How Public Procurement can Boost Sustainability

Public procurement has the power to drive sustainability on a massive scale, but achieving its full potential is no easy task. The World Economic Forum (WEF) highlights that governments face significant hurdles such as fragmented systems, high costs and outdated frameworks that must be tackled to maximise green procurement.

Globally, governments spend more than US$10tn annually on goods and services, which accounts for around 15% of global greenhouse gas emissions. Public procurement's footprint is particularly significant in high-impact sectors like infrastructure and transport.

Yet, under the weight of geopolitical, trade and financial challenges, many governments are falling behind on their climate and environmental goals.

The WEF emphasises that procurement leaders, such as CPOs, are central to driving sustainable transformation. Public procurement, it states, can not only combat climate change but also encourage more sustainable industries and supply chains. Public-private collaborations are seen as essential to accelerating these goals and creating demand for greener products and services.

Collective action through expert collaboration

To explore these possibilities, the WEF convened international organisations, national and local government leaders and sustainability experts at the 2024 Urban Transformation Summit and a virtual roundtable on Green Public Procurement Leadership.

These events were hosted in collaboration with the Clean Energy Ministerial Industrial Deep Decarbonisation Initiative (IDDI), the World Bank, the Organisation for Economic Cooperation and Development (OECD) and C40 Cities.

Discussions focused on how governments can leverage procurement to foster greener supply chains and industries. The WEF subsequently published a report outlining both the opportunities and the challenges in making public procurement more sustainable.

Addressing key barriers

The report identifies several challenges governments need to overcome to make green public procurement (GPP) a reality.

Tackling fragmented procurement systems

Many governments face decentralised procurement systems, which hinder the development of cohesive strategies for green procurement. By unifying these systems, they can create more consistent and efficient frameworks.

Rowena Candice M Ruiz from the Government of the Philippines notes the difficulties posed by manual and fragmented processes, particularly when it comes to data and capacity building for GPP.

Managing the 'green premium'

The "green premium" refers to the higher cost of sustainable goods and services. This remains a significant barrier to adoption. Some governments are mitigating these costs by pooling resources through partnerships, spreading expenses across phased procurement plans and offering financial incentives to encourage greener purchasing decisions.

Nick Xenos of the Government of Canada shares how the country is addressing this issue by focusing on the total cost of product ownership.

"We are partnering with the private sector to green federal buildings through energy performance contracts that use energy savings to pay for building upgrades," he explains.

Modernising frameworks and enhancing supplier capabilities

Outdated regulations and a lack of supplier collaboration often prevent the integration of sustainability into public procurement. Governments, with the support of organisations like the World Bank and the OECD, are modernising their procurement frameworks to overcome these limitations.

For instance, Ethiopia is updating its procurement regulations and implementing an e-procurement system to better track supplier data, as explained by Woldeab Demissie from the country's Federal Public Procurement and Property Authority.

The City of Oslo provides another example of progress. Philip Mortensen, a Senior Advisor for the city's Agency for Climate, notes: "The City of Oslo has electrified public construction works through the strategic use of green public procurement."

Balancing immediate needs with long-term goals

Governments often feel pressured to deliver quick, visible results, which can make it harder to prioritise long-term sustainability goals. The WEF stresses that achieving transformative change requires a vision for a low-carbon economy that balances immediate benefits with a strong foundation for the future.

Imran Dassu, from Kearney, highlights the need for this balance, asking: "What is the vision for sustainable impact that actually creates the right foundations for the longer term?"

Success stories in green procurement

While challenges persist, there are promising examples of how public procurement is advancing sustainability. The WEF points to initiatives like the US Federal Buy Clean Programme, which leverages federal purchasing power to drive demand for cleaner construction materials.

Deputy Federal Chief Sustainability Officer Madeline Reeves explains: "The Federal Buy Clean Program leverages the purchasing power of the US Federal Government, as the single largest buyer on Earth, to spur demand for clean American-made construction materials."

At an international level, IDDI has been instrumental in encouraging low-carbon industrial materials, with seven governments pledging to adopt its Green Public Procurement standards.

Soledad Reeve, a senior green procurement specialist at the United Nations Industrial Development Organisation, highlights the programme’s impact: "The IDDI government signatories are sending a strong demand signal for low-emission concrete and steel, which are high-impact procurement categories in infrastructure projects."

Cities as testing grounds for green procurement

Cities are proving to be ideal testing grounds for innovative procurement strategies. In Sweden, the city of Lund is leading with energy efficiency projects that utilise low-grade heat sources and promote sustainable financing. Similarly, New York City is engaging directly with suppliers to integrate sustainability into local supply chains.

Sylvie Binder from New York City’s Mayor’s Office of Climate and Environmental Justice explains: "We are making efforts to incorporate low-carbon concrete specifications for ready-mix and precast concrete on all of our city projects."

She adds that a coalition of cities and private sector partners has significant potential to drive growth in this market, noting that the coalition spends more than US$10bn on construction annually.

As governments and cities continue to refine their strategies, public procurement emerges as a critical tool for shaping greener economies and supply chains.

As the WEF report concludes: "Political cycles and public expectations often push government leaders toward quick, visible wins. However, truly transformative green public procurement requires a long-term vision for transitioning to a low-carbon, environmentally friendly economy."

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