(Originally published in UNOPS 2012 Annual Supplement on "Balancing Social, Environmental and Economic Considerations in Procurement", Copenhagen, Denmark)
Introduction
The total volume of public procurement in India is estimated to constitute about 30 percent of the country’s gross domestic product. However, the use of public procurement as a tool to influence market trends in favour of environmentally and socially sustainable products and services is a very new concept in India.
There is currently no overarching legislation governing sustainable public procurement in India. The General Financial Rules issued by the Ministry of Finance defines the key principles of efficiency, economy, fairness, consistency and promotion of competition in public procurement. However, these guidelines in their current form do not mandate public authorities to incorporate environmental and social concerns in their buying decisions. Nevertheless, awareness about the need to incorporate sustainability into government decision-making has been gaining traction in recent years.
While stakeholders in India are grappling to understand this subject and its implications, multilateral agencies such as UNEP, the German development agency GIZ and others have increased their sustainable procurement activities in the country. Their efforts, which have included workshops and seminars, have led to greater awareness among stakeholders. Moreover, in 2012, two noteworthy milestones were reached. First was the introduction of the Public Procurement Bill in Parliament stating that the environmental sustainability of a product can be adopted as one of the criteria for evaluating a tender. Second, a committee nominated by the Ministry of Environment and Forests recommended introducing legislation that encourages a shift in supplying greener products and services. Though these events have created some buzz around this topic among public procurers, the fact remains that only a handful of them are aware of sustainable public procurement.
Many studies have highlighted the barriers to adopting and implementing sustainable public procurement. A study carried out in the Indian context identified the following key challenges in implementing sustainable public procurement in the country: a lack of stakeholder awareness, knowledge and skills; the absence of clear policy guidelines; non-availability of green products in the market; a lack of vendor preparedness; and the perceived higher cost of green products and services. These findings have been corroborated by other studies carried out on developing nations.
Case: Purchasing environmentally friendly paper for Indian Railways
The Ministry of Railways, the body that operates Indian Railways, is one of the central ministries of the Government of India. The procurement of goods, works and services by the Ministry of Railways is governed by the General Financial Rules and other codes, manuals and departmental guidelines. The ministry has the largest cadre of trained procurement professionals in India but faces similar challenges as described earlier in integrating environmental and social considerations into public buying decisions. The foremost among them is the lack of awareness and knowledge of sustainable public procurement concepts among stakeholders in India. More specific critical issues facing procurement professionals within the ministry are: legal and technical problems during the procurement process (inclusion of sustainability criteria, evaluation and monitoring); the lack of knowledge and experience in using techniques such as life-cycle costing and life-cycle assessment; and the dependency on experts to define specifications and mitigate potential financial risks due to the perceived high costs of greener products.
Despite these overwhelming challenges, sustainability champions in the public railway sector have resolved to integrate sustainability considerations into public buying. Their actions rest on the belief that although the current public procurement legislation does not explicitly mandate sustainability, it does not prevent any government agency from procuring ‘green’ products and services within the given policy framework.
At the beginning of 2013, the head of procurement for the Ministry of Railways identified ‘green’ procurement as one of the priorities for the financial year, and support from the political leadership was identified as crucial to its implementation.
In support of this goal, an advisory team was tasked to guide the ministries efforts by developing specifications for procuring greener products, and determining vendor availability and cost implications for buying such products.
The team assessed the ministry’s procurement of writing and printing paper. They initially found that while efforts to purchase environmentally sustainable paper were already being made, there was still a long way to go before achieving true sustainability. For example, because calls for tender stipulated that paper made from 100 percent agro-based pulp would be the only type accepted, recycled paper manufacturers could not participate in this process. Unhappy with this condition, recycled paper manufacturers proceeded to discuss the potential economic and environmental benefits of buying their product with the ministry.
In an effort to develop specifications for environmental friendly paper, the advisory team initially considered incorporating government-approved Ecomark ecological labels. But this option was dropped after it was discovered that only eight Indian paper manufactures were certified, with four of them located in one state alone. The team then consulted with various national paper manufacturers with the aim of developing universally accepted specifications, but these consultations did not yield many tangible results. During the consultations, it was discovered that there are three distinct types of paper manufacturers using three distinct types of pulp: wood based, agro based or recycled. Each type of manufacturer claimed that their paper was the most environmentally friendly. However, comparing the life cycles of the different types of paper revealed that recycled paper is the most environmentally favourable. It was also found that recycled paper costs the least in the Indian market.
Despite its advantages, printers working with the ministry were concerned that the use of recycled paper would decrease the efficiency of their printing press and result in more wastage, leading to higher printing costs. They were also apprehensive about the durability of paper manufactured from recycled pulp. To assuage their fears it was pointed out that quality and suitability of paper should be assessed not on the type of pulp, but on other quality parameters set by the Bureau of Indian Standards. Following these consultations, the ministry decided to start buying paper made from a minimum of 60 percent recycled pulp, a more sustainable and inclusive policy.
Impact of the advisory project
The Ministry of Railways annually procures about 10,000 metric tons of paper. The shift to recycled pulp could result in electricity savings of up to 31.6 mega units per year and the reduction in greenhouse gas emissions by 9,382 metric tons per year. Moreover, the decision should encourage more manufacturers to produce recycled paper and promote recycling habits among consumers.
Key Lessons learned
The case highlights the importance of embedding ‘green campaigners’ to drive sustainable public procurement within an organization, or establishing a committed pool of sustainability experts in the long run. It also demonstrates how support from top management, such as head of procurement at the Ministry of Railways, can provide the required synergy and motivate sustainability champions to explore and develop appropriate solutions. It is therefore not only important to train procurement professionals in sustainable public procurement processes but to also sensitize other stakeholders, including top management, on role of governments in demanding environmentally friendly products.
The role of governments in driving sustainable public procurement has often been examined in literature. But the role of small and medium enterprises (SMEs) in implementing sustainable public procurement has not been analyzed in much detail. The case illustrates how SMEs, such as paper manufacturers, can utilize their collective bargaining power in democratic environments to influence the political leadership into incorporating sustainability considerations for the greater public good.
In addition, while a growing number of public procurement stakeholders are becoming more and more aware of sustainability, this in itself is not sufficient unless they truly understand the multifaceted nature of sustainable public procurement.
Furthermore, environmental and social criteria need to be integrated at every stage of the procurement process without becoming discriminatory or anti-competitive. A credible labeling scheme can prove to be an easy and efficient solution, as it can act as a reliable benchmark for buyers to make informed purchasing decisions. In this case study, the number of vendors with the Ecomark label was so few that recommending this type of labeling would have negative implications on the competition during the bidding process. But how does one make trade-offs between competitiveness in public procurement and the promotion of eco labeling schemes supporting sustainability? Managing this dilemma for public buyers is indeed a challenging task. One possible way that buyers can solve this could be to notify the market in advance of their intent to buy products with eco labels. This would help provide adequate time for manufacturers to acquire labels if they do not already have one and also avoid criticism that vendors are not given adequate time to prepare for the sustainable procurement process.
Lastly, several studies on the challenges of implementing sustainable public procurement in India have noted the expressed need for clear legislation and guidelines. In this case study, one of the largest public procurers in India, the Ministry of Railways, started buying recycled paper without such legal requirements. The ministry still managed to improve the sustainable procurement of its paper within the available framework. Though this strategy may be sufficient in the short-term, it is important to have unambiguous legislation and guidelines for long-term success. This would provide the much needed legitimacy, direction and framework for sustainable public procurement to be rolled out across India’s ministries and departments in a systematic manner.
Conclusion
This paper presents a first of its kind initiative for implementing a sustainable public procurement policy in India. The impact of this initiative may appear insignificant now, but its outcome could be considerable as more and more products incorporate sustainability considerations and consumers – big and small – get more motivated to buy green products and services.
