Greening government procurement could supercharge push for net-zero

27 January 2022 3 min. read

Global government procurement is responsible for 15% of greenhouse gas emissions. With governments around the world are currently spending $11 trillion on procurement every year, transitioning this to green public procurement crucial could not only be crucial for reaching net-zero, but stimulate private sector spending at the same time.

Government procurement or public procurement is the procurement of goods, services and works on behalf of a public authority, such as a government agency. It is believed to amount to $11 billion, or 15% of global GDP – a substantial part of the global economy. Due to this size, a new report also suggests that public procurement is tied to a huge amount of global emissions. 

According to a new report from the World Economic Forum and Boston Consulting Group (BCG), global government procurement currently accounts for seven-times the amount of greenhouse gases emitted by the whole aviation industry. Public sector procurement activities are directly or indirectly responsible for 15% of global greenhouse gas emissions, with six particular aspects standing out as top polluters. 

Contribution to government procurement emissions

Defence and security is currently the segment causing the largest amount of greenhouse release. Accounting for an estimated 17% of public procurement emissions, it was followed by transportation, waste management services, construction, industrial products, and utilities. Paying closer attention to these areas could provide a major opportunity for governments to put their operations on a faster path to net-zero. 

Joerg Hildebrandt, a BCG Managing Director, and a co-author of the report, said, "Public procurement's sheer scale and spending power can exert considerable influence in combating global warming. There is a short-term green premium for governments when transitioning to more sustainable products and services. The increased cost will decline over time, however, as new technologies are scaled up, making the production of net-zero products more efficient.”

While the costs of change are often cited as a reason things cannot be made more sustainable, BCG also suggested this shift is not as unattainable as critics suggest. The study finds that approximately 40% of all emissions related to public procurement can be abated for less than $15 per ton of CO2 emissions – though this amount varies by industry. Meanwhile, greener public procurement would likely increase costs to governments by no more than 3% to 6%.

Green public procurement can trigger private sector investment, provide economic stimulus and create new jobs

At the same time, decarbonising public procurement could also be a boon to the private economy. The added cost of green procurement could spur governments to work cooperatively to encourage suppliers to invest in the technological innovation needed to make the transition to net zero. This, in turn, would help suppliers decarbonise the goods and services they sell to governments. 

The total impact of a green transition in public procurement could see some $58 trillion in investment triggered – along with the creation of 42 million jobs. As a result, GDP could expect a $70 trillion boost. 

Borge Brende, President of the World Economic Forum, concluded, "Achieving net zero will require collaboration between governments and companies. Importantly, this report shows that the transition to green public procurement benefits all stakeholders. The transition to green procurement practices shouldn't be perceived as a cost burden for industries and the public sector, but rather as something that creates long-term sustainable economic growth.”