McKinsey study shows: Public procurement and investments hold enormous potential for climate protection
With annual expenditures for procurement amounting to a total of 260 billion euro federal, Länder and local authorities command a tremendous market potential. 50 billion euro out of the total sum are directly relevant for the "green" markets of the future. This is the result of a study carried out by the consultants McKinsey & Company Inc. and presented by Federal Environment Minister Sigmar Gabriel in Berlin today. He said: "Federal, Länder and local authorities should conclude a procurement and investment pact and agree to prioritise environmental aspects even more in their procurement procedures. Because climate-friendly investments not only save money, they also generate economic growth and employment."
The Federal Environment Ministry had commissioned McKinsey to carry out a study on “Identifying the potential of public procurement to contribute to an ecological industrial policy and climate protection”. This study is the first to investigate on a worldwide level how climate friendly procurement can contribute to cutting costs and opening up new markets for eco-friendly products.
Public authorities invest around 51 billion euro annually in environmentally oriented markets of the future. The largest single items are transport routes, the construction of new buildings, the refurbishment of existing ones and energy procurement. Of this, 32 billion euro (60%) are borne by local authorities, 6 billion euro by Länder authorities and 13 billion euro by federal authorities.
Public authorities are an important customer and potential driver of investments in many spheres. To give just some examples: federal, Länder and local authorities are responsible for 41 percent of all investments with regard to supply and disposal. In the segments "Information technologies and electrical appliances" and "Construction of new buildings, refurbishment of existing buildings" their share also amounts to a significant 10 percent and 6 percent respectively. If ecological criteria were prioritised to a greater extent in procurement this would propel innovations supporting an ecological industrial policy. In many cases cost cutting and alleviating environmental burdens are possible at acceptable costs. To give just one example from the transport sector: In Germany there are almost 38,000 buses and coaches used on scheduled services. Every year 3000 new vehicles are procured. Thus the market share of the public sector as a customer goes well beyond 50 percent. The fuel consumption of a hybrid bus is around 30 percent lower than that of a conventional bus. Over the life cycle of a bus the savings for a hybrid bus as compared to a conventional bus amount to around 120,000 euro per bus (fuel savings 150,000 euro, additional costs when procuring appropriate quantities 30,000 euro).
In 2006 the public sector was responsible for around 4 percent of all GHG emissions in Germany (42.8 megatonnes of carbon dioxide equivalent), buildings alone accounted for 23.5 megatonnes of this total. In this context schools are the largest single emitter (6.7 megatonnes). If the measures proposed in the study are implemented rigorously 12 megatonnes of GHG emissions could be saved by 2020. The Federal Minister pointed out: "In view of the McKinsey study we want to start deliberations with the Länder and local authorities as well as on the federal level on how to implement the proposed measures in a joint effort. We need a procurement and investment pact for the local, Länder and federal authorities to join forces and proceed together. I think it would be a good idea to make at least part of the public procurement budgets, e.g. 25 percent, on all levels of administration subject to the consideration of ambitious environmental and social criteria. The German Advisory Council on Global Change and the Council for Sustainable Development have also expressed similar views."
He added: "Such a procurement and investment pact could facilitate the breakthrough of new environmentally friendly technologies, thus safeguarding economic growth and employment. Particularly in times of economic crisis the public sector has to be aware of its responsibility for the environment and employment."