Public procurement is responsible for around 7.5 billion tonnes of direct and indirect greenhouse gas emissions (GHG), representing roughly 15% of total global emissions.
The US$11 trillion ($14.79 trillion) spent on public procurement globally offers a remarkable opportunity to supercharge a more sustainable economic system and put governments at the forefront of spearheading a true net-zero future.
Budget 2022 framed bold ambitions to achieve a more sustainable Singapore, with plans to achieve net zero by 2050 backed by strengthened carbon taxes. Green public procurement will play a pivotal role in achieving the overall net-zero targets — Singapore has already targeted peak public sector emissions around 2025.
New research by Boston Consulting Group (BCG) in partnership with the World Economic Forum (WEF) reveals the critical need to transition public procurement practice. Green Public Procurement: Catalysing the Net-Zero Economy highlights not only the essential nature of this transition, but the potential value it could unlock.
Private investment and new jobs triggered by greener public procurement could boost global GDP by around US$6 trillion by 2050, representing a remarkable green value generator for Singapore and the world.
Unlocking public procurement benefits
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Ninety-two countries that collectively account for around 85% of GHG emissions have made net-zero emissions commitments. This includes the world’s two biggest polluters: The US and China which are expected to be net zero by 2050 at the latest and before 2060 respectively.
Public procurement is a vital piece of the puzzle in achieving these net-zero aims. A sustainable solution must address both direct and indirect emissions.
Direct emissions (Scope 1) are reflected in the emissions created by direct activities, such as the use of public agency vehicles. Indirect emissions (Scope 2 and 3) offer a holistic view of the end-to-end energy footprint, including sources of energy as well as purchased goods and services, waste, and downstream use of services. Only by capturing this end-to-end ecosystem can public sector operations truly be deemed to be “green”.
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Most emissions associated with public procurement stem from just six industries — defence and security, transportation, waste management services, construction, industrial projects, and utilities. These six sectors account for up to 70% of total direct and indirect emissions generated by public procurement. Burning fossil fuels for public transport and defence and security activities make up by far the greatest share of this burden.
Public spending accounts for a large proportion of revenues in defence and security, waste management services, and construction industries in particular. This provides public bodies with a powerful negotiating platform to inspire more sustainable solutions with these industries.
We should not sugar coat the initial challenges — a green transition in public procurement is not a simple task. These are complex, and often deeply bureaucratic processes. Embracing green procurement strategies will also likely result in short-term cost increases during the transition. Yet this is not an insurmountable hurdle. The report makes clear that approximately 40% of all emissions related to public procurement can be abated for less than US$15 per tonne of CO2e, with the share being even higher (55%) in waste management services and utilities.
It is estimated that efforts to reach net-zero emissions in public procurement will increase procurement costs by between 3% and 6%. This expected cost rise is not a permanent “green premium” but will reduce over time, as new technologies emerge and are scaled up, creating more efficient and cost-effective net-zero products and services.
This should be framed against an environment of growing carbon taxes, with Singapore targeting to increase carbon taxes to $50–80 per tonne by 2030. This is a signal to accelerate decarbonisation efforts and reduce exposure to potential costs.
Inspiring a wider transition
Greener public procurement not only offers a path to reducing the emissions intensity of public bodies themselves. It also provides the template and inspiration to drive deeper penetration of net-zero practices in private organisations, setting a crucial example to companies and constituents about the urgent need for sustainable solutions.
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Singapore is perhaps afforded a unique opportunity in this arena. In many countries, most government procurement spending takes place across regional and local levels, often distributed across substantial geographical areas. Canada is one of the least densely populated countries in the world, with a population density of just four people per square kilometre. Almost 90% of its spending is undertaken by regional and local governments. Singapore, on the other hand, is one of the world’s most densely populated nations, with a population density almost 2,000 times that of Canada.
There are already encouraging signs of this transition. Singapore’s public procurement strategy is committed to growing reliance on renewable energy, increasing the use of solar energy to 1.5 gigawatt-peak by 2030, representing three-quarters of the national 2 gigawatt-peak target. All public sector premises are set to deploy solar panels where feasible.
The public sector is also shifting to purchase products that meet high-efficiency or sustainability standards. This expands on policies established in 2016 that public sector agencies were mandated to only buy products that met the Singapore Green Label standards. Singapore will also introduce sustainability assessments for suppliers as part of public tenders, a key part of green public procurement practice.
Green public procurement offers an important catalyst for wider economic benefits. It can promote innovation and investment into greener supply chains, while at the same time unlocking new job opportunities. The report estimates around three million net new jobs gained from green procurement-driven investment activity, while at the same time boosting global GDP by up to US$6 trillion.
Many of these measures align with BCG and WEF’s recommendations for a green procurement framework, across five key strategic priorities for public procurement. Create transparency in baseline targets. This requires establishing an understanding of direct and indirect emissions, incorporating both internal and supplier data. This should be used to measure the impact and costs of changing procurement strategies.
Optimise products for GHG abatement across their lifecycle. Develop a clear roadmap that sets out abatement steps that suppliers should take, including cost, impact, and feasibility.
Define product and supplier standards and work with suppliers. Set procurement standards for all products, services, and project activities, inclusive of sustainability targets. Assess and prioritise suppliers based on this strategy. Develop the wider ecosystem and create buying groups. Work with industry coalitions to promote decarbonisation across key industries, with certifications to accredit top performers.
Transform the procurement organisation and align across agencies. Realign the organisation’s governance model to ensure clear decision rights, responsibilities, and accountability. Consider a central green-procurement hub to champion and support green transition efforts, while boosting topic understanding through education and learning support processes.
These measures can provide a powerful framework to accelerate green public procurement efforts and deliver real long-term economic value. Suppliers in Singapore will need time to prepare for this green transformation, and as such the government should work to engage suppliers to assess their readiness by sector, size, and category. They should be supported through a multi-year roadmap advising them how to reduce their emissions, and by what date.
Singapore is presented with some unique advantages when it comes to spearheading this transition, generating real momentum as a regional leader in green public procurement. That means an accelerated pathway towards a more sustainable Singapore of the future, and a potential headstart in unlocking the economic benefits that such a transition could deliver.
Dave Sivaprasad is managing director and partner, SEA leader for climate & sustainability, Boston Consulting Group; Alex Dolya is managing director and partner, APAC leader for procurement, Boston Consulting Group
Photo: EV charging station operated by the SP Group / Samuel Isaac Chua of The Edge Singapore
