Green public procurement: The role of government spending in the race to net zero

What if 15 per cent of global greenhouse gas (GHG) emissions could be reduced, simply through redirecting government spending?

According to a recent white paper by Boston Consulting Group (BCG) and World Economic Forum (WEF) governments worldwide spend an annual total of $11 trillion, across defense and security, transportation, waste management, construction, industrial products, utilities among others.

Public procurement in these areas currently accumulates to 7.5 billion tonnes of direct and indirect GHGs, or 15 per cent of global emissions.

Governments, as large global consumers, therefore play a key role in the global plight towards net zero, in their efforts to abate emissions as they procure across these six key industries.
By pursuing net zero goals and adopting a green public procurement framework, governments can work to decarbonise their supply chains, generate new investment, new jobs and contribute to the global GDP the authors say.

While cost challenges of an additional three to six per cent still face governments when it comes to greener procurement, the COP26 Glasgow conference revealed that 92 countries have pledged to meet net zero targets and many governments are pledging to improve their procurement processes.

For example, the Industrial Deep Decarbonisation Initiative (IDDI) saw governments of the United Kingdom, India, Germany, the United Arab Emirates and Canada announce plans to procure low carbon concrete and steel.

BCG and WEF’s ten-step framework outlines how governments can create transparency in baselines and targets, starting with better data collection, optimise products for GHG abatement, define standards and engage suppliers, develop and create buying groups and realign the steering model.

“Given its sheer scale and spending power, public procurement can exert considerable influence in the effort to combat global warming. We urge all public procurement officials to take on this crucial task, work in concert with all stakeholders and begin the process now,” the authors say.

“Unless we can slow global warming, public procurement costs will skyrocket as governments spend to adapt to the effects of climate change.”

Despite increased short term costs, BCG and WEF estimate that green public procurement will trigger private sector investment and create additional jobs as those in the fossil fuel driven sectors decline.

According to the report, “Abating these emissions will have several benefits. It will lead to an estimated $4 trillion boost to the green economy, create around 3 million net new jobs and considerably reduce the social cost of carbon.”

“The green procurement framework can be applied to procurement functions at all levels of government — central, regional, and local. The key is collaboration: reaping the full benefits of green public procurement will happen only if all stakeholders across the entire public-procurement ecosystem work together to set and reach their net-zero goals.”