Strategy to implement Sustainable Public Procurement in India

                                                                                   - Sanjay Kumar 

(Published in Encore Volume 9, BCSD India, Issue 1, June - August 2012)

Over recent years, India has witnessed unprecedented economic growth. In business as usual scenario, it cannot be sustained without compromising needs of future generations. Earlier supply side policy initiatives to promote low carbon economy have failed and therefore focus has now shifted on demand side policy instrument such as sustainable public procurement (SPP) that aims at integrating environmental and social consideration in purchasing process. It is an affirmative action in selection and acquisition of products and services that most effectively minimize negative environmental impacts over their life cycle of manufacturing, transportation, use and recycling or disposal. The philosophy behind this instrument is that market would respond to demand of sustainable products and services by consumers.

SPP calls for a paradigm shift in procurement n pose risks; thus strategic planning supported by top management00 tonnes of carbon dioxide emissions a policy and influences the businesses and public at large and thus demonstrates Government's commitment towards a sustainable future. The importance of SPP is known since the Rio Earth Summit in 1992. However, none took it seriously in India because any debate on sustainability issue is seen here as an attempt by developed nations to throttle developmental aspiration of her people without realizing that SPP is not in conflict with poverty alleviation, economic growth, health, education and environmental protection. The SPP encourages public authority to drive sustainable innovation, particularly for those technology and services that contribute to accelerate resource and energy efficiency. With public spending in India about 30 % of GDP, public authorities can make a smart use of their procurement budgets to shift India growth on low carbon path by integrating environmental consideration in purchasing decision.

What is the right strategy? There is not one and Government has to adopt multipronged strategies to adopt SPP. First, we need to identify obstacles at both procurers and vendors end that hinder procurement of environmentally friendly products and services. The critical issues with the public authorities are limited political motivation, absence of legal framework and guidelines, lack of knowledge to avoid legal and technical problems during the procurement process (inclusion, evaluation and monitoring), no knowledge & experiences of using tools such as LCC and LCA (CO₂ emission assessment), dependency on experts to define specifications and to mitigate potential financial risks due to perceived high costs of greener products. Vendors want that SPP is implemented in a transparent way with sufficient time to react, Intellectual Property Rights (IPR) is respected and products quality is guaranteed by third party certification.

India has options to choose from various approaches such as thematic approach (addressing issue such as energy, water, waste, health etc.), product based approach (selecting products having high environmental impact) or mainstreaming approach (designing criteria based on resource efficiency, exclusions, biodegradability, and recyclability), eco-labeling, price preference etc. But she has to decide which approach is the best for her needs to balance growth and sustainability.

In preceding months, two noteworthy events related to SPP have happened in India. First, introduction of Public Procurement Bill-2012 in Parliament stating that environmental criteria of a product may be adopted as one of the criteria for evaluation of tender. Second, a committee nominated by MoEF has recommended introducing a legislation to encourage shift in demand towards greener products and services. Although, legal framework is necessary first step, merely enacting a law would not automatically lead to sustainable procurement unless we closely look at how it enables stakeholders to effectively collaborate and build sustainability across the entire supply chain. Incorporation of concept like eco-label, LCC and LCA in procurement may in fact make decision making more difficult for procurers. The lack of clarification and potential difficulty in using some of the concept run the risk that procurement process can be easily challenged by bidders and may even discourage public authority from including environmental aspects in the first place. Therefore, implementing SPP would be an interesting case in strategic decision making to watch.

Implementation of SPP in practice would need a change in mindset amongst stakeholders besides new guidelines. What is now urgently needed is a shift towards an understanding that spending public money is an opportunity to directly foster sustainable development and innovation. This calls for huge capacity building of all stakeholders. Equipping public sector buyers with the know-how on how to include sustainability requirements into their purchasing processes would be a key to successful implementation of SPP.    

Another pertinent issue is do we really need to wait to initiate capacity building measures till legislation and guidelines come into force? Cannot we start this action in parallel? Capacity building for SPP is a huge task. You not only need to focus on procurers, users and vendors but need to go till the last man, who is framing tender documents & specifications. The next question is do we have capacity to impart meaningful training to stakeholders? It would be a good idea to arrange training of trainers by competent people and not settle for a shade less than the best. Again, who would steer this mammoth project? Whether MoEF or MoF or empowered high-level body or individual public authority? This issue needs to be sorted out by dialogue at the earliest so that the process is at least substantially completed before the act comes into force.

The vendors’ support being key, public authorities should engage, encourage and motivate them to change their mindset. They should focus on collaborating with them rather than conventional top-down approach of monitoring them. Engaging suppliers on sustainability and not solely focusing on monitoring would be a key aspect of SPP strategy. One of the innovative ways to engage vendors could be early engagement in the pre-procurement phase of public tender. The vendors can register with public authorities under pre-procurement market engagement and public authorities give advance notice to these suppliers about tenders for greener products and services to be invited in future.    

The draft Public Procurement Bill-2012 has just been introduced. The parliamentary procedures would take at least a year. Formulation of guidelines based on this act would take further time.  Now that one bill is in Parliament clearly giving mandate for taking environmental criteria in evaluation of bid, do we need another bill as envisaged by MoEF nominated committee? It is high time we put our act together and synergize our efforts. We can avoid lot of complexity and make it simple for procurers and contracting authorities. Their job now is anyway not less burden!

It is fine to implement SPP program and policies in India based on experiences of other countries notably EU and Japan (Thanks to Bill Gates for making cut & paste so easy!) but long-term success would need own grounding & research. It is alarming to see that there is not a single research paper on this subject by Indian researchers in any journal worth its name! We need to focus and encourage research on this subject and take research finding into account as we progress. Setting up a Center of Excellence would not be a bad idea.

Last but not the least, procurers’ engagement is crucial to success of SPP program. Merely prefixing ‘sustainable’ before procurement does take away sheen from procurers. It is basically a procurement job with few environmental criteria. Their engagement is lacking till date but we should not proceed with formation of guidelines without taking them on board. They are the ringleaders of procurement process and they know what works and what not. It is their job to bring vendors on sustainability board. It is unimaginable to have a SPP program without procurers themselves owning it.   Remember, it is they, who would undergo punishment of 15 days to 5 years, as proposed in new bill, so let them design and own SPP program and never ever try to force on them.

This is one of a kind opportunity to stir products and services innovation in market and lead India on sustainability path. It is hoped Government would not be found wanting!