Public Procurement: A Powerful Tool for Shaping Markets and Advancing EU Policies
Public procurement accounts for approximately 14% of the Union Europea’s GDP, making it one of the most potent tools for the EU block to shape markets and promote policy objectives. However, a recent evaluation by the European Commission confirms what many governments and businesses have long suspected: under the current framework, public spending still lacks simplicity, strategy, and eco-friendliness.
In over 75% of cases, public contracts do not include environmental criteria. Consequently, public spending is poorly aligned with the EU’s industrial and climate goals.
EU Leadership’s Focus on Public Procurement Reform
Ursula von der Leyen, President of the European Commission, has prioritized public procurement reform as a central element in the EU’s new strategic agenda, linking it to the Industrial Acceleration Act and the goal of creating “Made in Europe” markets for clean technologies.
In her recent speech on the state of the Union, she emphasized the need to simultaneously push for European production and decarbonization, rather than viewing them as conflicting objectives. Stéphane Séjourné, Executive Vice-President of the European Commission, highlights public procurement’s potential as a tool to ensure competitiveness, economic resilience, and security.
Ensuring Sustainability in Public Procurement
To foster genuine competitiveness and significant climate leadership, sustainability must be an essential requirement in public tenders, not an optional add-on. Otherwise, companies building clean steel plants or producing low-carbon cement will remain at a disadvantage compared to cheaper, more polluting competitors.
These heavy industries are crucial for Europe’s competitiveness and job creation, adhering to European strategies by decarbonizing supply chains, investing in innovation, and creating local skilled jobs. However, they need stable incentives that reward decarbonization and foster reliable markets for clean products.
Current Legal Framework Challenges
Although many public entities strive to integrate ecological criteria into their procurement processes, the existing legal framework remains too fragmented and complex to facilitate standardized strategic public procurement aligned with climate goals.
This leaves environmentally conscious businesses facing unstable demand and unclear expectations. Public procurement should be a strategic instrument rewarding good performance, not merely regulatory compliance. However, outdated habits and excessive administrative caution still hinder innovation and benefit more polluting competitors.
Declining Competitiveness in EU Public Procurement
Moreover, EU public procurement processes are becoming less competitive, especially in smaller tenders. The European Court of Auditors found that the proportion of single-bidder contracts rose from 24% in 2011 to 42% in 2021, while the recent Commission evaluation shows that large contracts still attract many competitors.
Simplification is needed, not to lower requirements but to make green public procurement easier and more coherent.
Learning from Other Economies
During Joe Biden’s presidency, the United States passed the Inflation Reduction Act, using public spending to promote clean manufacturing and local resilience. In the United Kingdom, a new public procurement law incorporates “social value” and climate criteria into public tenders, creating clearer incentives for innovation and sustainability.
These examples demonstrate how public procurement can create “pilot markets” for clean materials, a central goal of the Industrial Acceleration Act.
EU’s Path Forward
With proper implementation, public procurement reforms can unlock more competitive, coherent, and resilient public spending without increasing budgets.
- Award contracts based on genuine quality-price ratios, making green public procurement the default option, signaling to markets that quality, life-cycle costs, and overall social benefit matter more than the lowest initial offer.
- Establish common environmental criteria and robust standards for the entire single market, ensuring that both buyers and suppliers adhere to the same rules, facilitating process execution, and fostering fairer competition.
- Harmonize requirements in key sectors to reduce complexity for public buyers and provide businesses with the certainty needed for planning and investment.
Some countries have already demonstrated possibilities. Lithuania increased eco-friendly public procurement from 5% to over 90% of contract value in just three years, combining clear criteria with training and supervision mechanisms. Portugal introduced binding environmental standards in priority sectors, while Ireland uses carbon targets for more eco-friendly and high-performing public building procurement.
Benefits of Sustainable Public Procurement
The EU already possesses tools to improve. Implementing them can generate benefits beyond fostering green industrial innovation.
Air pollution costs Europe €600 billion annually (approximately $696 billion). According to consultancy Carbone 4, aligning public procurement with sustainability can reduce annual CO2 emissions by 34 million metric tons, mobilize €86 billion for green industries, and create 384,000 high-quality jobs.
The same dynamics apply at the local level: in the French city of Dinan, adding ecological and social criteria to a public cleaning services contract reduced costs by 20%, decreased water consumption, and created jobs for unemployed residents.
Public Procurement: A Strategic Advantage
In a time of rising demands and limited public budgets, strategic public procurement can bolster business activity, cut emissions, safeguard public health, and promote economic growth simultaneously.
Why not change the rules to make it standard practice?
Authors
Signatories:
Paolo Campanella and Gijs Termeer
Experts:
- Liesbeth Casier, Sustainable Public Procurement and Infrastructure Area, International Institute for Sustainable Development
- Joren Verschaeve, Coordinator of the Low-Carbon Cement and Concrete Alliance
- Christophe Deboffe, Neo-Eco, Circular Economy Consultancy
