Both the private and public sector have one goal in terms of procurement and that is to get the most “bang for the buck”. The private sector always aims for the best value to maximize profits to shareholders, while the public sector seeks the best value because of the increasingly limited resources available.
The public sector spends about 45 to 65 percent of its budget on procurement. Given this volume, public procurement is one of the key drivers of international trade, creating value chains that span around the world. If governments make an effort to purchase environmentally and socially preferred goods, it can have a huge impact on green economic transformation.
Green public procurement is defined as “a process whereby public and semi-public authorities meet their needs for goods, services, works, and utilities by choosing solutions that have a reduced impact on the environment throughout their life cycle, as compared to alternative products and solutions”. While a relatively new concept, GPP has been gaining popularity as citizens demand their governments to do so.
An important aspect of GPP is the lifecycle costing, which is defined in the International Organization for Standardization standard, Buildings and Constructed Assets, Service-Life Planning, Part 5: Life-Cycle Costing (ISO 15686-5) as an ―economic assessment considering all agreed projected significant and relevant cost flows over a period of analysis expressed in monetary value. The projected costs are those needed to achieve defined levels of performance, including reliability, safety and availability”. The use of LCC demonstrates that the price of goods and services does not reflect the financial and non-financial gains that are offered by environmentally and socially preferable goods and services. Simply put, despite being costlier, green goods and services are better options than their alternatives. Public organizations should also consider that additional costs will be largely offset through efficiency gains, cost savings, and lowered risk during the product lifetime.
Several countries in the Asian region have already adopted the concept of GPP. In 2000, Japan passed a law on “Promoting Green Purchasing” which requires government agencies to implement GPP. To date, all central government ministries practice green procurement; 47 prefectures and 12 designated cities are engaged in green procurement, and two-thirds of the 700 cities systematically implement green procurement.
In South Korea, the government has instituted the “Act on Encouragement of the Purchase of Green Products” which aims to reduce environmental pollution and wasteful use of resources. Local and national government agencies are required to submit their annual plans with specific number of green products to be purchased. Since the implementation of the act in 2005, South Korea’s public green market has expanded to USD 1.6 billion in 2009. It has also created more jobs and reduced carbon dioxide emissions.
China’s central government, meanwhile, came up with a list of green products that are environmentally friendly and energy efficient. The list is handed to public procurement centers that are responsible in implementing public procurement plans with the instruction that these products be given priority in procurement. The list includes lists include products ranging from cars to construction materials, office equipment and other consumer goods.
Malaysia incorporated GPP in its “Eleventh Malaysia Plan” and “National Sustainable and Consumption Blueprint” which highlights GPP becoming mandatory in all government agencies, both national and local, by 2030. The target is to increase Malaysia’s green purchasing volume by 100 percent. Ministries of Finance, Energy, Green Technology, and Water are in charge of promoting and implementing GPP which is also aimed to increase Malaysia’s competitiveness.
GPP continues to be accepted and adopted because of the benefits associated in implementing it.
- GPP drives innovation and provides the public sector with incentives to switch to environmentally friendly and energy efficient goods, products, works and services.
- GPP promotes savings for public sector agencies, particularly if you consider the life-cycle cost and not just the purchase price.
- Governments implementing GPP are better equipped to meet the evolving environmental challenges.
In developing a functional GPP program, governments are advised to build on existing good procurement practices such as transparency, accountability, non-discrimination and competitiveness. Governments should also consider including GPP in their national action plans roadmap to send a strong signal to other sectors to venture into green enterprise. Through the implementation of GPP, governments take the lead role in shifting the entire market to green.