Public sector procurement activities are directly or indirectly responsible for 15% of global greenhouse gas (GHG) emissions, seven times the amount emitted by the entire aviation industry, according to a new report from the World Economic Forum and Boston Consulting Group (BCG). Around the world, the study finds, governments currently spend $11 trillion—or 15% of global GDP—on procurement every year, making the transition to green public procurement crucial for reaching net zero. The report, titled “Green Public Procurement: Catalyzing the Net-Zero Economy,” is being released today.
As of November 2021, 92 countries, which collectively account for about 85% of global greenhouse gas emissions, have pledged to meet net-zero emissions targets. The new analysis indicates that greener public procurement practices can significantly reduce CO2 emissions across government supply chains and operations. Most of the emissions associated with public procurement—up to 75% of the total—stem from the activities of six industries: defense and security, transportation, waste management services, construction, industrial products, and utilities.
Joerg Hildebrandt, a BCG managing director and senior partner, and a co-author of the report said: “Government spending power is often overlooked in discussions of paths to net zero. But 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.”
The private investment and new jobs triggered by greener public procurement, in aggregate, will boost global GDP by around $6 trillion through 2050—a significant proportion of the green economy’s total GDP of $70 trillion.
Public Procurement Emissions Can Be Abated at Low Cost
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, although this amount varies by industry. And greener public procurement should increase costs to governments by no more than 3% to 6%.
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 decarbonize the goods and services they sell to governments.
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.”