Making sustainable public procurement part of the COVID-19 fiscal response

In the face of deep economic and social crisis resulting from the COVID-19 pandemic, some countries and business groups have been calling for a temporary easing of environmental rules. In fact, many stimulus measures recently announced by major economies show a significant lack of consideration when it comes to addressing environmental sustainability. While it may be tempting to give up on some environmental commitments to address short-term social and economic priorities, this would be a mistake. Instead, the global health crisis should be seen as an opportunity to build more sustainable and inclusive economies and societies, and one way to achieve this is through sustainable public procurement.  

Sustainable public procurement (SPP) can harness existing expenditures towards green growth and the attainment of sustainability objectives by leveraging public procurement, which represents an average of 12% of GDP in OECD countries and 30% of GDP in developing countries. In fact, SPP is so important there is a specific UN Sustainable Development Goal target, SDG 12.7.1, which calls for the promotion of public procurement practices that are sustainable, in accordance with national policies and priorities by 2030.

At a time when governments need to conduct expansionary fiscal policies to limit or avoid economic recessions, SPP must take its place in the range of fiscal instruments considered in the green recovery packages. Here are some specific goals that could be achieved through sustainable public procurement as part of the COVID-19 response packages:

• Reduce governments’ environmental footprints, limit negative social impacts of public procurement and contribute to market transformations
  Governments should scale up the purchasing of sustainable, low carbon and fair trade products in order to reduce their negative socio-ecological impacts and drive markets towards sustainability. Eco-labelled products should be prioritized by governments as they offer a guarantee of third party verified compliance with critical environmental or social requirements. Governments should also integrate more thoroughly the principles of circular economy in their public procurement and should enact mandatory procurement for a range of products including energy efficient ones.
• Promote compliance with labour laws and human rights
  Institutional purchasers should integrate social requirements in their tendering processes to promote compliance with labour laws and human rights. Contracting authorities should be allowed to make use of vendor’s score cards developed by credible organizations to select responsible suppliers. In the wake of the coronavirus crisis, governments should also step up their efforts to ensure maximum transparency in the supply chains. Initiatives such as the UK and Australian Modern Slavery Acts or the French Duty of Vigilance Law are commendable and should be replicated in other countries. By increasing the compliance of suppliers with sustainability and human rights standards across the supply chain, these legal instruments could also limit the negative social impacts of the post-Covid-19 crisis.
• Support hard hit small and medium-sized businesses
  SPP could play a major role to rescue SMEs and other companies by replenishing their order books. Set asides would be reserved for SMEs owned by women and disadvantaged groups who are and will be particularly impacted by the economic downturns.

Implementation barriers

To achieve its full potential, SPP will have to address some of the obstacles that have limited its uptake. UNEP’s 2017 Global Review of Sustainable Public Procurement noted that the two most commonly cited barriers were the perception that sustainable products and/or services are more expensive and the lack of expertise in sustainable public procurement implementation.

The relative cost of sustainable products compared to conventional ones can be lowered by considering lifecycle costs, i.e. by internalizing negative externalities that are currently not factored in, such as carbon impacts. Green taxes and the phasing out of negative subsidies (e.g. for fossil fuels) will also limit the price bias in favour of non-ecological conventional products. Market research has shown that the relative price of green products – for example, the price of recycled paper and organic food – tended to diminish over time when purchasing volumes were significantly increasing thanks to economies of scale and higher investments.

Another barrier, which is often cited by procurers, is the inadequate legal frameworks that limit the possibilities of practicing SPP. In many countries, the lowest price is still the only award criteria for tenders. In the EU, despite major progress in the last public procurement directive, some clauses still limit the selection of greener suppliers and the use of ecolabels. Researchers involved in the Sustainable Market Actors for Responsible Trade (SMART) project recently published a study on the possible improvement of EU sustainable public procurement in order to better leverage SPP to making post-crisis economic recovery sustainable. Among the recommendations, researchers noted the need to introduce management improvements (making the mapping and monitoring of supply chain risks mandatory, due diligence and transparency in public supply chains) as well as creating a legislative environment that is more “friendly” for sustainable public procurement (e.g. removing the requirement of the “linked to the subject matter of the contract” and increasing the number of mandatory SPP requirements).

Priority sectors

In the wake of the COVID-19 crisis, the systematic application of sustainable procurement in the following sectors would be particularly impactful and relevant:

Construction

The construction sector is essential for economic recovery. It can rapidly create large amounts of jobs and involves far-reaching value chains of small and large businesses. At the same time, the sector presents a massive – and largely unused – opportunity to respond to the climate crisis. The construction and operation of buildings is responsible for 40% of all energy-related carbon dioxide emissions, even more than transport or industry. This trend is accelerating, as the building floor area is set to double by 2060, and energy demand is growing fast. The building sector holds the potential for a double win: providing a powerful tool to stimulate the economy, while moving the whole sector to a new and greener state. The launch of public procurement programmes aimed at enhancing energy efficiency in public buildings (schools, hospitals or administrative buildings) could be particularly impactful.

Public transport

Public transport can create and maintain jobs more quickly than other transportation investments. Beyond being a green stimulus investment, public transport offers wider benefits to society, since it is more efficient than private vehicle use, emits less greenhouse gas per person and spews less air pollution. It is also much safer than the widespread use of private vehicles, which can help stem the rising tide of road deaths. Compact, transit-oriented development encourages walking and biking that can make for healthier residents. Public transport can also provide more equitable access to jobs, education and services than large highway networks – a boon to urban resilience that the COVID-19 crisis has brought to light. Governments and development banks can make public transport an integral part of stimulus packages for economic recovery by creating high-quality bus and transit infrastructure, modernizing and electrifying bus fleets, investing in cycling and walking routes and building robust electric vehicle charging infrastructure.

Energy efficient products

Governments should mandate the sustainable procurement of high-impact electrical products such as energy efficient lighting, refrigerators, room air conditioners electric motors and distribution transformers, products that together represent more than one-third of global energy consumption, and which have the potential to considerably reduce GHG emissions and at the same lead to significant financial savings for state and semi-state entities due to much lower energy consumption.

Health products

The magnitude of the coronavirus pandemic and its response have resulted in acute shortages of personnel protective equipment that include surgical masks, face shields, hand sanitizer and surgical gloves as well as medicine for countries to procure. Because of the urgency with which countries have to respond, contracting authorities may overlook  sustainability aspects in the procurement processes. In the spirit of “building back better”, procuring entities should ensure that the products and services they buy are as sustainable as possible, with the lowest environmental impact and most positive social results.

As the impacts of the COVID-19 crisis start to loom with their dramatic social and economic consequences, governments have the duty to react forcefully without compromising their commitments to the SDGs and the sustainable development agenda. With their massive purchasing power, governments can leverage procurement to protect employment and create green jobs, support SMEs through reserved procurement and reduce their carbon impacts by purchasing low-carbon products. A certain number of barriers would, however, need to be lifted to ensure the maximum efficacy of sustainable procurement policies. This includes legal improvements and the removal of harmful subsidies, which increase the relative prices of green products. The systematic application of sustainable procurement in the construction, public transport and health sectors as well as for the purchasing of high-impact electrical products would be particularly impactful and relevant.