Public procurement accounts for between 13% and 20% of GDP worldwide (World Bank, 2020). In the EU, this share was just over 13% in 2017 (European Commission, 2019) and in the US, it amounts to 10%. What this means, is that governments possess significant purchasing power. This, in turn, gives them the ability to influence the market with their requirements.
The concept of sustainable procurement was born out of the notion that it has become an absolute necessity to take care of both human and natural resources, in order to ensure a more just and sustainable future for the generations to come.
Unlike traditional procurement, the practices associated with sustainable procurement focus on making sure that the products and services that are purchased (usually by public authorities) are as sustainable as possible, with the lowest environmental impact and most positive social results.
The Role of Green Procurement
Green procurement also referred to as environment-centric procurement, can rightly be called the centerpiece of sustainable procurement, due to the fact that environmental concerns are the main justification for establishing sustainable procurement practices worldwide.
Whilst it is chiefly viewed as a tool to tackle climate change, green procurement also offers a broader capacity to mitigate the over-exploitation of any and all scarce resources, such as water and fossil fuels. Green procurement programs may be as simple as purchasing renewable energy or recycled office paper; or more involved, such as setting environmental requirements for suppliers and contractors.
Main Goals of Green Public Procurement
As it became clear, green procurement is seen as a key instrument in fighting climate change. To be more specific, though, we should enumerate some particular goals that the purchasing of green goods is targeting. These include, but are not limited to, the following:
- Reduction of CO2 emissions
- Renewable energy generation
- More efficient resource management
- Better waste management
- Increased recycling
- Pollution reduction
- Increased biodiversity
The Benefits of Green Procurement
Given the governments’ significant purchasing power referred to at the beginning of this article, GPP is a key driver for innovation, providing the industry with incentives to develop environmentally-friendly works, products and services. A benefit of this kind has an enormous potential to set the wheels in motion to create an ethos where green considerations are at the forefront of most public projects.
Furthermore, green procurement may also lead to substantial savings for public authorities, especially when the full life-cycle cost of a contract is taken into account. Whilst the upfront cost of an environmentally friendly product may be higher, estimating the total cost over the life of an asset usually justifies its selection. Therefore, such products turn out to be more economically viable than their cheaper alternatives.
An example of the benefits brought about by LCC can be highlighted by the Framework Agreement on Desktop Sourcing Consip SpA - the Italian central purchasing body owned by the Ministry of Economy and Finance - set the terms for in November 2011. This was a public contract for the management of IT platforms, leasing of hardware, software licenses and virtualization services, whose main focus was on energy efficiency and the rationalization of IT infrastructure, a reduction of staffing costs and routine maintenance (upgrades and repairs of PC systems and servers).
Following the implementation of the framework agreement, it transpired that the use of “duplex printing” could generate net savings ranging between 19-50% in life-cycle costing (LCC). Furthermore, the general savings from the purchase of energy-efficient Energy Star certified desktops amounted to some EUR 2.5m, emphasizing the cost efficiency of the solution.
Challenges to Green Public Procurement
Procuring in a sustainable way requires detaching one’s self from short-term needs, assessing, instead, the long-term impact a purchase might have. Yet, it is proving hard for contracting authorities to break away from the habit of awarding a tender based on short-term cost considerations only. To tackle this, wider and more detailed information campaigns might be required to explain that, while the initial investment in green products and services could be slightly higher, their life-cycle cost actually makes them the most economically viable option in the long run.
Another hurdle that needs to be overcome is the general lack of training, and thus of expertise, of public procurers when it comes to assessing the green criteria and regulations that need to be applied and appraised. Due to the complexity of the matter, public officials often find it hard to determine the implementation of which green criteria may lead to the best economic results. To fix this, there has to be a concerted effort to educate procurers, which involves spending long hours unraveling the intricacies and possible effects of environmentally-friendly practices.
Last but not least, the addition of green criteria to tenders is still largely voluntary, as evidenced by the European Union, for example. While the European Commission has come up with its own Green Public Procurement (GPP) instrument, the existing GPP criteria are not legally binding. As a result, the total uptake of GPP processes across the EU remains limited
Green products or services utilize fewer resources, are designed to last longer, and minimize their impact on the environment during their lifecycle. Despite the tangible challenges that green procurement still needs to address, the future is set to be replete with promising prospects and the overall ‘greening’ of our lives looks inevitable.
Political leaders, corporations large and small, and the wider public seem to have reached a universal consensus that we, collectively, need to step up our game in order to protect the environment, whilst keeping a healthy economy.
That being said, it is turning into a necessity for businesses all over the world to keep their eyes peeled on the introduction of any new green requirements they have to meet or, better still, to take the initiative themselves and look at how they can modify their operations so they can increase their chances of a successful bid next time they tender for a government contract.
TenderAlpha.com operates the largest global database of public procurement contracts. Having recognized the increasing importance of GPP, we are now placing special emphasis on detecting green contracts via our own methodology. To find out more about how we can provide you with both historical data and current and future GPP opportunities, please get in touch.