BrazilGovernment procurement accounts for 15% of global emissions
Government procurement is responsible for 15% of all global greenhouse gas emissions according to a new report from BCG, suggesting greener practices could significantly serve reduction targets.
A new report from strategy firm Boston Consulting Group and the World Economic Forum suggests that 15 percent of global greenhouse gas emissions could be eliminated through greener government procurement practices. The study also found that close to 70 percent of the annual 7.5 billion tonnes of worldwide carbon emissions associated with public procurement were concentrated in just six areas, led by defence and security.
Largely a result of fossil fuel burning and the manufacturing of heavy materials to build defence- and security-related assets, the industry accounts for one quarter of that 70 percent total, or 17 percent overall, followed by waste management, transport and construction, which contribute a further 12 percent of emissions apiece as to government procurement. The two remaining major sources were industrial products and utilities.
While the burning of fossil fuels in transport and defence & security activities accounts for almost all of the Scope 1 emissions related to government procurement, and around 20 percent of the total, over two thirds is made up of Scope 3 emissions – that is, generated by the companies which provide governments with goods and services. Here, the report points to the enormous spending power and influence held by governments.
The BCG analysts peg the combined goods and services bill of governments worldwide at $11 trillion per year (or 13 percent of global GDP), an amount it says “should give procurement officials a considerable amount of influence over the industries they buy from, and especially those that are particularly dependent on public procurement.”
Those that are the heaviest emitters also happen to be among the most reliant on government spending. As an example, the defence & security industry sector derives 95 percent of its revenues from public procurement, while waste management service providers also rely on governments for the bulk of their income, at a ratio of 60 percent against private and household demand.
A significant portion of revenues in the construction industry – one quarter of an estimated $12 trillion global market – are also generated through government-funded projects.
“Government spending power is often overlooked in discussions of paths to net zero,” says BCG senior partner Joerg Hildebrandt. “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. However, the increased cost will decline over time as new technologies are scaled up.”
As to the additional short-term costs of transitioning, 40 percent of CO2 emissions across government supply chains and operations could be reduced according to BCG’s sums at a cost of less than $15 per ton. Altogether, the firm predicts that procurement costs for governments will increase by 3 to 6 percent as they strive to achieve net-zero by 2050, with fuel-related emissions from the defence & security and transport sectors the costliest challenge.
On the other hand, the consulting firm contends that the adoption of greener government procurement practices would considerably reduce the social costs associated with carbon emissions – estimated to reach $115 per tonne by 2050 – as well as unlock a potential $4 trillion worth of private sector investments, with the majority of that outlay to be made over the next decade. This activity in turn would create around 3 million net new jobs by mid-century.
“Achieving net zero will require collaboration between governments and companies,” concludes the World Economic Forum president, Borge Brende. “Importantly, this study 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.”
