How green government procurement can catalyse the net zero economy

As makers of the rules that affect how businesses and consumers behave, governments are a key player in the fight against climate change. But they play another role, one which is less obvious but just as important.

Governments are among the biggest buyers of goods in every economy - spending $11tr every year - and they are responsible, directly or indirectly, for about 15 per cent of global greenhouse gas emissions. That means that their procurement decisions can make a big difference. "Abating these emissions will have several benefits," says a report - 'Green Public Procurement: Catalysing the Net-Zero Economy' - from BCG and the World Economic Forum. "It will lead to an estimated $4tr boost to the green economy, create around three million net new jobs and considerably reduce the social cost of carbon."

Up to 70 per cent of public procurement is focused on just six industries - defence and security, transport, waste management services, construction, industrial products and utilities - so governments can have an outsize impact in these sectors. Well over half of public sector emissions - 67 per cent - come from their suppliers.

There are challenges to overcome if we want to cut emissions - government procurement is highly decentralised, and green procurement would raise costs by 3-6 per cent at a time of rising inflation and post-pandemic pressure on public budgets and competition from other departments. And because transparent data on public sector emissions is lacking, setting emissions baselines, defining decarbonisation targets and tracking progress are difficult. 

However, the report sets out a framework to overcome the challenges of greener public procurement. The first steps are to create a baseline of emissions and set targets in a transparent manner. This means public bodies need to identify the suppliers with the heaviest emissions, work out where they can have most impact, determine comment metrics and set targets.

Next, they need to develop an abatement roadmap outlining how they will achieve their targets, looking at how much they will cost, what their impact is and how feasible they are.

Once that is done, product and supplier standards should be established - both for internal operations and external suppliers, and buyers should engage their suppliers, prioritising those that are best able to help the organisation achieve its targets.

Because public procurement is decentralised, it is important that departments collaborate with other customers, joining buyer groups to help create markets for low-carbon products, and working with industry bodies to promote decarbonisation and to certify suppliers and individual products.

The final steps are to transform the way your organisation goes about procurement to ensure that the scale and spending power of public procurement is directed towards tackling climate change. This requires new ways of working and better data collecting and analysing capacity.

Government spending power is often overlooked in discussions of how nations can achieve their net zero targets, but its sheer scale means it can have considerable influence and impact in cutting emissions. In the short term, more sustainable products and services can be slightly more costly, but as new technologies are scaled up, costs come down - in part because of government spending in these areas.

At the same time, greener public procurement will lift private investment, create new jobs and add trillions of dollars to global GDP. Governments play a vital role in setting the rules for the net zero transition. They can make another important contribution by ensuring that their own spending is as green as possible. As the report says: "In addition to far lower emissions, climate sensitive public procurement will stimulate the green economy, reduce the social cost of carbon and lead entire industries towards a net zero future."

To read the report, click here.

This article is sponsored by Boston Consulting Group