Winds of Change: Greening World Bank Procurement

Someone rightly said – The only thing that is constant is change! Last month World Bank released new framework for Procurement in World Bank (WB) Investment Project Finance that throws some light on things to expect in future. It was an outcome of the review process, which WB began in 2012, to re-establish its relevance in this capricious world. Such review is not new to the Bank, as its procurement policy has been constantly evolving to maximize outcome of its lending to borrower countries. In fact Bank, through such reviews, strives to reinforce its leadership in setting international standards and principles that have served as models and inputs to procurement reforms worldwide.

The first thing that struck me, when I went through proposed new framework, was its vision statement – “Procurement in Bank Operations supports clients to achieve value for money with integrity in delivering sustainable development”. What is remarkable about this statement is the phrase value for money in delivering sustainable development. Never before had the Bank spelt sustainable development as its objective in so many words.  But how does the Bank aim to achieve sustainable development? The document states that its “value proposition would emphasize sustainable development centered on achieving value for money, supporting its clients in pursuing sustainable procurement goals, integration, and exercising adaptability and leadership”. The fact that Bank intends to achieve value for money in delivering sustainable development through sustainable procurement is a big thumbs-up for proponents of this policy. In fact, going through this document, I discovered that the word “sustainable” appears 21 times in this 23-page document!

In its current avatar, the Bank uses Safeguard Policies to access potential environmental and social risks, but has no specific guidelines on how to incorporate such risks arising out of projects into the procurement process so as to mitigate and/or eliminate project-related risks. The idea, that procurement acts as a gatekeeper and that the choice of products and services has significant bearing on environmental and social risks arising out of a project, did not find merit in Bank’s procurement policies till yesterday. Further in context of value for money, paragraph 2.52 of the guidelines is very relevant; it says that other factors including safety and environmental benefits can be used for determining the lowest evaluated bid. Many people take recourse to this paragraph and argue that Bank’s guidelines allow evaluation of bid based on life cycle costing in the procurement of goods and equipment. I don’t suspect the earnestness of their argument but the fact remains that this flexibility has been rarely used in Bank’s project to achieve sustainability goals. With such a background, the Bank’s move to embrace sustainable public procurement (SPP) in delivering sustainable objective is a lot to cheer about.

Public procurement was identified at the World Summit on Sustainable Development 2002 as an important tool to stimulate consumption and production of environmentally friendly goods and services. Thereafter, initiatives on GPP and SPP have flourished in many European and North American countries. European Union and UNEP have been very active in promoting SPP through awareness raising, toolkit development and capacity-building activities. UNEP also launched Sustainable Public Procurement Initiative (SPPI) in 2012 during Rio+20 to support adoption of SPP policy in developing & poor nations and enhance performance of SPP programs and policies in countries, which had already adopted it. But this concept is mostly non-existent in most of the developing and under-developed countries. Though it is not hard to find reasons for such inaction on part of these countries, it was difficult to find reason for such inaction on Bank’s part towards its procurement policy.

As a staunch supporter of sustainable procurement policy, I have been wondering all these years why the Bank was tight-lipped on sustainable procurement, which has proved very effective in achieving sustainability goals. After all, the Bank has huge portfolio of investment, comprising about $ 20.6 billion in IBRD lending and $ 14.8 billion in IDA support in 2012. As per an estimate, about 95% of this lending is typically spent on procurement of goods, works and services.  This represents a huge sum of money and the Bank can leverage this lending power to transform a country’s procurement system. By spending even a small percentage of this sum on buying greener products, services and works, the Bank and in turn its borrowers can shift consumption and production in respective countries from brown products and services to greener products and services and create market for sustainable products & services. Though this would be a sizable achievement, there are other benefits too.

The Bank has considerable leverage in many poor countries, where IDA lending forms sizeable chunk of government expenditure in those countries. By integrating sustainability in Bank’s funded procurement process, Bank can influence and guide mainstreaming of sustainability agenda in those countries. The net outcome of adoption of sustainable procurement practices would be felt across entire policy domain. Besides helping countries to reduce environmental impact of project, it would also help domestic industries develop capability to innovate and produce competitive greener products. It can also be used as a strategic tool to help development on sustainable path and for poor nations to achieve their Millennium Development Goals (MDGs). Attaining MDGs requires production and consumption of more products/services to meet the basic needs and aspirations of the poorest, without impairing environment. The Sustainable Procurement policy provides an opportunity to attain MDGs by delivering more products/services in a cleaner way while using fewer resources and less energy.

All these sound good. But we have to wait and watch till 2015 when the final policy will be unveiled. I don’t think Bank is going to go back on commitment made in current review document on sustainability. I expect final policy document to give clear mandate to stakeholders to integrate environmental and social concerns in procurement process of projects financed by the Bank. The adoption of sustainability as one of the principles of procurement by Bank will change the way stakeholders currently perceive sustainable procurement. The sheer volumes of spent and reach of Bank in developing and poor countries would synergize the current efforts of UNEP in promoting SPP policy in developing nations. So come 2015, we are in for some interesting times as far as sustainable procurement is concerned.