How Sustainable Procurement can change the world
As environmental concerns grow all over the world as a response to the challenges posed by climate change, it is no surprise that global public policies around this topic have increasingly taken shape in the last decades. Sustainable development is a top of mind subject, and the approval of several international legal instruments (Kyoto Protocol, Paris agreement, European Green Deal) has set ambitious goals and accelerated important efforts.
These instruments have also explored the path many can take to address the global challenge of climate change, specifically companies. More than ever, organizations understand the imminent threat that climate change represents, and many are aware that the "world is now at a tipping point if we are to act to mitigate" its effects
In this sense, public procurement has been widely identified as an extremely relevant process of change. It constitutes an important and potential tool in the pursuit of environmental sustainability objectives, given the size of the public sector as a major purchaser of goods, services and works ("the world's largest single marketplace").
For example, according to the European Commission, by 2013, public procurement volume was estimated to be worth 14% of the European Union’s GDP. This is quite a lot of money, and no wonder the EU has launched several specific programs to encourage the use of public procurement in achieving current environmental goals. This is the so-called Green Public Procurement (GPP).
GPP is defined by the European Commission as “a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured”. Although a voluntary policy tool, it plays a critical part in the European Union's efforts to build a resource-efficient economy.
It establishes a set of environmental requirements for technical specifications, award criteria, as well as contract performance clauses. Europe’s public authorities are, in fact, major consumers, and with a lot of purchasing power. Influencing this power in favor of environmentally friendly goods, services, and works can make a vital change with repercussions for the future.
For example, Greenhouse gas emissions (GHG) like CO2, can be addressed by the settlement of criteria that regulate the purchase of products and services with a lower GHG footprint throughout their life cycle, like water heaters. Or the use of finite resources and critical raw materials to produce IT products can be addressed simply by extending a product’s life at the end of its service life (reusability). These are simple criteria that when used can have long-lasting effects. In France, for example, it is already possible to see the effects of these measures. Earlier this year, manufacturers of certain electronic devices, like smartphones and laptops, were required to inform consumers about their products' repairability.
Despite these benefits, the road to GPP implementation has not been easy, as earlier studies found quite a few barriers. According to a 2006 study that analyzed the implementation of GPP in the EU, 44% of Public bodies from all 25 member states found that environmentally friendly products are more expensive, while 35% noted that the lack of organizational resources (including money and time) and promotion policies for GPP was a major obstacle for its implementation.
The last few years have been fundamental in shifting opinions and objectives, though. By 2019, most procurement organizations found that complying with regulations was significant, and so was delivering on corporate sustainability goals. Until now, the EU has attempted to adopt green or sustainable public procurement through soft law and, in some cases, mandatory regulations. As important deadlines approach, new stricter measures may come into place.
The Next Generation EU funds, which account for more than half of the EU's green and digital transformation grants, seem to point in this direction. Current predictions point that green criteria will be mandatory to gain access to much of the Next Generation EU funds.
Perhaps the biggest influence of GPP is yet to be felt across Europe and the world, but the next couple of years will be decisive for companies to align their business strategy with true global sustainability ones.
On the other hand, more than ever, enterprises not only identify the value of innovation and resource and energy efficiency, but they are also under customer pressure to be more ecologically conscious. These green criteria can influence production and consumption patterns, effectively influencing demand for “green” products, while others have also shown the ability to improve the business performance of companies who consistently apply GPP.
The survival of some businesses actually depends on meeting these sustainability goals, and this number is expected to increase in the near future. For these companies, sustainability performance pays off in terms of opportunities for growth, as it is still the most certain approach to innovation for the businesses that are searching for a competitive advantage.
Take for example how GPP was used by the German city of Regensburg to purchase utilities, resulting in a savings of 10 million euros in energy and water costs over a 15-year period. Or Microsoft’s $1 million investment with a single manufacturing supplier in order to use technology and tools to reduce “energy consumption by installing solar arrays and completing an energy-smart building retrofit”.
These are impressive opportunities that also demonstrate how sustainability will be a key factor of success, as supplier companies are increasingly seen as stakeholders in the buyer’s sustainable development strategy. Sustainable procurement truly is a vehicle for a strong win-win relationship, that minimizes risk and fosters growth for everyone.