An important part of a circular economy is circular procurement, so the bank needs to be sure its suppliers are reusing their products after the use phase either through recycling or recapturing the raw materials they contain. To support circular procurement at the bank, we’re analysing the supply chains of the products we buy and are working closely with our suppliers.
ABN AMRO already has a policy of sustainable purchasing in place so that its own products and services, in turn, aren’t harmful to either people or the planet. Purchasing is a crucial part of further embedding sustainability in the organisation and encouraging our suppliers to embrace sustainability, too. Now we’re going one step further with circular procurement.
Mapping the supply chain
At the moment, we’re in full transition mode, using a range of software and other methods to see how we can make our purchasing process more circular. One of those is Pre-returnable Procurement® (PRP), which shows us how circular the supply chain is for products we’re currently purchasing. But it’s also about a shift in mindset, since making circular initiatives a success means working even more closely with our suppliers. The buyer acts as a coordinator of the process, focusing on total costs of usage (TCU) both during and after a product’s lifespan.
Making firm agreements in the tender stage
In the tender process, we can encourage suppliers to incorporate buy-back agreements. While it’s still early days, and there are challenges to be met here, more and more products are coming to market which have been developed to be disassembled and reused at the end of their life cycle. When we choose products like these with our suppliers, we’re effectively safeguarding the value of the materials they contain. Two important tools we use to encourage circular procurement are lifetime and buy-back guarantees.
In addition to buy-back guarantees, we ask the supplier to issue a lifetime guarantee covering the functionality of a product or a specific part. If it breaks down earlier than expected, we pay for the repair on a pro-rata basis. Such an agreement means suppliers will look more critically at their products’ lifespan and try to extend it using innovative, new solutions.
During the tender process, we also ask suppliers for a buy-back guarantee, the duration of which depends on the technical life cycle of the product. We also request that they submit a proposal for preventive and corrective maintenance, including a long-term budget, thus encouraging them to maximise their products’ life cycles through efficient maintenance.