Aligning public procurement with net-zero goals

Governments currently spend $11 trillion annually, resulting in 7.5 billion tonnes of direct or indirect global greenhouse gas emissions: roughly 15% of the world’s total (World Economic Forum, 2022). Government procurement accounts for 12% of the national GDP in OECD countries (OECD, 2021) and government agencies are top buyers of emission-intensive products including steel, cement, and concrete (Morales et al., 2023). In this blog we outline why governments should be focussing on procurement as a decarbonisation opportunity, and the approaches being taken in Canada, Germany and the USA.  

While firmly grounded in the physical science of climate, achieving the goal of meeting net zero requires engagement with social, political, and economic frameworks (Fankhauser et al., 2022). Public procurement plays a critical role in delivering public services, promoting good governance, and fostering sustainable, inclusive economic growth and shaping and advancing broader government policy implementation (Harland et al., 2019; Glas et al., 2017). Therefore, it is imperative for countries to strive for maximum efficiency, effectiveness, and value for money in public procurement.  Identifying policy opportunities acceptable to the public will be essential for achieving net zero.  

Procurement can offer benefits as a policy tool for aligning the economy with net-zero targets:   

1. It aligns with the government’s own commitments, urging governments to match their targets with financial efforts.  

2. It does not levy a tax or impose costs on consumers or industries but rather encourages industry to pursue sustainable outcomes using the existing power of programmes and spending.  

An analysis of government activities within the G20 indicates a gradual yet consistent progression towards the implementation of corporate climate regulation (Diaz, Axelsson, Elera, 2023). Several G20 member countries, including the UK, US, Canada, Italy, Japan, and South Korea, are currently in the process of implementing some form of sustainable procurement within their respective governmental systems.  

Canada   

The federal government of Canada allocates around $37 billion annually for procurement of goods and services, with Public Services and Procurement Canada overseeing purchases valued at approximately $27 billion per year. The government supports businesses participating in procurement opportunities and prioritises environmentally friendly goods and services, aligning with the Directive on the Management of Procurement. The Centre for Greening Government collaborates with departments and agencies to implement green procurement as part of the Greening Government Strategy. Coordinating multiple governing bodies necessitates efficient communication and consensus amongst various ministerial offices or departments to develop and implement policies, according to Morales et al (2023).  

Germany    

Public procurement accounts for approximately 15% of Germany’s GDP, a substantial amount of EUR 500 billion per year (OECD, 2019). The 2022 startup strategy of the German government aims to advance innovative climate technologies through climate-neutral public procurement (German Energy Agency, 2023). Establishing partnerships with climate tech start-ups can give federal, state, and local governments access to the innovative solutions needed for their climate-neutral procurement initiatives, which have largely remained untapped until now (ibid).  

The United States 

The United States government is the world’s largest consumer, with an annual spending of approximately $750 billion on procurements, according to Ceres (2024). In 2022 and 2023, the US Federal Acquisition Regulation Council introduced two new procurement regulations that encompass general administration, defence, aeronautic, and atmospheric activities with the aim of reducing climate-related financial risks, accelerating efforts to decrease carbon emissions, and strengthening resilience across the economy (ibid). 

Under the forthcoming Supplier Climate Risk and Resilience Proposal, agencies and contracting officers would be mandated to prioritise the purchase of products and services labelled as ‘sustainable’ unless they provide a written justification for selecting an alternative (Ceres, 2024). This policy seeks to make sustainable purchasing the default option for federal agencies, fostering investment in sustainable product innovation, broadening the availability of sustainable products and services, and mitigating sustainability-related risks to safeguard taxpayers (ibid).  

Why Net Zero Aligned Public Procurement Matters 

The implementation of regulations ensures that fairness is upheld through legal means, while voluntary systems depend on public oversight and the threat to reputation to drive compliance (Hale et al., 2024). Even in a well-functioning voluntary system, many companies still opt out of taking action on climate change, with nearly 50% of the companies on the Forbes 2000 list yet to commit to a net zero target (Net Zero Tracker, 2024). Axelsson (2023) argues that although addressing greenwashing is a crucial endeavour, sustainable public procurement may prove an even more powerful lever to cultivate supportive environments that empower companies to fulfil their climate pledges. Rigorously and thoughtfully designed public procurement policy and practice can play a vital role in aligning economies with the goal of achieving net zero emissions. 

Researched and written by Keiko Kanno

References   

  Axelsson, K. (2023). Turning COP’s promises into progress and the rise of climate regulation. https://www.oxfordmartin.ox.ac.uk/blog/turning-cops-promises-into-progress-and-the-rise-of-climate-regulation  

  Canada.ca (2024). Green procurement. https://www.canada.ca/en/treasury-board-secretariat/services/innovation/greening-government/green-procurement.html  

  Ceres (2024). Strengthen the Federal Supply Chain with Climate Resilience. https://www.ceres.org/accelerator/procurement  

  Fankhauser, S., Smith, S. M., Allen, M., Axelsson, K., Hale, T., Hepburn, C., Kendall, J. M., Khosla, R., Lezaun, J., Mitchell-Larson, E., Obersteiner, M., Rajamani, L., Rickaby, R., Seddon, N., & Wetzer, T. (2021). The meaning of net zero and how to get it right.  https://www.nature.com/articles/s41558-021-01245-w

German Energy Agency (2023). Tech for Net Zero Alliance: Green Public Procurement:  Climate-neutral procurement by federal, state and local authorities. https://techfornetzero.org/wp-content/uploads/2023/03/Tech-for-Net-Zero-2023-Green-Public-Procurement-Policy-Paper.pdf  

Glas, A. H. et al. (2017) An organisational perspective on the implementation of strategic goals in public procurement. Emerald Publishing Limited. https://www.emerald.com/insight/content/doi/10.1108/JOPP-17-04-2017-B004/full/html 

  Hale, T., Wetzer, T., Abebe, S. K., Allen, M., Amel-Zadeh, A., Armour, J., Axelsson, K., Caldecott, B., Dias, L., Fankhauser, S., Franta, B., Hepburn, C., Mbeva, K., Rajamani, L., Smith, S., & Stuart-Smith, R. (2024). Turning a groundswell of climate action into ground rules for net zero. Nature Climate Change, 14(4), 306–308. https://doi.org/10.1038/s41558-024-01967-7  

Harland, C., Telgen, J., Callender, G., Grimm, R., & Patrucco, A. (2019). Implementing Government Policy in Supply Chains: An International Coproduction Study of Public Procurement. The Journal of Supply Chain Management, 55(2), 6–25. https://doi.org/10.1111/jscm.12197  

  Morales, E., Skinner, E., Hemingway, P., Axelsson, K., & Piirsalu, E. (2023). Unlocking the G20’s Green Public Procurement Potential. https://t20ind.org/wp-content/uploads/2023/05/T20_PolicyBrief_TF4_GreenProcurement.pdf  

 Net Zero Tracker (2024). https://zerotracker.net/  

OECD. (2021). Government at a Glance 2021. Paris: OECD Publishing.  https://www.oecd-ilibrary.org/governance/government-at-a-glance-2021_1c258f55-en 

OECD (2019). Public Procurement in Germany: Strategic Dimensions for Well-being and Growth, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/22190414  

 World Economic Forum (2022). Green Public Procurement: Catalysing the Net-Zero Economy. https://www3.weforum.org/docs WEF_Green_Public_Procurement_2022.pdf