Sustainable procurement for a green economy

Public procurement encompasses all processes through which public institutions, authorities and municipalities procure products and services. State-owned companies are also involved in these processes. These activities account for a significant proportion of the total economic volume and are therefore of great economic importance.

Public procurement plays a central role in the economy. This results in an obligation to integrate sustainable principles into its processes in order to achieve positive social and environmental results in the long term. Sustainable practices not only promote climate and environmental protection, but are also committed to fair and safe working conditions and support for the local economy.

According to the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection, the procurement volume of the public sector in Germany is around 500 billion euros. This represents a significant proportion of the procurement of products and services.

In comparison, local authorities are the largest players in the public procurement of goods and services. This can be attributed to the fact that they take on tasks that directly affect citizens, such as the provision of schools, public transportation and social services. The wide range of goods that need to be procured for public administration include office equipment, electricity, paper, furniture, official vehicles, medical equipment, etc.

Status quo of the public sector: emission profiles and environmental impacts

Public procurement generates a considerable amount of greenhouse gas emissions. In 2006, the federal government, federal states, local authorities and public companies were responsiblefor 42.8 megatons (Mt) of carbon dioxide equivalent (CO₂e). This corresponds to around4 percent of all emissions in Germany. The distribution of these emissions, which are caused directly or indirectly by the procurement activities of the public sector, is as follows:

• Energy consumption in public buildings: 23.5 MtCO2e

• Means of transportation and mobility: 5.7 MtCO2e, including public transport with 3.1 MtCO2e

• Water supply and disposal: 7.6 MtCO2e

• Indirect emissions from the production of building materials:6 MtCO2e

(Source:Federal Ministry for the Environment, Nature Conservation and Nuclear Safety)

These high figures clearly show the relevance for the procurement of sustainable goods, for example:

• energy-efficient heating and cooling systems to reduce energy requirements

• Electric vehicles or low-emission means of transportation for lower CO2 emissions in traffic

• energy-efficient technologies for water supply and disposal to reduce electricity consumption by wastewater treatment plants and CO2 emissions from wastewater treatment

• more environmentally friendly materials, such as recycled building materials, to reduce indirect emissions for construction projects

Innovative procurement management for greater environmental awareness

The building blocks for environmentally conscious action

The concept of sustainable procurement is based on the three dimensions of sustainability. The following building blocks of an environmentally friendly procurement strategy can be implemented as part of this:

Relevant drivers of sustainability in procurement

Integrating sustainable strategies into public sector procurement mechanisms is more than just a legal and ethical obligation. It offers numerous benefits and is based on four key drivers:

Criteria for sustainability

The following criteria must be observed in order to qualify as “sustainable procurement”:

Comprehensive supplier management enables your company to identify bottlenecks and delays at an early stage and react flexibly to them. In addition, continuous measurement of your partners’performancehelps you to identify potential risks and strengthen your own security of supply. This reduces dependency on individual suppliers and promotes the stability of the entire supply chain.

• Definition of clear guidelines and standards or environmental and social criteria in tender documents and award procedures.

• Continuous monitoring and transparent disclosure of sustainability performance, progress and impacts.

• Partnerships with suppliers and other relevant stakeholders to develop sustainable strategies and innovations.

• Training all those involved or responsible in the procurement process to raise awareness of sustainability.

In this context, various regulatory guidelines play a key role in ensuring compliance with sustainability principles for fair competition.

These include

• EU procurement directives regulate the integration of environmental and social criteria into the award procedures of public contracting authorities. The aim is to promote environmentally friendly decisions in procurement.

• Environmental laws define standards that must be complied with when procurement goods and services. They are intended to help minimize the impact on the environment.

• Labor laws, which focus on fair working conditions and compliance with labor standards in the manufacturing process.

Transparency regulations relate to the reporting and disclosure of relevant data. They concern all decisions and actions of the public sector in the context of procurement.

The importance of EU Directive 2014/24/EU for sustainable public procurement

The increasing importance of sustainability in public procurement is reflected in the legal requirements and directives. Directive 2014/24/EU emphasizes the importance of taking environmental and social criteria as well as innovation into account in procurement procedures.

It encourages contracting authorities to take into account not only price, but also qualitative, environmental and social aspects when awarding contracts. This enables a more comprehensive evaluation of tenders and promotes the use of sustainable products and services.

The most relevant requirements of the Public Procurement Ordinance (VgV):

Life cycle costs

Contracting authorities are obliged to take into account all the costs of a product or service that are incurred throughout its life cycle. This comprehensive cost analysis should help to ensure that financial resources are used optimally and that more sustainable and economical decisions are made. The costs incurred include, for example, costs for acquisition, operation, maintenance and disposal.

Environmental certificates

The procurement regulation also requires the use of ecolabels and certificates awarded by recognized organizations. This increases transparency for consumers and helps to prove the sustainability of a product or service.

Among other things, these environmental certificates stand for the prioritization of environmentally friendly alternatives and the reduction of environmental impacts. They show that the contracting authority is making an explicit contribution to sustainable development.

Technical specifications

Contracting authorities should define technical specifications that give preference to environmentally friendly products and services in order to comply with sustainable standards. The aim is to promote the use of environmentally friendly products and create incentives for the development and use of sustainable technologies. At the same time, green washingis to be avoided. The technical specifications include, for example, energy consumption, the emission values of the manufacturing process and the material composition.

Transparency

Public clients must clearly and transparently document and communicate all processes, areas of responsibility and decisions that are established in their procurement processes.

This includes the publication of:

• criteria for the evaluation of tenders

• reasons for decisions

• planned orders

Equal treatment

Discrimination and unfair practices during the award procedure are strictly prohibited. It is required that all applicants aretreated equally so that fairness and equal opportunities can be guaranteed.

Proportionality

Contracting authorities should formulate the required qualifications and selection criteria for the award of contracts in such a way that they are not overly restrictive. At the same time, these must be proportionate to the subject matter of the contract. This should ensure that the best possible provider can be found to meet the needs and objectives of the contract.

Opening up the competition

Public contracts must be put out to tender openly. This encourages fair competition and ensures that the most qualified bids for the contract can be found and selected. Special consideration is given to the participation of small and medium-sized enterprises (SMEs), as they often require support in order to participate in public procurement procedures.

Electronic communication

Efficient digitalization of the awarding process not only speeds it up, but can also reduce errors and increase transparency.

In addition to the requirements of the Public Procurement Ordinance, strategic environmental criteria have also been defined with the aim of minimizing the environmental impact of public procurement. Resource efficiency, emission reduction and the use of sustainable materials play a special role here.

Together for sustainability: partnerships & key players for innovative procurement

Numerous key players such as the Alliance for Sustainable Procurement (AfNB) and the Competence Center for Innovative Procurement (KOINNO) play a decisive rolein promoting sustainable procurement practices in the public sector.

We support you in achieving your sustainability goals

Public sector clients must adopt a strategic approach to ensure sustainable procurement. In this way, operational processes can also be made more environmentally friendly. Our approach goes beyond the mere consideration of environmental criteria and includes all relevant steps for the successful implementation of sustainability criteria:

1. Needs analysis: At the outset, requirements should be optimally adapted to sustainability aspects. This also requires the consideration of social and ecological criteria in the product description.
2. Procurementmarket analysis: In a further step, a detailed analysis of the suppliers is required. They are compared and evaluated on the basis of their competence and performance. In particular, their contributions to sustainability and existing certifications play a decisive role in the decision-making process.
3. Award strategy: An effective award strategy must then be developed that integrates qualitative, environmental and social award criteria. Life cycle costs should also be taken into account in order to make sustainable decisions.
4. Supplier selection: By applying a sustainability evaluation matrix, all tenders can be objectively assessed. This includes both life cycle costs and external costs in order to analyze the long-term effects of procurement.
5. Contractual anchoring and sustainability monitoring: Finally, all sustainability criteria must be integrated into the contracts. In addition, efficient and continuous monitoring must be ensured to check whether the criteria are being adhered to throughout the term of the contract.