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The power of procurement: How governments can purchase a greener future

Aug 9, 2022 | Public | 0 comments

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When it comes to how governments can lead the transition to a sustainable future, we often think only of the laws and regulations they can enact to steer companies and citizens in the right direction. While those are important, governments can also take more direct action — by changing their own purchasing habits through socially responsible and sustainable procurement policies.

For example, in my home country of the Netherlands, windmills have long been a part of the landscape, and Dutch authorities have continued this tradition into the 21st century by offering generous subsidies to build offshore and onshore wind farms.

The Dutch government subsidizes this clean energy, but when it comes to its own electricity purchases, it continues to rely heavily on fossil fuels. In some cases, most of the output of Dutch wind farms has been bought up by private companies, such as Microsoft’s deal with the Princess Ariane Wind Farm near Amsterdam — the largest wind farm in the Netherlands — to power its data centers.

Of course, this helps reduce the world’s carbon emissions, but there is a missed opportunity here. If the Dutch government had committed to sourcing its own energy needs from the clean energy projects it helps subsidize, the demand for green energy today would be even greater. Perhaps projects such as the Princess Ariane Wind Farm would have been built even bigger to meet this demand.

The National Institute for Public Health and the Environment (RIVM), an independent agency of the Dutch Ministry of Health, Welfare and Sport, wanted to explore how the government’s own buying power can achieve sustainable outcomes. Together with Purfacts, a consultancy that supports purchasing departments, my team at Metabolic helped the institute to learn more.

Even a single country’s procurement policies can affect emissions across borders in other lands.

We measured the procurement footprint of not only the central government but that of provinces, municipalities, water management organizations, schools and other government-linked entities. We found that together these entities spent about $87 billion on procurement in 2019 alone — that’s 12 percent of the total amount spent on products and services in the Netherlands. This spending is, in turn, connected to around 12 percent of the overall Dutch carbon footprint, 13 percent of the country’s mineral resource use and 5 percent of its land use.

All this equates to a climate footprint of 22.1 megatons of CO2 equivalent, 5,605 square miles of agricultural land use and the consumption of 1.32 million tons of mineral resources.

By incorporating sustainability requirements into procurement policies, governments can help reduce these impacts in a significant way. When it comes to climate emissions, the biggest impact of Dutch government procurement is in energy consumption, with 1.74 kilograms of CO2 equivalent generated per euro spent. There could be big improvements by following the lead of the Dutch nationalized rail service, which has committed to run entirely on wind power, synergizing the sustainability benefits of public transport and renewables.

There is potential in other areas of sustainability too — purchasing contracts for furniture could specify requirements for durability and recyclability, government employees could be incentivized to travel by train instead of by car, and food purchases could be sourced from regenerative agriculture farms that are better for the environment.

And these opportunities exist well beyond the borders of the Netherlands. If you think the Dutch government has some purchasing power, just imagine what the European Union could achieve through procurement. EU public authorities spend $2.04 trillion on procurement per year — a similar analysis of its spending could highlight some massive sustainability opportunities. There’s also room to undertake more holistic assessments so governments can understand the social benefits that could be realized through more conscientious purchasing policies.

Even a single country’s procurement policies can affect emissions across borders in other lands. In the Netherlands and many other European countries, much of the furniture is manufactured in other countries. So when a large government organization is specifying that furniture is easily repairable, then they are creating demand for that which in turn affects what is being produced in other countries. Today, most major suppliers offer furniture with repairability or recyclability as a selling point.

Michiel Zijp, senior researcher at the RIVM, the Dutch research institute committed to public health and the environment, pointed to information and computer technology (ICT) equipment as one area in which Dutch procurement practices can influence environmental impacts abroad. “A lot of the ICT products we purchase are produced outside the Netherlands,” he said. “From the analysis, we found that most emissions from ICT equipment are not from the energy consumed in use but in the production of the equipment. That means the largest share of the emissions is actually outside the Netherlands.”

To address that, Zijp said one option would be for the Netherlands to prioritize durability in ICT procurement and to ensure government employees are well-trained in how to use and maintain such equipment in a way that maximizes their lifespan. He added, though, that with Dutch demand for ICT equipment being a relatively small slice of the global market, far greater changes can be realized by more countries adopting sustainable procurement practices.

“We really have to join forces to influence the market,” he said. “So for ICT, that would be trying to find in the European context partners in which we can together influence the market to become more sustainable.”

Government procurement budgets really do have the potential to stimulate the whole supply chain to take a new direction. And in the globalized economy, these supply chains go beyond any single country’s border, reaching to the rest of Europe to China to America — impacts that will be felt around the world.

What we need to do first is get a better understanding of the impacts of individual governments and multinational entities such as the EU, so everyone can work together to achieve the global sustainability targets we all have a stake in.

The post "The power of procurement: How governments can purchase a greener future" appeared first on Green Biz

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