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Procurement is one of those seemingly simple, but actually incredibly weird, policy areas to discuss because it is just structurally not a market. Policymakers think about efficiency & transparency as optimal design principles, but those aren't applicable to most procurement... https://twitter.com/Justin_Ling/status/1336070911389208585
Take the first concept: Who procures things? And how do they decide what gets bought & what doesn't? Procurement officers aren't economists, they're largely administrative staff who buy goods from pre-approved vendor/contractor lists. So, right off the bat - not a market.
There isn't much info available to an average procurement officer. Every good doesn't come with embedded emissions estimates, or LCA data on environmental impacts. It's mostly goods catalogues, then a product is selected and a purchasing request gets sent.
What about getting greener options on the vendor lists? Well then you run into scale issues. The government wants to go greener, but it also needs vendors who have the scale necessary to guarantee supply.
Take printers: If government puts out a vendor contract for printers...
Take printers: If government puts out a vendor contract for printers...
Then there are supply limits on RFPs for vendors. Only the biggest companies can bid (Xerox, Canon, etc.). So if you want to green your procurement, you're limited by what those big firms produce. Since they know you'll buy it anyways, they have next to no incentive to innovate
Now, what about transparency? Can't you go upstream and impose pricing schemes on goods so carbon costs are embedded? Sometimes, but that really depends on carbon data being available across all goods you'd want to buy
Govs #1 procurement cost is buildings. You can relatively easily factor in a carbon price to inputs like concrete and steel. #2 is ships - Much trickier. Ship supply chains are global & expansive, and many parts are manufactured in regions without accessible carbon emissions data
So: not a market (i.e. market signals don't really work), incredibly hard to find accessible/transparent data, and there are structural limits that make RFPs largely uncompetitive.
So what policies would work well here?
So what policies would work well here?
1 - industry coalitions to commit to greener manufacturing amongst the biggest players. CSA's commitment to reach net-zero as a sector by 2050 did a ton to advance green procurement by ensuring the orgs big enough to land contracts actually greened their operations.
2 - Break RFPs down into more regional sectors. One interesting model is to allow for coalitions of SMEs to bid on larger contracts as one group, thereby committing to being able to cumulatively supply the total required. Would increase competition within the process.
3 - Get prescriptive. Very prescriptive. Create a bidding process where contracts have to prove BAT emissions performance relative to the market. And commit to fully turning over approved vendor lists every 3-5 years. This is would cause so many problems, but it might work a lil
Green procurement isn't simple because it involves overcoming distinctly non-market barriers: inertia, reliance on personal relationships to sell, aversion to change.
You wanna fix procurement? Get prescriptive & creative. Otherwise you'll keep making empty promises.
You wanna fix procurement? Get prescriptive & creative. Otherwise you'll keep making empty promises.
