Many organizations worldwide are making an effort to purchase products and services that are less harmful to local and global environments. Both public and private sector organizations in North America are implementing purchasing practices that include environmental (and social) considerations—green procurement. These activities are part of a broader movement toward more sustainable forms of production and consumption.
Trends and Approaches
Internationally, government procurement markets in 1997 accounted for 5–18% of GDP within OECD member countries.1 In North America, governments (all levels) spent US$3 trillion out of the total US$11 trillion economy in 2002, according to The Economist. Because of their significant buying power, governments have realized that public green procurement practices can:
- improve environmental performance of the public authorities themselves
- reduce the consumption of materials, resources and energy
- stimulate business development and new product/service markets
- stimulate "green" and innovative product development
Governments are realizing the benefits of green procurement practices such as cost savings from reduced energy consumption, resource use, and material management. They also reap more qualitative benefits such as improved image and achieving policy/program objectives. The awareness of these opportunities is a key factor driving the growth of green procurement at all levels of government.
Leading private sector organizations have also demonstrated significant movement towards greening procurement practices. Many private firms are working to improve the environmental performance of their operations and products and green procurement has been a logical extension of this work. Similar to public buyers, private sector organizations have in the last two decades adopted green procurement practices for specific products (e.g., recycled-content office paper, renewable energy, paints, cleaners, etc.), but are also looking at the materials, substances and chemicals they purchase that go into the products and services they provide. This supply chain approach looks beyond the company’s “gates” in an ongoing effort to reduce costs and risk. Leading companies are using life-cycle assessment and material tracking tools to identify materials, substances and chemicals in their products that pose significant environmental, health and safety risks and re-design their products to reduce or eliminate such materials. In the private sector green procurement is seen as a means towards improving their products and operations from environmental perspective to reduce risk, total cost of ownership and improve supply chain performance.
Despite differences in emphasis, green procurement activities in both the public and private sectors take four main approaches:
- Procuring eco-labeled products or services
- In-house product/service evaluations
- Third-party product/service evaluations
- Supply chain initiatives
These approaches are often initiated within administrative, procurement, environmental or operational departments of governments and private firms. Public green procurement activities often rely on
established product standards, labels and certifications that declare the environmental attributes or performance of the product. Driven by bottom-line performance, leading private sector firms see green procurement as a logical part of effective purchasing and supply chain management practices. Private companies often use in-house and third-party evaluations to make informed green procurement decisions. Private businesses however are reluctant to establish green procurement activities unless there are clearly demonstrated business benefits for themselves and/or their customers.
Benefits of Green Procurement
The collection of success stories in Section 3 of this paper illustrate that green procurement initiatives in North America are underway at various levels of government as well as in private businesses. The success stories illustrate the business rationale and tangible benefits for public and private organizations to establish green procurement activities. These include:
- Cost avoidance—lower waste management fees, lower hazardous material management fees, less time and costs for reporting;
- Savings from conserving energy, water, fuel and other resources;
- Easier compliance with environmental regulations;
- Demonstration of due diligence;
- Reduced risk of accidents, reduced liability and lower health and safety costs;
- Support of environmental/sustainability strategy and vision;
- Improved image, brand and goodwill;
- Improved employee and community health through cleaner air and water, less demand for landfill and less demand for resources; and
- Increased shareholder values.
While there are a number of other quantifiable benefits measured from green procurement, cost savings and risk reduction are perhaps the most universal across all types of industries and organizations. Qualitative benefits such as improved image, brand or ability to meet policy commitments is another key benefit and is of note in a business and public sector climate that is increasingly influenced by the public, nongovernmental organizations and employees that are well informed and educated around the environmental and social issues related to products and services. How both public and private sector organizations measure these benefits varies. They often quantify direct costs savings, environmental benefits, money spent or estimate hidden or indirect savings. Section 4 of this paper discusses these measurement techniques, while also presenting arguments for why green procurement is important for both public and private sector organizations today. This discussion is followed by key challenges that may hinder the further adoption of green procurement in North America.
Green procurement is here to stay. The success stories cited in this paper and other sources illustrate the specific benefits and opportunities of green procurement in North America. A range of resources and organizations exist to assist both the public and private sector in adopting green procurement practices. Green procurement practices often vary and depend on the service, product, resource, material, substance or commodity being purchased. Integrating environmental, health and safety aspects of products/services into the procurement process (and weighting them accordingly), alongside the traditional criteria of cost, quality, safety and technical performance continues to be the major challenge with both public and private sector organizations. While several challenges remain, they continue to be identified and addressed. Importantly, international trade agreements will not pose serious barriers to green procurement in North America.