How to Procure a Green Economy — PtboCanada

Guest column by David Billedeau, Senior Director of Natural Resources, Environment and Sustainability at the Canadian Chamber of Commerce and Nicholas Palaschuk, Economic Policy Researcher at the Canadian Chamber of Commerce.

The Canadian government is rightly focused on reaching net zero by 2050. However, Ottawa still resists implementing procurement policies to support a green economy.

The federal government is the largest single buyer in the country. According to the Organization for Economic Co-operation and Development (OECD), procurement of goods and services is estimated to account for nearly 33 percent of all federal spending and 13.3 percent of national GDP. With nearly $22 billion in procurement spending each year, the federal government is perfectly positioned to integrate environmental sustainability considerations into procurement decision-making processes and drive progress toward a net-zero economy.

In order to reach net zero, it is time for all levels of government to get serious about green procurement.

The federal government can deepen demand for green goods and services that validate low-carbon innovations and increase their use across Canada. This not only incentivizes industrial low-carbon investment, but also promotes emissions reductions, promotes the commercialization of Canadian-made goods/services, improves the global competitiveness of Canadian companies, and stimulates the creation of clean and sustainable jobs.

With over 56 governments around the world implementing green procurement policies as a tool of strategic innovation to support the transition to low-carbon manufacturing, it’s puzzling why Canada is lagging behind.

Demands for greening the procurement process are by no means new to Ottawa. In 1994, the federal government received the first mandate to develop a government-wide approach to green procurement. Given the more explicit obligations of the 2006 Green Procurement Directive, it seems that the federal government is not entirely indifferent to the idea of ​​including environmental considerations in procurement spending. While recent procurement efforts, including the Greening Government Strategy 2017, are helping to clarify how procurement policies can be leveraged to achieve net-zero commitments (e.g. buildings, fleet electrification, clean power), these efforts are staggered and show little skill in meaningfully engaging with new industries (e.g. small and medium-sized enterprises, aka SMEs) and community stakeholders (e.g. indigenous communities).

Canada needs to overhaul its nearly 30-year-old procurement system.

A recent Hewlett-Packard report from 2022 shows that the current federal procurement system does not adequately integrate sustainability into assessment processes and gives limited consideration to key environmental considerations – let alone the total cost of ownership over the life cycle of goods or services.

The principle of getting the best value for taxpayers’ money is being translated into a national system that uses cost-based ratings as the main guide for decision-making. This policy approach continues to pose significant obstacles to Canada’s net-zero commitments, as it overlooks key sustainability criteria related to product lifecycles and does little to reward those who drive innovation.

While incorporating environmental considerations and deepening industry and community involvement in procurement policy is no small measure, there are steps Canada can take.

First, aligning green procurement standards at federal, provincial, territorial, and local levels of government will enable companies to align organizational spending with sustainability values. With most public infrastructure located at the sub-national level, we believe there should be increased focus on coordinating green public procurement processes and metrics at all levels of government. Creating shared processes and understandings will foster national cohesion and reduce the confusion that comes from companies navigating a sophisticated regulatory environment. The Canadian Collaboration for Sustainable Procurement Network created a guide to engage local government officials and drive green procurement practices in community initiatives. Using such efforts as a launch pad to scale up statewide and down to the federal level will enable companies to be more willing and proactive in pursuing green innovation.

Second, Canada should develop a national industrial decarbonization strategy. With 20 percent of Canada’s exports coming from the oil and gas industry, a strategic and industry-led approach to cross-sector decarbonization is needed. Canada’s current approach of using broad policy levers (e.g. carbon pricing), while important, cannot drive the growth of new green industries at the scale needed to meet national net-zero commitments. While notable effort has gone into forming the Economic Strategy Tables and Industry Strategy Council, ongoing one-time investments are thinly spread across a handful of industries. Similar to the national strategy developed by the UK Government, building on Canada’s competitive advantage, will help build consensus on specific targets, processes and systems to manage and monitor the integration of sustainability into public procurement. More importantly, it will help clarify how Canadian industry can decarbonize in line with the net-zero commitments while building a competitive advantage without pushing emissions abroad.

Finally, the inclusion of total cost of ownership (TCO) as a procurement criterion will help establish a link between “best value” and the growth of the low-carbon economy. Defined as the practice of capturing all associated costs incurred by the buyer when purchasing from outside suppliers, integrating TCO would directly address an ongoing challenge in Canadian sourcing that prioritizes near-term savings at the expense of green innovation. Focused on core purchasing processes such as supplier selection, contract negotiation and performance management, the use of TCO is well-suited to a SME-dominated business landscape – it helps to identify hidden costs during the acquisition, operation and disposal of goods/services. This, in turn, will reduce the risk of low-carbon innovation and drive decarbonization through green business competition.

By doing this, the government can begin to create the kind of market signals that will incentivize green innovation and help Canadian companies scale to break into low-carbon markets and have credibility in global supply chains.

While Canada’s current approach to procurement should be troubling, it underscores the breadth of potential opportunities that can be realized through meaningfully integrating sustainability into the business

public procurement. We believe that Ottawa, as a leader in greening procurement, will have a knock-on effect across the economy.

If Canada is to have any chance of achieving its net-zero ambitions, we need a renewed focus on green procurement that creates inclusive, results-based partnerships between the public and private sectors.

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