Wednesday, 19 February 2014

Procurement as a green growth strategy

Procurement as a Green Growth Strategy

In order for government to fulfil its mandate to society, it must undertake large spending initiatives that simultaneously supply its own operation but also provide infrastructure and services for the community at large. Consequently, governments have large and diverse spending strategies on procurement ranging from routine items like stationary, computers, or furniture, to complex spending areas such as utility networks, schools, hospitals or homes. All this equates to substantial investment that can rise to as much as 45 per cent of government budgets, which is around 13 to 20 per cent of gross domestic product (GDP) in industrialized countries, and more elsewhere—35 per cent in South Africa; 43 per cent in India, 47 per cent in Brazil, 52 per cent in Ghana, 49 per cent in Mauritius and 46 per cent in Cost Rica. As such, public sector procurement is a major contributor to industry growth and stability across a wide range of sectors, providing finances and contracts that drive markets for goods and services.

In the procurement of infrastructure and works, governments are adding private investment to their spending through public–private partnerships/private finance initiatives (PPP/PFI). This means that, in addition to the large financial flows from government procurement budgets, private sector investment is also in part being directed by government policy and priorities. In the case of the procurement of works, in the 20 years between 1990 and 2009 there have been more than 1,300 PPP contracts worth more than €5 million signed within the EU, with a combined capital value in excess of EUR250 billion. PPPs ability to provide investment in adverse climates is also demonstrated through the fact that, since 2007, some 350 new projects representing almost €70 billion have reached financial closure within the EU . Moreover, currently accounting for only 4 per cent of total public investment worldwide, figures suggest that PPP has room to grow and the potential to play an even greater role in future public infrastructure investment .

The case for a sustainable approach to government procurement is the desire to harness the massive purchasing power of public sectors to transform industry growth into green industry growth. Not only is it possible to ‘green’ existing industries through sustainable procurement policies, but purchasing power is large enough to also catalyse green growth, as industry and enterprises within the green sector will be willing to invest, innovate and scale up when demand is secure and well directed.
GPP’s ability to stimulate industry growth can be best demonstrated through the elevation of previously niche or restricted green markets into mainstream consciousness. In North America, the domestic market for green electronics, including computers and mobile telephones, was born when the Federal Government began buying green in the early 1990s. Similarly in Europe, public procurement served as the impetus to launch markets for organic food and drink, fuel-efficient vehicles and sustainable timber products.
The influence of GPP is far reaching, as prioritizing sustainability considerations in government purchasing create positive externalities across both the domestic economy and international supplier chains: Through GPP, government can:
                [i]Support the implementation of environmental policies on water and energy efficiency, waste management, renewable energy supply, resource efficient and cleaner production, lower greenhouse gas emissions and more.
                [ii]By ensuing scaled up and long term demand, provide an incentive for investment and innovation on sustainable products, services and works.
                [iii]Improve transparency and efficiency in procurement processes.
                [iv]Realize cost savings in the construction and operation of public assets and services
                [v]Support the introduction of new and improved sustainable goods, services and works into the market.

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