Implementing Sustainable Procurement Strategy in the Oil and Gas Sector: Analytic Hierarchy Process Approach

1. Introduction

Sustainable Procurement (SP) is increasingly on the agenda of academics and practitioners, such as purchasing, and supply managers, who seek to demonstrate corporate social responsibility (CSR) in their supply chains (Genovese et al., 2014; Nadeem et al., 2017). Liu et al., (2018) argued that CSR has been a prime challenge, driven by environmental, social, and economic issues. Hence, different stakeholders, such as customers, employees, regulators, and communities provide added pressures on sustainable business practices (Foerstl et al., 2015; Wang, 2018). The same notion is evident in the UAE’s oil and gas industry (Gulf News, 2017) and its significant impact on social, environmental, and economic sustainability (IFC and UNDP, 2017; The National, 2015). Carbon dioxide (CO₂) emissions by the UAE’s energy sector, which mainly consists of oil (28%) and gas production (71%) (Elizabeth and Jacqueline, 2011), account for 74% of the total emissions of the country (Gulf News, 2017). Moreover, the cost of projects carried out by the oil and gas industry is remarkably high (Kidd, 2017), which is a hindrance to its economic sustainability. Additionally, various other indications, such as increasing wastage and energy consumption, economic downturns, and oil price fluctuations, have exposed the fact that SP operations within the UAE’s oil and gas industry might not be sustainable at the industry’s current level of activity (Abu Dhabi QCC, 2015). Such increased pressures, together with added emphasis on sustainability by different stakeholders (Asdiou and Mokhtari, 2019; Foerstl et al., 2015), have prompted the UAE’s oil and gas companies to understand the most influential factors that affect the formulation and implementation of an effective SP strategy. These facts raise a fundamental research question: which critical internal and external factors, as well as capabilities that determine SP should be prioritised and utilised by the UAE’s oil and gas industry when implementing sustaible procurement strategies and policies?

In view of the above, it is suggested that there are many factors or criteria to be coped with by oil and gas companies when implementing a SP strategy successfully in the UAE. Despite the efforts industry managers are presently making to improve implementation of SP strategy, there is limited systematic and empirical researches concerning factors that must be identified and prioritised when implementing SP strategy effectively (França et al., 2017). Nevertheless, three important factors, such as internal, external criteria, and innovation capabilities, affecting implementation of a SP strategy in oil and gas industry can theoretically be derived through a systematic literature review (Mohamed and Hassan, 2019), and these factors can further be broken down into many sub factors. Procurement management literature represents very few studies that investigated the impact of various factors on SP strategy, whereas they have focused on different industries within different countries (Erkul et al., 2015; Giunipero et al., 2012; Walker et al., 2012). Some internal and external organisational factors highlighted by these studies were cost, support from top management, management strategy, investment cost, advanced technology, infrastructure, environmental procurement, environmental crises, lack of clear standards and suitable regulations, and social and cultural differences. On the other hand, some studies emphasised on the critical importance of innovation on SP strategy and process (Reuter 2012; Walker and Phillips, 2009).

Accordingly, it is undeniable that different types of factors, such as internal, external criteria, and innovation capabilities, need to be profoundly identified and prioritised so as to control such criteria to support effective implementation of a SP strategy. However, the importance of such internal and external criteria, and innovation capabilities, and how they should be prioritised when formulating and implementing SP strategy, have not been assessed in the context of the UAE’s oil and gas industry. Hence, the purpose of this paper is to achieve the following two objectives.

Critically examine the key factors and their sub factors that affect successful implementation of SP strategy in the UAE oil and gas industry;

Prioritise the most important key factors and their sub-criteria that affect the implementation of SP strategy in the UAE oil and gas industry by using the Analytical Hierarchy Process (AHP) model.