Public procurement can represent up 20-30 percent of gross domestic product (GDP) of less developed economies. Sustainable public procurement (SPP) can provide a powerful tool to drive demand for goods and services that benefit BOP.
SPP considers value for money as set by public authorities along economic, environmental, and social dimensions. It can generate growth, reduce costs over a product’s life cycle, support the transfer of skills and technology, and encourage innovation. From the social perspective, SPP can create employment, improve equity and diversity, respect core labor standards and human rights, as well as contribute to poverty alleviation and inclusion of disadvantaged communities. Thus, SPP can be a driver of inclusive business strategies for companies that aim to sell to government.
In the past decade, multilateral development institutions such as the World Bank, the United Nations, and the Asian Development Bank have revised their procurement policies committing to purchasing products that promote social and environmental sustainability. The World Food Program, for example, procures agricultural products from smallholders under its “Purchase for Progress” program thereby enhancing their access to markets and strengthening value chains.
Points to consider
- Perception and awareness: In many developing countries awareness about the benefits of SPP is still limited. Where it is being discussed, both government officials and consumers often perceive SPP as being more expensive than traditional procurement. This is also due to the fact that few public sector agencies have data available to argue the case for sustainable public procurement effectively, such as the long-term financial savings, its impact on target groups, or its achievement of set targets.
- Capacity: Knowledge and skills among procurement staff on cross-cutting issues such as environment, social, and community development are often limited. As the decentralization of procurement processes increases, the human resource capacity constraint sector is likely to grow.
- Clarity: There is a lack of a generally accepted definition of sustainability or inclusiveness, nor an agreed upon verification method. Without clarity on definitions, practical guidance, and strong monitoring systems, there is a risk that the integration of social (and environmental) criteria in procurement may distort fair competition and open the door for corruption.
- Tools: Many public sector procurement reforms in emerging and developing countries do not sufficiently integrate SPP in their programs. Nations that embark on general public procurement reform have therefore usually left out sustainability considerations or developed two separate systems.
- Success factors: According to a United Nations Environment Programme (UNEP) study carried out in 2011 and 2013, the three largest drivers for establishing successful SPP systems include the national legislation, strong political and organizational leadership, and policy commitments. Additional conditions for success included linking SPP with broader development goals and policy initiatives (e.g. entrepreneurship development, PPPs, or sustainable financial systems development) as well as support by donor organizations.
Chile: Opening up government procurement markets to MSMEs
In 2009, only 1 percent of the Chilean government’s procurement orders met sustainability targets. ChileCompra, the Public Procurement and Contracting Bureau in Chile, set a target to increase SPP to 15 percent by 2012.
ChileCompra operates under the supervision of the president through the Ministry of Finance. It uses a combination of tools, including policy and legal reforms, development of guidelines, provider accreditation, labels to indicate products are eco-friendly, and training and capacity building. Chile also launched a comprehensive online procurement portal, www.mercadopublico.cl, which organizes many of these tools and resources and provides useful guidance to potential vendors.
The program has proven successful. By the end of 2011, ChileCompra exceeded its original SPP target and was up to 17 percent of purchases orders meeting sustainability criteria. Through this effort, ChileCompra was also able to award more procurements to MSMEs and vendors from outside Santiago.
- O’Rourke, A.; Leire, C.; Bowden, T. (2013). Sustainable Public Procurement: A Global Review. UNEP Full Report. Paris, France: UNEP.
- UNEP, 2012. Sustainable Public Procurement: A global review. Final Report, Annex.
Policy Case Study
- European Commission. (2010). Buying social: A Guide to Taking Account of Social Considerations in Public Procurement. Luxembourg: European Union.
- O’Rourke, C.; Leire, C.; Bowden, T. (2013). Sustainable Public Procurement: A Global Review. UNEP Full Report. Paris, France: UNEP.
- Roos, R. (2012). Sustainable Public Procurement: Mainstreaming sustainability criteria in public procurement in developing countries. Report by Centre for Sustainability Management, Leuphania University. Lüneburg, Germany: Leuphania University.
- Roos, R. (2013). Sustainable Public Procurement in LICs: Implications for the Ongoing World Bank Procurement Review. Report funded by Gesellschaft für Internationale Zusammenarbeit (GIZ). Berlin, Germany: GIZ.
- Sustainable Public Procurement Resource Center
- Sustainability Compass Public Procurement Platform
 The United Nations Environment Programme (UNEP) defines sustainable public procurement as a “process whereby public organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life cycle basis in terms of generating benefits not only to the organization, but also to society and the economy, whilst significantly reducing negative impacts on the environment.”
 Socially responsible procurement is discussed as part of a sustainable procurement strategy throughout this Annex.
 Independent Evaluation Group. (2014). The World Bank and Public Procurement—An Independent Evaluation. Volume II: Achieving Development Effectiveness through Procurement in Bank Financial Assistance. Washington, DC: World Bank Group.
 O’Rourke, A.; Leire, C.; Bowden, T. (2013). p. 39.