SUSTAINABLE PROCUREMENT POLICY DOCUMENT SUSTAINABLE PROCUREMENT POLICY

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1 SUSTAINABLE PROCUREMENT POLICY

2 A note about who we are: Northumbrian Water Group (NWG) operates as Northumbrian Water and Essex & Suffolk Water. Please note, Northumbrian Water Ltd (NWL) is the registered legal name for the company and is used in legal documents. Our Sustainable Procurement Policy We are committed to ethically procuring goods, works and services in a way that generates maximum value, not only to our organisation but also to society and the economy, while enhancing the environment. Why is sustainable procurement important to us? We are firmly rooted within the communities we serve. It is important to us that we demonstrate our responsibility to the economic and social wellbeing of our customers and employees and enhance the environment and communities we serve. By embedding sustainable procurement practices, we will maximise the value we bring to our stakeholders and customers, now and in the future. Strategic context This policy should be read in conjunction with other Northumbrian Water Ltd policies namely: NWL Procurement Policy NWL Corporate Social Responsibility Policy What are the key areas of focus for our procurement team? We have a commitment to: Eliminate and mitigate supply chain risk (for example, ensuring high labour standards). Health and Safety, Environment and Quality assessment of suppliers (e.g. ISO9001, 14001, 18001). Procure sustainable products from renewable sources wherever possible. Reduce usage, and to re-use and recycle. Be ethical, transparent and fair in all our activity. Promote equality, diversity and inclusion treating all stakeholders equally irrespective of age, gender, disability, race or religion. Decisions based on whole life cost implications. Building our local supply chain and supporting SMEs to grow. Making a positive contribution to local communities (for example, by supporting apprenticeships and social enterprise). Strong, long term supplier relationships built on mutual goals and trust. Encourage challenge from the supply chain helping us to deliver innovative and creative solutions.

3 How will we meet these aims and objectives? We will: Build skills and knowledge supporting our procurement team to positively engage and constructively challenge historical norms driving innovation and creativity. Embed sustainability within strategic sourcing cycle and strategic category planning ensuring sustainability is considered in all procurement activity. Prioritise areas for action that offer opportunity for us to make a positive impact on supply chain risk and wider sustainability issues. Use whole life costing to form the basis of all value assessment, taking into consideration purchase, operation, maintenance and disposal costs of goods. Review specifications ensuring suppliers are not restricted in offering new and innovative solutions. Benchmark, collaborate and knowledge share both within and outside of our own industry and supply chain to measure our performance and share best practice. Use supplier assessment to always consider appropriate sustainability issues. Sustainability will be assigned a meaningful weighting in tender assessment. Proactively engage and support local SMEs and wherever possible go to market in a manner which promotes their involvement in our procurement activity. Deliver prompt payment of our suppliers in accordance with fair agreed terms, supporting our supply chain to manage cash-flow effectively. How will we measure sustainable procurement performance? To help us set targets and measure our performance towards achieving our sustainable procurement objectives, we will engage with the Chartered Institute of Purchasing and Supply (CIPS) to use the CIPS Sustainability Index (CSI). The CSI is an independent assessment of suppliers economic, environmental and social sustainability credentials. The system allows suppliers to prove their sustainability credentials and will help us obtain essential sustainability information in an efficient manner.

4 Our suppliers are required to answer a number of questions which produce an independent rating for each of the three key areas of sustainability: environment, social and economic. The ratings will provide us with a benchmarking and target setting tool. We will work in partnership with suppliers to identify and improve areas of concern and we will ask our best performance supplier to share experiences and best practice within our supply chain. The sustainability action plan is included in appendix 2. For more information see How will we communicate sustainable procurement objects and expectations to staff, stakeholders and suppliers? We set what we expect from our key suppliers and what they can expect from us in our Suppliers Sustainability Charter (appendix 1). All of our key suppliers will sign up to this charter as an indication of their commitment to work with us in achieving our sustainable procurement objectives. This policy will also be available for all stakeholders and suppliers. In conjunction with our broader procurement policy this will form the basis of how we communicate what we do and how we do it to our stakeholders, existing and new suppliers. The procurement management team will challenge staff to drive sustainability through all procurement activity. The procurement management team will review this policy annually. Further information Northumbrian Water Ltd using the following a sources of information and best practice with regard to sustainable procurement: BS8903:2010 Principals and framework for procuring sustainably Chartered Institute of Purchase and Supply (CIPS) Ethical and Sustainable Procurement 2013

5 APPENDIX 1 NORTHUMBRIAN WATER GROUP SUPPLIERS SUSTAINABILITY CHARTER We are committed to ethically procuring goods, works and services in a way that generates maximum value, not only to our organisation but also to society and the economy, while minimising the damage to the environment. This charter informs suppliers what Northumbrian Water expects from them as we work together to drive sustainability and what suppliers can expect in return from us. We will ensure that ethical standards are not compromised by commercial, financial or other pressures. We will pay our suppliers promptly in accordance with fair agreed terms. We will be ethical, transparent and fair in all our activities. We will promote equality, diversity and inclusion treating all stakeholders equally irrespective of age, gender, disability, race or religion. We will assess our suppliers based on whole life cost, taking into account social and environmental factors. We will challenge one another to be innovative and creative in finding new solutions to familiar issues. We will actively encourage shared learning and sharing of experience and best practice across our supply chains. We will build a strong relationship communicating openly and taking a non-adversarial approach to dispute resolution. We will aim to reduce, re-use and recycle wherever possible and focus on driving efficiencies and the reduction of waste. With our support you will prioritise sustainable outcomes and embrace with the CIPS Sustainability index (where appropriate) to measure and monitor your own performance, set stretch targets and drive continuous improvements. SIGNED: (NWG) SIGNED: (Supplier) Steve Crake Head of Procurement Northumbrian Water Ltd. A note about who we are: Northumbrian Water Group (NWG) operates as Northumbrian Water and Essex & Suffolk Water. Please note, Northumbrian Water Ltd (NWL) is the registered legal name for the company and is used in legal documents.

6 APPENDIX 2 SUSTAINABLE PROCUREMENT ACTION PLAN This action plan will be reviewed annually by the procurement management team. Setting Policy Planning Taking Action Continuous Improvement Northumbrian Water (NWL) sustainable procurement policy built upon best practice including BS8903:2010 Sustainable procurement policy shared with all suppliers and potential suppliers via website and e-procurement tool. Sustainable procurement embedded in strategic sourcing process and category management plans. Consider sustainability as a fundamental objective / outcome as part of all procurement activity. Identify procurements that offer an opportunity to make a positive impact on procurement risk and wider sustainability issues. Engage market place to understand best practice. Build sustainability knowledge and capacity within procurement team. All goods, works and service specifications are written with a focus on sustainability including considering whole life costs and environmental impacts at disposal. Terms and conditions promote sustainability and can be negotiated direct with specific suppliers to encourage partnerships. Evaluation includes a focus on sustainability with appropriate weighting. Suppliers are encouraged to obtain CIPS Sustainability Index rating. A rating will become mandatory for key / high risk suppliers. CIPS index recommendations are discussed with key suppliers and action plans developed to improve areas of risk / weakness. Category specific target setting and action planning led category manager. Category specific sharing of knowledge learning and best practice led by category manager.

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