What a lot of change £175 billion could buy. That is the amount spent by the UK public sector alone every year on procuring goods and services. Imagine what could be achieved if sustainability were factored into the spending decisions underlying this total?
With the exploding global population and associated strain on the planet’s ever-depleting resources, not to mention the urgency of mitigating climate change growing each day, all avenues of reducing the environmental impact of our daily lives need to be explored. One such avenue is for the public sector to leverage its vast spending power to effect positive change.
Considering that government spending has consistently grown throughout this century, from 37 per cent of GDP in 2000 to 41 per cent in 2006 and a whopping 48 per cent this coming year, public procurement policies have huge implications for domestic economies. The potential for procurement spending as a tool for spurring environmental and social best practice is great indeed; therefore it would seem incumbent on the government to use this tool to its best advantage. Nonetheless, much of the present debate remains focused on how to encourage the private sector to contribute up to 90 per cent of the capital required to both mitigate and adapt to climate change – all the while overlooking an obvious opportunity.
PUBLIC MONEY FOR PUBLIC INTEREST In its ‘Buying a Better World’ report, Forum for the Future, a UK-based NGO, summed up sustainable procurement as ‘the process of acquiring goods and services that: meet the users’ needs, deliver long term value for money, maximise social and economic benefits and minimise damage to the environment and health.’
Government departments have substantial negotiating power with suppliers, often placing orders individually worth millions of pounds. With that kind of money at stake, if successful tenders rest on the sustainability credentials of supplier companies then there is a huge incentive for more sustainable business practices. Sustainable public procurement (SPP) can, and should, be a vital tool for encouraging the consideration of our environment in products and services – after all, the public sector has a duty to spend public money in the long-term public interest.
FINANCIAL SENSE Duty aside, why would a government want to promote SPP? The remit for procurement offices is generally: get the best value for money. This does not necessarily imply opting for the cheapest tender, however, for the net effect on the economy must be taken into consideration. Although SPP practices pre-dated its publication, the Stern Review on the Economics of Climate Change (2006) has highlighted the potentially massive financial cost of climate change if we continue doing business as usual: a permanent 20 per cent drop in GDP, versus an annual investment of two per cent of GDP if we start acting now to avert the crisis. In short, immediate action is financially sensible.
But SPP doesn’t only make financial sense in the long-term. It is widely presumed that more sustainable products come at a higher cost; however in many cases this is pure misconception, and even where there is an extra initial cost it is usually recovered through the whole-life cost savings of the product or service. A 2009 study by the National Audit Office (NAO) revealed that in the UK the Department for Works and Pensions (DWP), in spending £1 billion on replacing its vehicle fleet according to SPP practices, had as a result reduced the average CO2 emissions of its fleet by 1.5 per cent and saved £18 million on fuel to date of publication of the NAO’s report.
Governments globally are also trying to explore innovative ways to incentivise private sector investment in new environmental technologies. SPP can be used as a tool to encourage this investment – governments ‘get the ball rolling’ by becoming early adopters of new technologies, thereby providing crucial capital for small and medium enterprises (SMEs) to continue developing their products. This backing to SMEs not only helps support the national economy but also takes some of the risk out of private sector investment and lending, helping innovative SMEs to traverse the all-too-common ‘valley of death’.
BIG PICTURE SENSE The public sector is a large and unwieldy beast, and as with such large entities the left hand seldom speaks to the right; procurement is therefore fragmented and silo-ed, the end result of which can mean that a poor purchasing decision by one organisation can have knock-on negative cost implications for another. By contrast, Jamie Oliver’s ‘food revolution’ and his focus on healthy school meals is a great example of good procurement decisions having a positive pan-sector impact: school authorities are being encouraged to invest in fresh, healthy, local produce for school dinners; sourcing the fresh food locally boosts the local economy; local produce does not have far to travel, thereby cutting carbon emissions; and ultimately, the burden on the NHS is reduced through the health benefits of better eating habits.
SLOW UPTAKE Sadly, however, while SPP is catching on, the uptake is not nearly quick enough. In the same NAO study referred to above, it was revealed that of the surveyed government departments in the UK, only one department in the NHS and the DWP respectively had implemented SPP policies to the recommended level. Many other departments had failed to reach even ‘level one’ of the Flexible Framework established by the Sustainable Procurement Task Force. (The Task Force had previously recommended that departments attain level three, out of a possible five, by 2009.) Similarly, a study into Norwegian procurement tenders showed that only 60 per cent contained any environmental criteria, and at any rate a third of those were inadequately described, making their environmental benefits doubtful.
So the question is: if there are so many positives to SPP, then why is it taking so long to catch-on?
Clearly governments have targets, but implementation of these targets can be hindered by poor internal communication, poor organisational design and a lack of clarity on guidelines. Current strategies with respect to clarity include the EU’s Green Public Procurement (GPP) toolkit, which seeks to educate purchasing officers of the benefits of, as well as the legal issues surrounding, SPP. In addition, the EU has introduced the ‘Ecolabel’ to try and assist purchasers in gauging the environmental impact of products on offer. (This initiative has led to some legal issues, as procurement officers cannot demand to see an Ecolabel, but rather only that the Ecolabel’s standards are met, and such compliance can be difficult to establish independently.) Immediately recognisable among these Ecolabels is the energy performance label carried by new white goods. Although difficult and costly in the initial period, extending this type of labelling to other goods will help in greening procurement practices, and money wisely spent now is money wisely saved later.
Overcoming poor internal communication and organisational design will require careful reorganisation, with procurement activities ‘professionalised’ to ensure the approach taken across the public sector is consistent and therefore efficient. This will require a fine balancing act between centralising and aggregating procurement on the one hand, and facilitating tailored regional and local procurement on the other.
PROCURING CHANGE Admittedly there are barriers, both perceived and actual, to change, but these barriers are not insurmountable, and the ultimate benefit – economic, environmental and social – to be derived from SPP is immense. As Vicki Robin, co-founder of the New Road Map Foundation, a non-profit organisation advocating financial integrity, once said, ‘How we spend our money is how we vote on what exists in the world.’ Spend wisely, big spenders.