beneficial on the long-term.

B. Be critical in what you share. Not every policy is appealing to anyone. Try therefore to be mindful on what emphasis to put on which aspects. This will trigger curiosity which likely increases attendance to information sessions.

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30

5.3 Limitations and future work

As in every research, this study has its limitations. Firstly, although a clear picture has been obtained from the 14 interviews conducted at a large public organization, it remains one organization as such that the generalizability of the results is limited. The sustainable public procurement processes of other municipalities in The Netherland have been left outside the scope of this study. Therefore, the propositions made are not “ready to use” approach for broader purposes. An implication for further research is therefore to conduct a comparative case study across multiple municipalities in the Netherlands in order to improve evidence, and at the same time also the generalizability. This can be conducted with the same intention of this study or by enhancing a broader view and including some perspectives of potential partners or suppliers.

Furthermore, this study had the aim to unravel links between SPP and the integration of sustainable logistics for facility goods. However, even though 8 from the 14 interviewees were employed in the SSC domain from which 5 had direct influence on the SPP process, none of them could provide insights into the logistics flows that arose from facility contracts. This because public procurers in general at the municipality of Groningen do not include transport requirements as standard in their tenders. This limited the study in as sense only general assumptions about sustainable logistics could be made instead of focused ones.

Lastly, even though the results retrieved from the municipality of Groningen provide a clear indication for the lack of knowledge on ways to promote sustainable city logistics associated with public purchases, this inadequacy cannot be seen as a generic problem in every public organization. As such, public procurers at the municipality of Rotterdam, for example, could be very much aware of sustainable logistics. In other words, the results obtained for this barrier will stand in the context in which the research has been conducted. For future research it is therefore recommended to compare other SPP processes in different municipalities and perhaps countries.

5.4 Conclusion

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31

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