Master
Integrating sustainability standards into public procurement process : a comparative analysis between Germany and Viet nam
LAMBERT, Siti Rubiah
Abstract
Integrating sustainability standards into public procurement process - a comparative analysis between Germany and Viet Nam
Reference
LAMBERT, Siti Rubiah. Integrating sustainability standards into public procurement process : a comparative analysis between Germany and Viet nam. Master : Univ. Genève, 2020
Available at: http://archive-ouverte.unige.ch/unige:132372
Disclaimer: layout of this document may differ from the published version.
1 / 1 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Integrating Sustainability Standards into Public Procurement Process A comparative analysis between Germany and Viet Nam
Submitted by LAMBERT, Siti Rubiah
Under the supervision of: Professor Reinhard Weissinger University of Geneva / ISO Geneva School of Social Sciences
Second Reader: Santiago FernandezdeCordoba Senior Economist/ Trade Expert United Nations Conference on Trade and Development (UNCTAD)
I certify that the work presented here is, to the best of my knowledge and belief, original and the result of my own investigations, except as acknowledged, and has not been submitted, either in part or whole, for a degree at this or any other University.
7 January 2020
1 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
TABLE OF CONTENTS
INTRODUCTION ...... 3 1. SUSTAINABILITY STANDARDS ...... 6
1.1 DEFINITIONS ...... 8 1.1.1 Standard ...... 9 1.2 SUSTAINABILITY STANDARDS TERMINOLOGY ...... 9 1.3 SUSTAINABILITY STANDARDS AND ITS RELATIONSHIP WITH THE SUSTAINABLE DEVELOPMENT GOALS (SDGS) 13 2. SUSTAINABLE PUBLIC PROCUREMENT (SPP) ...... 17 2.1. SUSTAINABLE DEVELOPMENT GOALS AND SPP ...... 18 2.2. INTERNATIONAL SUSTAINABLE PUBLIC PROCUREMENT FRAMEWORKS ...... 19 2.2.1 The Organisation for Economic Co-operation and Development (OECD) Recommendation of the Council on Public Procurement ...... 20 2.2.2. World Trade Organization Government Procurement Agreement - WTO GPA ...... 21 2.2.3. The World Bank’s Sustainable Procurement Guidance ...... 22 2.2.4. European Union (EU) Green Public Procurement (GPP) ...... 24 2.2.5. UN Environment 10YFP Sustainable Public Procurement Programme ...... 26 2.2.6. International Organization of Standardization (ISO) 20400:2017 Sustainable Procurement Guideline ...... 28 2.3. BARRIERS OF SPP ...... 31 2.4. SUSTAINABILITY STANDARDS AS AN INSTRUMENT TO DRIVE EFFECTIVENESS IN SPP ...... 33 3. COMPARATIVE ANALYSIS BETWEEN GERMANY AND VIET NAM ...... 34 3.1 THE MATURITY OF SPP IN GERMANY ...... 37 ...... 37 3.1.1 Political Willingness ...... 39 3.1.2 Adoption of a global strategy ...... 41 3.1.3 Knowledge of SPP ...... 42 3.1.4 Legal Framework ...... 44 3.1.5 Monitoring ...... 46 3.1.6 Market Readiness ...... 47 3.2 THE MATURITY OF SPP IN VIET NAM ...... 52 ...... 52 3.2.1 Political Willingness ...... 53 3.2.2 Adoption of a global strategy ...... 56 3.2.3 Knowledge of SPP ...... 57 3.2.4 Legal Framework ...... 58 3.2.5 Monitoring ...... 60 3.2.6 Market Readiness ...... 61 4. EVALUATION OF THE COMPARATIVE ANALYSIS ...... 62 5. CONCLUSIONS ...... 73 6. BIBLIOGRAPHY ...... 74 7. ANNEXURES ...... 78
2 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Introduction
“If the world continues to consume as many resources as it currently does, we would need two planets. This shows that we urgently need to change course. Public Procurement is an important tool. In Germany alone, the public sector buys products and services valued around 300 billion euros, if we align these public investments with sustainability criteria in Germany and around the world, we will take a major step forward towards a more social and ecological world. The state is a role model in the area of public procurement and has the ability to develop new markets through its buyer power and to help innovative products achieve breakthroughs. In Germany, we can do much more and, as the Federal Government, we can lead the way. We are already well positioned in certain areas such as timber and energy-efficient devices; in other areas, however, there is still room for improvement, for example as regards the demand for recycled materials.”
Rita Schwarzelühr-Sutter1, Parliamentary State Secretary, German Federal Environment Ministry.
The share of public procurement represents on average, 12% of the Gross Domestic Product (GDP) in OECD countries (OECD, 2017). In Europe alone, it was estimated that almost €1,8 trillion is spent on public procurement on an annual basis, which is about 14% of European Union (EU) GDP (EU, 2016). The estimation for developing countries seem to count even higher: up to 30% of the GDP (UNEP, 2012a). The magnitude of such spending and the unsustainable pattern of consumption and production is aggravating poverty, environmental deterioration and imbalances can be considered as one of the most cited reasons why Sustainable Public Procurement (SPP) is needed. A 1% saving in procurement expenditure might represent EUR43 billion per year in OECD countries (OECD, 2017). Essentially, governments can use public procurement as a political vehicle to drive broader policy objectives such as ensuring that public procurement laws, processes and practices are aligned to the Sustainable Development Goals (SDGs).
The main objective of this paper is particularly focused on the dynamics of sustainability standards as an instrument that could potentially drive effectiveness when integrated in SPP policy. This would address the perceived burden directed towards sustainability standards which includes the confusion around the multiplicity of standards that currently exist, an additional bureaucratic red tape to the whole procurement process, higher costs and the lack of goods in compliance to sustainability standards that may hinder SPP activities.
In order to do so, a comparative analysis on the maturity of SPP between two countries- Germany and Viet Nam will provide a broader perspective of the countries’ public procurement state-of-the-art, thus discussing the maturity of SPP in each of these countries. The intention of understanding the maturity of SPP is mainly to elucidate how it affects the integration of sustainability standards in the procurement process, namely the promotion for the use of sustainability standards. Thus, addressing the research question: How does the maturity of SPP affect the integration of sustainability standards in public procurement process?
1 Statement of Rita Schwarzelühr-Sutter at the 2018 High-Level Political Forum on Sustainable Development “Transformation towards sustainable and resilient societies”. 3 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Case Selection Germany and Viet Nam have been selected as a way to illustrate a balanced representation between a developed and developing nation-state, Germany being part of the EU confirms their strong alliance with the EU GPP framework whereas, Viet Nam is part of the Association of Southeast Asian Nations (ASEAN) which has not established any intergovernmental approaches for SPP. It is equally important to note that both countries have implemented SPP initiatives one way or another, which makes the maturity of SPP analysis feasible.
Note: While a study based on only two countries may not be representative to conclude with good practices applicable for all countries, it will however provide a preliminary approach to the integration of sustainability standards in public procurement process through the understanding of the maturity of SPP in a given country.
Methodology This study is predominantly based on literature reviews. The findings are entirely obtained by analysing existing documents, including legal documents, scientific journals, and project reports relating to public procurement and Sustainable Development Goals (SDGs).
Online tools were also used to provide certain data: • the International Trade Centre (ITC) ‘Sustainability Map’ have also been utilised to provide market trends and VSS landscape; • the German ‘Sustainability Compass’ to have a clearer perspective on how sustainability standards are integrated into the public procurement system. Unfortunately, the most part of the website is not available in English and the same for the Vietnamese procurement portal. • Opentender.eu provides a snapshot of product and services sector that are significant to the public procurement in a given European country • eCertis is an online database listing the eligibility criteria and documentary evidence needed in each European Economic Area (EEA) country for companies to take part in public procurement.
Limitations Published articles in relation to sustainable public procurement in developing countries (even in developed countries) tend to be limited given this relatively new concept. Thus, for the case of Viet Nam, most of the references tend to be reports published by project implementing organizations, if not donor organizations. This may question the impartiality of the findings. Obtaining raw data on the uptake of sustainability standards or the use of sustainability criteria from sustainability standards have also been a challenge given the monitoring implications of SPP which has not been profound up until today, not even in a developed country like Germany which will be discussed in the case study.
Structure of the paper The first chapter of this paper will be focused on the definition and complexities of sustainability standards i.e. terminology clarity and market dynamics, especially in relation to the growing influence of Voluntary Sustainability standards (VSS).
This will then set a clearer understanding as to how these standards would work in public policy settings, which will be discussed in the second chapter, along with the definition and complexities of the whole concept around Sustainable Public Procurement (SPP).
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As part of the public policy component, the different international sustainable public procurement initiatives/ standards such as the Organisation for Economic Co-operation and Development (OECD) Recommendation of the Council of Public Procurement, the World Bank Sustainable Procurement Guidance, the World Trade Organization (WTO) Government Procurement Agreement (GPA), the EU Green Public Procurement (GPP), the United Nations Environment Programme (UNEP) 10 Year Framework of Programmes (YFP) SPP Programme and the ISO 20400:2017 Sustainable Procurement Guidance will also be discussed in this section to showcase the different frameworks that governments can adopt. Essentially the EU GPP will be referenced against Germany’s Public Procurement system and the UNEP 10YFP SPP will be referenced against Viet Nam’s system.
The third chapter is the analytical component. The maturity of SPP analysis will be adapted from the criteria identified by UNEP (2012a) on the ‘Maturity levels for Sustainable Public Procurement’ with 6 key elements: i) Political Willingness; ii) Adoption of a global strategy; iii) knowledge of SPP; iv) Legal Framework; v) Monitoring and; vi) Market readiness. Having these elements as criteria will enable a more structured comparative analysis between the two countries.
While the initial idea was to conduct a rating score between ‘high’, ‘medium’ and ‘low’ levels of SPP maturity based on the criteria above, there was, however no measurable indicators available. A request was then sent to the project manager of this publication in UNEP but was told that there was none developed at this point in time.
Comparative Analysis: Comparative Evaluation:
Maturity of SPP based on the UNEP Usages of Sustainability Standards in (2012a) 6 identified criteria procurement process
From the analysis, the evaluation will then be discussed in the fourth chapter, linking the comparative analysis on the maturity of SPP in each country to its integration dynamics of sustainability standards or sustainability criteria in the procurement processes. This chapter will discuss the promotion of sustainability standards for SPP through two key factors: political and socio-economic as they can be perceived as the potential pull factor towards internalising the use of sustainability standards in public procurement.
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1. Sustainability Standards
While different stakeholders would define ‘sustainability’ differently, the most commonly used definition would be that sustainability is effectively the goal of ‘Sustainable Development’, in which the 1987 Report of the World Commission on Environment and Development: Our Common Future (commonly referred to as the Brundtland Report), has defined it as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” (Cassen, 1987).
In 2015, all the United Nations Member States adopted the 2030 Agenda for Sustainable Development, which has provided a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart, the 17 Sustainable Development Goals (SDGs) are an urgent call for action by all countries – developed and developing – in a global partnership framework (more details about the SDGs and SPP in Chapter 2.1).
Sustainability encompasses three dimensions (economic, environmental and social) and these dimensions are typically interdependent and can be mutually reinforcing. The environment sets the natural limits to the social system, which is made up of human institutions and individuals. The economy, as port of the social system, includes the consumption of resources, employment, meeting the needs of populations, income, and the distribution and use of products.
Sustainability standards provide criteria that should guarantee the products purchased do not hurt the environment and the people that make them. These standards are considered market-based tools that are meant to transform production, global supply chains and consumption patterns to be more sustainable.
Sustainability standards have also been referred to as ‘trade-related sustainability assurance schemes’ by the European Commission, as a communication vehicle to recognize its support for sustainable development through their purchasing decisions (EC, 2009). In addition, the 2030 Agenda for Sustainable Development recognizes international trade as an engine for economic growth and an important means to achieve the SDGs (Bellmann & Tipping, 2015) and that sustainability standards offer explicit strategies to link trade with better practices (ITC, 2019).
Proliferation of Sustainability Standards in the commodities market Currently, there are more than 400 of such standards across the globe and they are no longer a novelty serving the niche market (ITC, 2019). Over the past decade and more, they have increasingly found their way into the mainstream markets- see Figure 1 on the proliferation of standards over time, especially in 2007. For some producers and suppliers, adopting a set of recognized principles for sustainable practices represents a steppingstone to implementing best practices within supply chains. For others, compliance with a given standard may offer a strategy for managing reputational risks or even supply risks (ITC, 2019). The Sustainability Map2 currently covers 241 sustainability standards applicable to more than 80 sectors and 180 countries, which contains public and private standards as well as domestic and transnational programmes.
2 The Sustainability Map database is an inventory of VSS, including a wide range of programs and organizations in the field of sustainable production and trade - www.sustainabilitymap.org 6 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Figure 1: UNFSS (2018) – Proliferation of sustainability standards over time
As of today, these standards have certified at least 17.9 million hectares of eight agricultural commodities3 that were analysed: bananas, cocoa, coffee, oil palm, soybeans, sugarcane and tea and the they are continuing to grow. The certified area of the 8 selected crops grew 59.4% in 2013-2016 and 18% in 2016-2017 (ibid.).
Figure 2: Extracted from ITC (2019) – Selected products certified by sustainability standards (minimum possible), 2008-2017.
3 These commodities are not limited to public procurement purchases. This illustration serves to prove the mainstreaming of certified agricultural commodities in the global market. 7 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
When translating the certified area to the share of the standards used, sustainability standards have expanded by double digits in 2013-2017. Better Cotton Initiative (BCI) and Round Table on Responsible Soy were reported with the most growth (ibid.).
Table 1: Extracted from ITC (2019)– Selected sustainability standards growth indicators4.
1.1 Definitions From a very simplistic view, one can derive to the understanding of sustainability standard as a standard that incorporates social and environmental requirements to reduce the negative impacts of global economic activity on the society and the environment. Besides the term sustainability standard, label, ecolabel or certification are also widely used. The World Bank for example, differentiates the labels between Eco-Label and Social-Label as the former focuses on the environment and the latter focuses on social standard.
Figure 3: World Bank (2019) – Examples of eco/social labels
Moreover, experts also distinguish between ‘standards’ and ‘schemes’. The German Sustainability Compass5 for example, defines ‘standards’ as the document in which the requirements are specified and a ‘scheme’ additionally comprises the underlying assurance system.
4 These standards are not limited to public procurement uptake. This illustration serves to prove the mainstreaming of sustainability standards in the global market. 5 An online procurement tool: https://www.kompass-nachhaltigkeit.de 8 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The concept of “scheme” is broader than that of “standard”. While standards are incorporated in schemes as requirements or test methods, schemes define i.e. the frequency of audits, which areas are audited, who audits and who evaluates the audit results before issuing a certificate.
That said, the definition of a Conformity Assessment (CA) scheme on the other hand is “Set of rules and procedures that describes the objects of conformity assessment, identifies the specified requirements and provides the methodology for performing conformity assessment.” (ISO/IEC 17000, 2004) The CA scheme defines i) the object being assessed; ii) the requirements or criteria applied in the assessment and; iii) the process or procedures that are followed in the assessment. A scheme is generally owned by a scheme owner, which can be a Conformity Assessment Body (CAB), a governmental agency, an industry or trade association, an international organization etc.
While it may be hard to pin down the best term to use, this paper will instead use ‘sustainability standards’ to represent all that is involved under the entire standard system, unless mentioned otherwise. This is to avoid confusion, including the complexities that will be discussed in this section. It is important to understand that the basis of this discussion is ‘sustainability’ in terms of standard compliance and at this juncture, regardless of which term is used, the main purpose of sustainability standards is that it incorporates the social, environmental and economic value of sustainable development.
1.1.1 Standard Standards are documents that provide requirements, specifications, guidelines or characteristics used to ensure that materials, products, processes and services are consistently fit for their purposes6. The World Trade Organization (WTO) definition of a standard is illustrated in the Agreement on Technical Barriers to Trade (TBT) as a ‘Document approved by a recognized body, that provides, for common and repeated use, rules, guidelines or characteristics for products or related processes and production methods, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method’.7
1.2 Sustainability Standards Terminology The term ‘sustainability standards’ does not seem to have a single, widely recognized definition. This is not surprising, given the great variety of NGO initiatives, industry programs, and corporate codes of conduct that are commonly subsumed under the label ‘VSS’. From an analytical perspective, this lack of clarity is highly problematic because it leads to a concept stretching and blurring the lines between sometimes very different empirical phenomena (UNFSS, 2018). The general feature of sustainability standards in a nutshell promotes the objectives of sustainable development by including social and environmental considerations in the underlying economic focus on business (UNFSS, 2013).
6 ISO, Standards, available at: http://www.iso.org/iso/home/standards.htm, retrieved: 19 December 2019. 7 WTO, TBT Annex 1, available at: https://www.wto.org/english/docs_e/legal_e/17-tbt_e.htm#annexI retrieved: 19 December 2019. 9 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Thus, for the purpose of this study, ‘sustainability standards could be defined as the following working definition: Standards are typically voluntary instruments that address products, processes, systems, services etc. and are typically developed by consensus. The legal status of standards as voluntary instruments can change e.g. through incorporation into public technical regulations or private contracts. Sustainability standards are standards whose explicit objectives are the promotion of one or more of the three pillars of sustainability.’ This definition combines the WTO definition of standards being ‘not mandatory’ and the generic definition of standards development by consensus. It also incorporates its potential use as a legal instrument where sustainability criteria are concerned.
Voluntary Sustainability standards (VSS) on the other hand has been defined explicitly as ‘standards that specifies requirements that producers, traders, manufacturers, retailers or service providers may be asked to meet, relating to a wide range of sustainability metrics, including respect for basic human rights, workers’ health and safety, environmental impacts, community relations, land-use planning and others’ (UNFSS, 2013). However, this definition also applies in most of the other cases in sustainability standards.
The distinction between VSS and sustainability standards is therefore; VSS may be developed by individual businesses, business associations, environmental or social non-governmental organizations or governments, or through multi-stakeholder initiatives that attempt to balance the interests of a range of interested parties and stakeholders (UNFSS, 2013), while there are also other types of sustainability standards that may be developed by public bodies i.e. the German Blue Angel and also in reference to other international Standards Developing Organizations (SDOs) such as International Organization of Standardization (ISO), standards are namely developed through national members.
The International Social and Environmental Accreditation and Labelling (ISEAL) Alliance8 grouped these VSS and termed them as ‘standard systems’ to describe the collective of organizations responsible for the activities involved in the implementation of a sustainability standard, including standard-setting, capacity building, assurance, labelling and monitoring and evaluation (UNFSS, 2018; ISEAL Credibility Principles, 2013).
Figure 4: UNFSS (2018) – Voluntary standards as a new regulatory form, adapted from Bartley (2010).
8 The ISEAL Alliance – a London based umbrella organization of leading VSS programs.
10 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Based on this, four major attributes have been identified as a VSS system (UNFSS, 2018): i) they are discernible standard-setting and implementation system; ii) they are led by private actors (NGOs and/or firms); iii) they are not corporate codes of conducts (i.e. firm-level programmes) and iv) they use information (typically certification/ labelling) to create market incentives for sustainable production.
VSS are thus, conceptualized as a new regulatory form, situated in the intersection of market-based instruments, regulation by information, and voluntary private governance (UNFSS, 2018) – refer to figure 4.
While there are many other types of Standards Development Organizations (SDOs) such as the International Electrotechnical Commission (IEC), International Telecommunication Union (ITU), Codex Alimentarius Commission, ASTM International as well as the regional standards organizations (a very exhaustive list), the International Organization of Standardization (ISO) for example, develops standards based on three key principles, i) a response to requests from the market; ii) based on global expert opinion who are part of the technical committee and; iii) developed based on a consensus. Although these principles are no different to that of VSS, ISO standards characteristics also include members from the National Standard Bodies (NSBs) - 164 countries (member based on subscription with fees9) and the main organs of the Organization includes a General Assembly, a Council, a Technical Management Board, Technical Committees and a Central Secretariat.
Based on the national standard body’s membership subscription (subscriber/ correspondent/ full member), members have the rights to i) participate in developing international standards; ii) participate in developing policy; iii) sell ISO standards and publications, using copyright and the ISO name and logo and; iv) participate in governing ISO (ISO, 2015). By the end of 2018, 120 NSBs were full members, 39 NSBs were correspondent members and 3 NSBs were subscriber members (ISO Annual Report, 2018). As an ISO member, the NSB are the ones organizing consultations among stakeholders in their respective country to develop a national position on ISO standards.
Table 2: Extracted from ISO (2015).
9 Refer to ISO Membership manual for calculation of fees based on Full member, Correspondent member or Subscriber member - https://www.iso.org/files/live/sites/isoorg/files/archive/pdf/en/iso_membership_manual.pdf
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As an example (not exclusive), the ISO Guide 82:2014 - Guidelines for addressing sustainability in standards on the other hand mentioned three types of sustainability standards: i) process standards are standards specifying measurements and definitions can directly or indirectly govern or affect physical or social processes, which can themselves have an impact on sustainability; ii) management system standards can indirectly alter the sustainability impact of the processes governed by the management system. Management systems can, for example, directly alter the activities of workers, the additional stakeholders involved, and the systematic strategies for identifying and managing sustainability issues and; iii) product standards include standards related to services, can have many different sustainability issues.
The ISO sustainability standards typically include ISO 26000 - Guidance on Social Responsibility, ISO 14001/4/44 – Environmental management systems, ISO 5006 – Energy management systems and ISO 20400 – Sustainable procurement guidelines.
In essence, although the standards development and implementation procedure between the ISO type standards and VSS may not be similar, by definition all sustainability standards are designed to contribute to sustainable development even though they aim to do so in different ways. Sustainability standards, gathered by D’Hollander and Marx (2014) are generally, market-based private regulation (D’Hollander and Marx, 2014; Büthe and Mattli, 2011), trade-related sustainability assurance schemes (D’Hollander and Marx, 2014; EC, 2009), sustainable supply chain governance systems (D’Hollander and Marx, 2014; Vermeulen et al., 2011), non-state market-driven governance systems (D’Hollander and Marx, 2014; Cashore et al., 2004), and non-statutory, private, voluntary, or Corporate Social Responsibility (CSR) standards (D’Hollander and Marx, 2014; Bendell et Al., 2011).
However, there also exist the fine lines between public and private sustainability standards from a market perspective. Public standards may be voluntary, while private standards may be made mandatory. In the same vein, India’s ‘Private’ Sustainability Standard (PSS) National Platform differentiated the term Voluntary from Private, claiming that private standards differ from the public ones and by using ‘private’ and ‘voluntary’ interchangeably may create confusion for the fact that public authorities have also created and adopted standards that are considered ‘voluntary’ (Pande, 2017).
Much of the current terminology characterized by the dichotomy between public or private regulation, or the distinction between voluntary and mandatory has become less clear-cut as governments have indeed adopted certain private standards to become de facto mandatory, especially for access to important markets.
12 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Figure 5: An illustration to summarize sustainability standards terminology
1.3 Sustainability standards and its relationship with the Sustainable Development Goals (SDGs) Given that Sustainable Public Procurement (SPP) has typically been oriented towards its interactions with some of the SDGs, instruments such as sustainability standards can be considered in the overall policy context as they are technically shaped by the SDGs.
Against this background, sustainability standards have been considered as one of the most prominent transnational supply chain tools that were able to enhance the connection between developing countries to the more developed markets. As a result, sustainability standards have become an important tool for some bilateral development agencies to stimulate the uptake of these standards by supporting the efforts of producers in developing countries to attain higher environmental and social deliberations. Equivalently, sustainability standards, described in UNFSS (2016), are schemes that are able to bring greater transparency on how sustainably operated supply chains are managed, and that they provide market incentives to altering production processes towards more sustainable ones (UNFSS, 2016).
As sustainability standards expand their role in international trade, their integration in public policy is becoming more evident (D’Hollander and Marx, 2014). • They enable governments to transcend the scope of their national regulatory capacities. • These policy objectives can be reached without having to commit additional costs and resources to reforming the national regulatory framework and setting up necessary verification mechanisms. • It allows governments to bring new social and environmental criteria into the economy without forcing them on the private sector. While these standards are voluntary and are subject of soft law, there are various ways in which governments can support their adoption, gradually making them semi-voluntary or mandatory in time (ibid.).
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Against this background, much of the discussion on sustainability standards were invested around its deliberation towards the national’s motivation to achieve the Sustainable Development Goals (SDGs). At this point in time, such data is not yet available as it is fairly new and limited in scope where the long-term impacts are hard to quantify. However, a mapping exercise on sustainability standards to the SDG indicators is currently underway, a study led by the European University Institute (EUI), International Trade Centre (ITC) and the United Nations Conference on Trade and Development (UNCTAD), with VSS data gathered through the utilization of ITC’s Standards Map (sustainabilitymap.org).
For the purpose of this paper however, there are studies that have shown the general impacts of sustainability standards on the economic, social and environmental aspects of Sustainable Development.
1. Economic Impacts Sustainability standards are potential contributors to SDGs 1 (Poverty Reduction), 8 (sustainable economic growth and employment), 9 (sustainable industrialization), and 10 (reduction in inequality) as they are tied to its implementation incumbency related to capacity building projects that may be able to help increase farmers’ productivity (COSA, 2013). This will lead to higher income for farmers, more stable relationships with their buyers, and greater access to resources (UNFSS, 2016; COSA, 2013).
Overdevest and Rickenback (2006) identified three possible benefits, i) sustainability standards as a market-based mechanism have the essentials in providing market advantages (in terms of price premiums, market access or increased consumer demand); ii) a teaming mechanism that enables the transfer of knowledge that might have an influence in innovation and better practices; and iii) an assurance mechanism or signal of hard-to-observe or predict organizational characteristics and practices, where Marx et al. (2015) described as a certification device to signal compliance with sustainability standards and hence protect inter alia their reputation (Marx et al., 2015; Overdevest and Rickenback, 2006).
However, the economic benefits of sustainability standards are still debatable when it comes to the profit distribution along the global supply chains. Although increased productivity may bring larger yields and increased overall revenue, it is however not evident to assume that the net income of farmers relatively increased as well. Some studies found that Fairtrade farmers receive higher prices, have greater access to credit (and) perceive their economic improvement as being more stable (UNFSS, 2016; IOB, 2014), yet there are also other studies that shows the economic gains from sustainable value chains do not necessarily accrue to the actors at the end of the value chain (i.e. farmers and producers). The Cocoa Barometer found that the value add for farmers in certified cocoa supply chains is only around 6.6%, while processors and retailers garner 35.2% and 44.2%, respectively (UNFSS, 2016; Barometer Consortium, 2015).
Much of this issue is still being discussed in international dialogues on sustainability standards, such that the need for ‘transparency’ became one of the most widely addressed issues.
2. Environmental Impacts There are some sustainability standards that have a more promising contribution to the environment, such as the Marine Stewardship Council (MSC), Rainforest Alliance, Forest Stewardship Council
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(FSC), Union of Ethical BioTrade (UEBT) etc. These certifications stipulate practices such as limiting the use of agro-chemicals, policies on deforestation, soil conservation, waste, and water management, in order to control negative environmental externalities arising from value chains. However, Marx et al. (2015) claimed that the impact of forest certification is not evident on environmental conditions. Their paper concluded that the process of FSC certification generates improvements with respect to the value managed forests for biodiversity but the incentives were not sufficient to attract the majority of the producers to seek certification, more so in tropical countries where the costs of improving forest management to meet FSC guidelines are significantly greater than any market benefits they receive (Marx et al., 2015).
However, studies up till today have mostly been focused on the uptake of these standards, which may be relevant to the impacts on the local environmental conditions. For this reason, a thematic study on Standards and Biodiversity conducted by the International Institute of sustainability standards (IISD, 2017) gave a more vivid perspective on the performance of 14 selected major international standards initiatives operating in the banana, cocoa, coffee, cotton, palm oil, soy, sugar, tea and cereals sectors based on the Biodiversity Impact Indicators for Commodity Production (BIIP) and found that an average of 63% coverage managed to signal a general alignment between sustainability standards criteria and the biodiversity objectives. Habitat conservation-related criteria and water use criteria carry the highest overall average coverage scores, while climate-specific criteria scores among the lowest (IISD, 2017). Overall, the standards reviewed focus on the protection of environmental systems rather than the measurement and monitoring or restoration of such systems.
Figure 6: IISD (2017) - Sustainability standards criteria information obtained from ITC Standards Map.
While sustainability standards offer several pathways to support biodiversity, these pathways require specific enforcement and governance mechanisms such that the growing influence for sustainability standards in the global landscape should operate through policy making, stakeholder engagement and capacity building activities.
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3. Social Impacts The 2014 State of Sustainability Report found that, on the average of sixteen analysed sustainability standards schemes, 51% of them covered the social criteria, i.e. human rights, labour rights, and gender (UNFSS, 2016). Most studies have focused on certification impacts on the local social relations. Tsanga et. al. (2014) for example analysed the role of forest certification, FSC, in Cameroon in terms of relationship improvements between logging companies and communities and found that FSC certification did play a key role in the emergence of multi-stakeholder platforms which are meant to function as a ‘social exchange’ to strengthen local networks. This in turn leads to reduced conflicting relations by reinforcing the social requirements of the local forest laws (Marx et al., 2015; Tsanga et. al., 2014). Similarly, ITC & EUI (2016) have also supported the role of stakeholders in sustainability standards governance and found that producers and producer associations tend to exude the highest level of engagement.
Figure 7: ITC & EUI (2016) - ITC and EUI calculations based on ITC Standards Map.
In addition to the high level of engagement, producers are also frequently involved in the management of standards and in standard-setting and review (ITC & EUI, 2016).
Marx et al. (2015) have also identified several studies that seem to suggest that forest certification holds a significant potential to integrate smallholders in the transnational commodity chains while empowering them as well. However, such positive outcome is not an indicative measure as other studies have also been able to highlight the challenges faced by smallholders in the context of certification process. In other cases, the lack of transparency in the distribution of benefits seem to have a more positive impact for the downstream economic actors in the value chain, such as brands/retailers, but less so for the farmers and producers.
Such imbalance of power dynamics have also been the reason why public authorities have to address these non-state, market-driven sustainability standards issue as much of the drawback could also have a significant impact on the entire economy.
The fact that these sustainability standards schemes can interact with the public sector in many ways, it is also an indication that government actions are often instrumental in stimulating and promoting the adoption of sustainability standards. While some developing countries have recognized the potential of sustainability standards to increase market access for exported products and services, developed markets whose economies have become reliant of imports of sustainably produced products
16 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
have identified sustainability standards as a useful instrument to reduce negative and environmental externalities (UNFSS, 2016).
2. Sustainable Public Procurement (SPP)
On the outset, Sustainable Procurement (SP) is defined as a process whereby organizations meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life cycle basis in terms of generating benefits not only to the organization, but also to society and the economy, whilst minimising damage to the environment10 (Defra, 2006).
SP according to the International Organization of Standardization (ISO)’s Sustainable Procurement Guidance (ISO 20400:2017) is a powerful instrument when an organization considers sustainability requirements and its own contribution to sustainable development. SP has the most positive environmental, social and economic impacts possible across the entire life cycle and strives to minimize adverse impacts with respect to the following principles; accountability, transparency, ethical behaviour, full and fair opportunity, respect for stakeholder interests, respect for the rule of law and international norms of behaviour, respect for human rights, innovative solutions, focus on needs, integration (in practice), analysis of all costs and continual improvement (ISO 20400, 2017).
The four primary goals of SP illustrated by Berry (2011) suggests that; i) it minimizes any negative impacts of goods, works or services across their life cycle and through supply chain for example impacts on the disposal of hazardous materials; ii) it minimizes demand for resources; iii) ensures that fair contract prices and terms are applied and respected that meet minimum ethical, human rights and employment standards; and iv) promotes diversity and equality throughout the supply chain (Berry, 2011).
While SP is mostly implemented by the private sector, SPP is typically associated with public policy with a more strategic approach that is able to justify taxpayers what is meant by value for money. According to the United Nations Environment Programme (UNEP) 10-Year Framework of Programmes on Sustainable Consumption and Production Patterns (10YFP), the benefits of SPP can be manifold and often mutually reinforcing (Roos, 2012).
Potential economic benefits include, i) financial savings, where there will be reduced total cost for purchase, use, maintenance and disposal by using ‘whole-life costing’ (Roos, 2012). Academic studies have attempted to link cost savings in public spending generated by procurement to concrete economic improvements such as GDP growth, gains in employment and increased in consumption; for example, the savings in procurement could be reallocated to other policy areas (OECD, 2019); ii) SPP can drive markets to more innovative solutions such as shifting to cleaner technologies as an avenue to improve competitiveness of suppliers nationally and internationally which could eventually lower overall costs due to economies of scale (Roos, 2012). SPP can enable the effective use of economic resources by supporting wealth creation throughout the economy (OECD, 2019); and iii) increased access to
10 Updated by the Multi-stakeholder Advisory Committee of the 10YFP SPP Programme from: Procuring the Future – the report of the UK Sustainable Procurement Task Force, June 2006. Definition adopted by the Marrakech Task Force on Sustainable Public Procurement. The footnote to the definition reads: Sustainable Procurement should consider the environmental, social and economic consequences of: Design; non-renewable material use; manufacture and production methods; logistics; service delivery; use; operation; maintenance; reuse; recycling options; disposal; and suppliers' capabilities to address these consequences throughout the supply chain. 17 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
markets can potentially promote small-medium companies globally and diversify the local suppliers (Roos, 2012). SPP can stimulate companies to be more competitive, productive and innovative, and in turn companies can provide employment and income for citizens (OECD, 2019).
Potential environmental benefits include, i) the contribution to mitigating environmental challenges such as responding to climate change, soil degradation, biodiversity loss, access to fresh water etc (Roos, 2012); ii) the contribution to achieving binding targets such as greenhouse gas emissions, energy efficiency and; ii) ameliorate local environment such as promoting non-toxic cleaning products, create healthier conditions for school children or by implementing low emission public transportation to improve local air quality (Roos, 2012). Through the correct use of Natural capital (individual assets like energy, water and land resources), this can directly have an input to the economic production by offering several benefits to the economic production when the environment is effectively managed, and it can also contribute the well-being of the people, for example improvements in the quality of life and health status of individuals can support higher labour market participation, resulting in further well-being and economic gains (OECD, 2019).
Potential social benefits can include, i) improved compliance with social and labor law with provisions of the basic International Labor Organization (ILO) Conventions, ii) improved living conditions by promoting voluntary social standards such as Fair Trade (Roos, 2012). Through SPP, supply chain of business contracted to the government tender have a compliant or responsible “value chain”, thus sub-contractors will also be responsible in the business practices or conduct, such as fair wages and good working conditions (OECD, 2019) and; iii) improved social justice by integrating different communities that tend to be under-represented and also improve gender and ethnic equality (Roos, 2012). Contracting authorities can make deliberate decisions to contract with business that have certain characteristics, such as immigrant-owned businesses, or businesses employing people with disabilities or other groups that are not well represented in the workforce (OECD, 2019).
2.1. Sustainable Development Goals and SPP Sustainable development has emerged as a collective goal for the international community, and the adoption of Sustainable Development Goals (SDGs) through the United Nations (UN) Member-state- led process with civil society participation provides an opportunity to further reinforce the legal status of the sustainable development concept (Kim, 2016).
The 17 Sustainable Development Goals of the United Nations present an integral part of global governance through a non-binding, goal-setting approach that is largely detached from the international legal system. The SDGs mark a historic shift towards one sustainable development agenda after a long history of trying to integrate economic and social development with environmental sustainability. Such goal-setting approach became the driving force of global policy and governance (Biermann, Kanie & Kim, 2017). The SDGs are grounded in international law (Kim, 2016) but they are not legally binding, and the instrument that established them - a UN General Assembly resolution is in no way intended to grant immediate legal force to the goals. Accordingly, governments are under no legal obligation to formally transfer the goals into their national legal systems (Biermann, Kanie & Kim, 2017). This approach underlines bottom-up, non-confrontational, country-driven, and stakeholder-oriented that has been cited as a key potential success factor to which states can formalize their commitments, strengthen related global governance arrangements, translate the global ambitions into national contexts, integrate sectoral policies and maintain flexibility in governance mechanisms
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(Biermann, Kanie & Kim, 2017). The SDGs are not an objective in themselves but rather offers long- term perspectives that leave much freedom for governments to determine their own ambition in attaining the goals.
It is worth noting that the three pillars of sustainability - environment, social and economy, established the triple baseline of external concerns to be fulfilled, which means that procurers need to look beyond the conventional criteria of price, quality and service when making purchasing decisions. Today, public agencies are increasingly using their purchasing power as a positive instrument to promote Sustainable Development (UNEP, 2016a). SPP is becoming increasingly important as a consequence of the rise in environmental, social and economic challenges both in developed and developing countries. A government’s main priority in procurement is no longer determined by the cheapest option available. The evaluation of tenders has increasingly taken up the ‘best-value for money’ approach whereby public procurement decisions have been shifted to a multi-criteria specification that incorporates the environmental and social dimensions (Roos, 2012).
Public Procurement Sustainable Development
“Development that meets the Overall process of acquiring needs of the present without goods, works, and services Sustainable compromising the ability of future on behalf of the Public Public generations to meet their own authority. Procurement needs” – Brundtland Report, 1987 Key Principles Three Pillars: Best Value for Money (VfM) Economic Social Acting Fairly Environmental
Figure 8: Adapted from Roos (2012).
2.2. International Sustainable Public Procurement Frameworks As mentioned in the previous section, one form of interaction between governments and sustainability standards can be witnessed in SPP policies. SPP provide governments with a tool to support the adoption of sustainability standards through public contracts, and in doing so, governments gain influence in shaping the institutional development of third-party/private certification schemes (D’Hollander and Marx, 2014).
However, given the barriers of SPP discussed in Section 2.3, this section aims to provide some of the international SPP frameworks that governments can adopt. Some of these initiatives have direct connection with the use of sustainability standards while others do not. As a quick summary based on the study of these frameworks, it seems that the only point of distinction that differs SPP from the regular public procurement practice is the integration of the three dimensions of sustainable
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development – environment, social and economy and the need for continual improvement via monitoring mechanisms. In essence, this section analyses:
• The main content of some of the influential Public Procurement Frameworks • If there are direct linkages with the use of sustainability standards • Application of the EU GPP in Germany’s case study and UNEP 10YFP in Viet Nam’s case study
2.2.1 The Organisation for Economic Co-operation and Development (OECD) Recommendation of the Council on Public Procurement In reference to the Organisation for Economic Co-operation and Development (OECD) principles of enhancing the integrity of public procurement, most of the part reflects the fundamentals of sustainability. The principles fall under four generic categories, i) transparency; ii) good management; iii) prevention of misconduct, compliance and monitoring; and iv) accountability and control (OECD, 2009). Refer to Annex 1 for the 10 OECD Principles of Enhancing the integrity of public procurement.
The OECD Recommendation on Public Procurement is the overarching OECD guiding principle that promotes the strategic and holistic use of public procurement. The 2015 Recommendation which is being discussed here, builds upon the foundational principles of the “2008 OECD Recommendations on Enhancing in Public Procurement” by expanding them to reflect the critical role of public procurement to achieve efficiency and advancing policy objectives (OECD, 2017). Essentially, the guidance aims to provide a reference for modernising procurement systems that can be applied across all levels of the government and state-owned enterprises. It addresses the entire procurement cycle while integrating public procurement with other elements of strategic governance such as budgeting, financial management and additional forms of services delivery (ibid.).
Although the recommendations may not be directly linked to the concept of sustainable development, the underlying motive recommends the adherents of transparency, integrity, access, balanced, stakeholder participation, efficiency, e-procurement, capacity, evaluation, risk management, accountability and integration.
The OECD Recommendation of the Council on Public Procurement based on the 2008 principles provide the basis of a policy framework for enhancing integrity in the entire public procurement cycle. While there are no set processes to comply with, the OECD developed a “Checklist” to help procurement officials implement the 12 principles.
In essence, the implementation of the OECD Public Procurement guidance come in the form of an online Toolbox11. The Toolbox provides country cases, best practices and assessment tools such as the Methodology for Assessing Procurement Systems (MAPS) to evaluate the quality and effectiveness of public procurement systems based on 4 pillars, i) Legislative, Regulatory and Policy Framework; ii) Institutional Framework and Management Capacity; iii) Procurement Operations and Market Practices and; iv) Accountability, Integrity and Transparency of the Public Procurement System. Each of these pillars includes indicators, sub-indicators and assessment criteria.
11 OECD Public Procurement Online Toolbox is publicly accessible at https://www.oecd.org/governance/procurement/toolbox/ 20 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
2.2.2. World Trade Organization Government Procurement Agreement - WTO GPA The public procurement approach of the World Trade Organization Government Procurement Agreement (WTO GPA) considers the component on global trade from a plurilateral perspective. Within the global trade terminology, one can assume that trade agreements between countries have a significant role in promoting the collective 2030 Sustainable Development Goals even though the provisions defined under the WTO GPA is not particularly focused on sustainability aspect of Public Procurement.
The fundamental aim of the WTO GPA is to mutually open government procurement markets among its parties. This paper thus, outlines only the key principles for public procurement in which Casier (2019) have highlighted to be the most important paragraphs that affect the implementation of sustainable procurement.
However, in regard to socioeconomic procurement, the non-discrimination provision (refer to Annex 2) remains contested as it prohibits origin-based discrimination. This means that, by favouring local suppliers in the tender procedure will be considered as a breach. However, preferential treatment of certain groups other than the country of origin should be encouraged, i.e. women-owned businesses. In this case, procurement does not have to be used implicitly in favour of local suppliers. This goes in line with the WTO GPA endorsement of “green” procurement specified in Art. X, even though the WTO GPA does not particularly associate their procurement activities with being green and/or sustainable (Casier, 2019).
Analysed by Casier (2019), three key paragraphs in the provision of technical specifications (refer to Annex 3) highlights sustainable procurement: i) under the description in 2(a), this provision encourages the use of performance-based or functional specifications, which is by definition a useful way to make procurement more sustainable; ii) similarly, 2(b) describes the encouragement of using specifications based on international standards. This means that the integrity of meeting what is internationally perceived as good ethics is highly favourable; iii) last but not least, point 6 specifically highlights the promotion of conservation of natural resources or protect the environment.
The General Principles on Conduct of Procurement (refer to Annex 4) is important for sustainable procurement given that procurers are not technically sustainability experts, but through diverse tendering methods they can engage with suppliers and learn more about the best technologies and practices for their needs. In essence, these engagements should be open, transparent and accessible to all interested suppliers. These principles are intended to protect suppliers from unfair procurement practices and help guarantee better value for money for the taxpayers (Casier, 2019).
Essentially, the WTO GPA promises to promote market opening, good governance, transparency and integrity, with a broader goal of helping developing countries implement the same principles by providing special treatment that allows transitional measures to support their development priorities12. Although Sustainable Development in this framework is not the most prominent factor, there may be some linkages between the benefits of the WTO GPA in supporting economic development, such as the facilitation for domestic producers to gain access in foreign markets, apart from increasing transparency of domestic procurement markets by making better use of public resources and,
12 https://www.wto.org/english/thewto_e/20y_e/gpa_brochure2015_e.pdf 21 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
encouraging foreign direct investment and transfer of new technology from abroad. Moreover, developing countries will get the aid for transitional measures, such as phasing-in of market access commitments (WTO, 2015).
2.2.3. The World Bank’s Sustainable Procurement Guidance Different from the OECD’s recommendation of public procurement approach and the WTO GPA, the World Bank’s Sustainable Public Procurement guidance provides a practical approach on how to include sustainability factors into the procurement processes, as well as providing incentives for vendors to offer more sustainable products and services (World Bank, 2019)13. The guidance is non- mandatory and serves mainly as an illustration of good practice. It is important to note however, that the guidance is meant for World Bank staff and Borrowers responsible for implementing Bank Investment Project Financing (IPF).
Just like other organizations, the World Bank’s SPP practices follow 7 core procurement principles – Value for Money, Economy, Integrity, Fit-for-Purpose, Efficiency, Transparency and Fairness.
Essentially, the Bank aims to help clients get better development results as it gives the World Bank the space and capacity to significantly increase its support to help countries develop their own procurement systems (World Bank, 2015).
The World Bank has identified 6 key stages in procurement process and the way to integrate sustainability considerations.
Figure 9: World Bank (2019) 6 key stages of sustainable procurement process14
13 The World Bank Sustainable Procurement Guidance referenced in this paper is taken from the Second edition which was published in April 2019. The first edition was published in November 2016. 14 Further details on each of the stages of SPP process can be found here: http://pubdocs.worldbank.org/en/788731479395390605/Guidance-on-Sustainable-Procurement.pdf
22 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The vision for procurement financed by the Bank through the IPF operations is: “Procurement in Investment Project Financing (IPF) supports Borrowers to achieve value for money (VfM) with integrity in delivering sustainable development.”
However, as a stated fact, “sustainability” remains loosely defined (Yukins & Williams-Elegbe, 2018) though the Bank’s reflection of it allows sustainability goals in sustainable procurement requirements be based on evidence (i.e., with supporting data), and the use of existing social-label criteria, eco-label criteria or information collected from stakeholders (World Bank, 2019).
Unlike the OECD Council on Public Procurement Recommendations, the World Bank’s SPP guidance has a specific criterion on sustainability standards which falls under the requirements stage. According to the Bank, sustainability criteria are generally based on verifiable standards and technical competencies that are ought to identify specific certification or verification of an industry, environmental or social standard, code of management system standard (World Bank, 2019). Technical capability is the key determining factor in the ability to meet social and environmental requirements. In essence, sustainability criteria must be directly linked to the performance of the contract, i.e. in the bidder pre-qualification phase certifications or equivalent verification of industry specific environmental and social standards. This type of independent certification can therefore be an important verification of the necessary technical and professional qualification of a supplier (ibid.).
Standard certifications and labels, according to the Bank, are valuable tools for implementing sustainable procurement. When labels are applied appropriately, they can be useful in preparing conformance specifications and aware criteria. Borrowers may use criteria from labels to draft conformance certifications and verify compliance (ibid.).
Reference Description Eco-Label Index A global directory of Eco-Labels available worldwide. Global Eco-Labelling The GEN is a non-profit association of third-party, environmental Network (GEN) performance recognition, certification and labelling organizations founded to improve, promote and develop the “Eco-Labelling” of products and services. EU GPP Criteria The EU GPP criteria are developed to facilitate the inclusion of green requirements in public tender documents. International Trade Provides information on standards, codes of conduct and audit Centre (ITC) Standards protocols addressing sustainability hotspots in global supply chains. Map International Finance Includes environmental and social performance standards and define Corporation (IFC)/ World client’s responsibilities for managing their environmental and social Bank Performance risks. Standards
Table 2: (World Bank, 2019) World Bank’s identified examples of portals of labels and certification schemes available worldwide at the time of publishing (refer to Annex 5 for the World Banks’s non-exhaustive list of labels and certification schemes).
23 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
2.2.4. European Union (EU) Green Public Procurement (GPP) Government expenditure on works, good and services represents around 14% of EU GDP, accounting for roughly EUR 1,8 trillion annually (EU, 2016). Sustainable Development is recognized as an overarching goal in the EU, since its inclusion in the EU Treaty Principles in 1997 (Roos, 2012). On 26 February 2014, the Council of the European Union and the European Parliament adopted two directives, i) Directive 2014/24/EU on Public Procurement and ii) Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors, all of which aimed at simplifying public procurement procedures and making them more flexible. These directives superseded Directive 2004/18/EC on the classical public sector and Directive 2004/17/EC on utilities15. It is equally important to note that both the 2004 Directives and the proposed reforms take into account the EU’s obligations as a party to the WTO plurilateral Agreement on GPA. By applying the Directives to economic operators of third countries that are signatory to the GPA, EU contracting authorities fulfil their obligations under the GPA (Semple, 2012).
Both the WTO GPA and the EU directives contain binding obligations16 to publish information about the tender opportunities open to companies of their trading partners. The GPA also contains obligations to report statistics about the procurements taking place to ensure access to opportunity (ibid. page 8).
The EU Green Public Procurement (GPP) on the other hand reinforces the directives with a ‘best practice’ approach following the principle of ‘best value for money’ through transparent and fair competitive process in line with the rules of the EU single market with the obligation to include environmental and social parameters, and ‘acting fairly’ which ensures transparency and equal opportunities for bidders to compete for the tender contract (Roos, 2012).
The GPP strategy has also been enhanced with the establishment of the common GPP product criteria. Based on the EU (2016a) 3rd Edition of ‘Buying green’ handbook, criteria for the 21 product groups are listed in the table below:
EU GPP Product Groups 1. Cleaning products and services 11. Indoor lighting 2. Copying and graphic paper 12. Office IT equipment 3. Combined heat and power (CHP) 13. Road Design, Construction and Maintenance 4. Office Buildings 14. Sanitary tapware 5. Electrical and electronic equipment in the 15. Street lighting and traffic signals health care sector 16. Textiles 6. Electricity 17. Toilets and urinals 7. Food and catering services 18. Transport 8. Furniture 19. Wall Panels 9. Gardening products and services 20. Wastewater infrastructure 10. Imaging equipment 21. Water-based heaters
Table 3: EU (2016a) – EU GPP Product Groups
15 https://ec.europa.eu/environment/gpp/eu_public_directives_en.htm 16 These obligations are in addition to the transparency requirements of local laws and oftentimes based on the UNCITRAL Model Law on Public Procurement 24 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The EU GPP criteria include two ‘levels’ for each sector covered (ibid. page 15):
• The core criteria are designed to allow easy application of GPP, focus on the key area(s) of environmental performance of a product or service, and aim to keep administrative costs for companies to a minimum. • The comprehensive criteria take into account more aspects of higher levels of environmental performance and are for use by authorities that want to go further in supporting environmental and innovation goals.
Where sustainability standards and labels are concerned, EU GPP recognizes these labels as a tool to help purchasers identify sustainable products and services. The environmental labels have been broken down into 4 categories:
• Multi-criteria labels are the most common type of environmental label and also the most commonly used in GPP. They are mostly based on scientific information about the environmental impact of a product or service information about the environmental impact of a product or service throughout its life cycle, from extraction of the raw materials, through production and distribution the use phase and final disposal. Examples of this type of label include the EU Ecolabel, the Nordic Swan and the Blue Angel.
• Single issue labels are based on one or more pass/fail criteria linked to specific issue eg. EU Organic label or the Energy Star label. • Sector-specific labels include forestry certification schemes operated by organizations such as Forest Stewardship Council (FSC) or Programme for the Endorsement of Forest Certification (PEFC).
• Graded product labels grade products and services according to the environmental performance on the issue. Examples include EU Energy Label.
The EU GPP criteria are designed to be inserted directly into tender documents and include information on verification methods. Echoing to the ways of using labels in EU GPP, it is also necessary to look at the labels as a confirmation that, i) they only concern criteria which are linked to the subject matter of the contract; ii) they are based on objectively verifiable and non-discriminatory criteria; iii) they are established using an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organizations, may participate; iv) they are accessible to all interested parties; and v) they are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence17 (EU, 2016).
In reference to the new EU directive for public procurement that was adopted in 2014, contracting authorities are able to directly require sustainability certification as proof, where else as D’Hollander and Marx (2014) stated that in the majority of the legal frameworks for public procurement, choosing a trademark or private label would imply discrimination and unfair treatment as it excludes uncertified products and services out of their procurement range. The authors have also noted that demanding a
17 Article 43(1) of Directive 2014/24/EU; article 61(1) of Directive 2014/25/EU https://eur-lex.europa.eu/legal- content/EN/TXT/PDF/?uri=CELEX:32014L0024&from=EN 25 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
specific scheme is not possible within the EU framework before, but contracting authorities have a certain degree of flexibility by referring to particular certification schemes as a non-exclusive proof of compliance.
2.2.5. UN Environment 10YFP Sustainable Public Procurement Programme The 10YFP Programme on SPP is a global multi-stakeholder platform that supports the implementation of SPP around the world. Led by the United Nations Environment Programme (UNEP), the programme is also a collaboration with the Korea Environmental Industry and Technology Institute (KEITI) and ICLEI-Local Governments for Sustainability as co-leads. The programme is a global framework that enhances international cooperation to accelerate the shift towards Sustainable Consumption and Production (SCP) in both developed and developing countries. It provides capacity building and technical & financial assistance to developing countries and encourages innovation and cooperation among all countries and stakeholders. The programme’s specific objectives are to: i) build the case for SPP by improving the knowledge of SPP and its effectiveness as a tool to promote sustainable consumption and production as well as to support greener economies and sustainable development; ii) support the implementation of SPP on the ground through increased collaboration and better access to capacity building tools and support through SPP experts (UNEP, 2016a).
The 10FYP SPP Programme’s principles include (UNEP, 2015a):
• Principle 1: SPP follows the essential elements of good public procurement – transparent, fair, non-discriminatory, competitive, accountable, efficient use of public funds, and verifiable, while accounting the three pillars of sustainable development – social, environmental and economic
• Principle 2: SPP implementation needs leadership
• Principle 3: SPP contribute to broad policy goals, such as sustainable natural resource management, resource efficiency, sustainable development, sustainable consumption and production. SPP can also drive markets for sustainable innovative solutions, encouraging early engagement with the market and create green and decent jobs
• Principle 4: SPP engages in multi-stakeholder approach
• Principle 5: SPP implementation is based on sound organizational management principles
• Principle 6: SPP monitors its outcomes and results in order to foster continuous improvements
Through this programme, the SPP Implementation Guidelines (UNEP, 2012), aims to give directions to governments on designing and implementing SPP policies and action plans. The objective is to provide countries a common vision, language and framework for SPP and to guide stakeholders on how to effectively pave the way towards SPP implementation. The guideline is primarily written for government agencies who wish to take a common step wise approach to SPP.
26 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
For the purpose of this study, the focus shall be on the implementation of using Eco-labels. According to UNEP, product standards and eco-labels can, and do, serve as information intended to facilitate SPP decisions. Eco-labels primarily deal with the environmental performance of a product or service. Eco- labels can be helpful in managing the environmental criteria associated with a product or service and can be used to help define specifications or be used directly as a requirement for products (UNEP, 2012b).
There are currently 463 active ecolabels in 199 countries and 25 industry sectors18 available worldwide in the marketplace, representing a great degree of diversity in how they were developed and what issues they address. Some focus on a single environmental attribute (i.e. energy efficiency) and some consider multiple environmental attributes. Some focus on a single phase of the lifecycle (i.e. material sourcing), some attempt to address the full lifecycle of a product. Some focus on environmental attributes and issues, others address social aspects (i.e. labour conditions in facilities where a product has been made). There are also diverse approaches to procedural aspects of standards and eco-labels, such as the process by which the standard was set, how conformity assessment process is designed (that is, the verification/certification/accreditation methods used), and who may apply for and receive the logo (UNEP, 2012b).
Box 1: Extracted from UNEP (2012b) – Types of Eco-labels Types of Eco-labels The International Standards Organisation (ISO) defined the principles and practices which can be used to categorize eco-labels and therefore indicate their usefulness to help assess the environmental performance of products and services in the ISO 14024 standard.
• Type I provide a ‘seal of approval’ where a Type I eco-label programme issues a licence to use their eco-label logo on products or services which have met the programme’s published specifications. • Type II (green claims) marks are self-declaration claims and environmental declarations. These types of eco-labels do not involve independent audits. • Type III are self-declared environment impact data and are given in the form of ‘environmental product declarations’, or ‘report cards’. These summarise quantified data using predetermined parameters and procurers can use them to compare the data to find the best performing product.
Eco-labels can also be described as follows:
A. Public, single-issue labels Single-issue labels are labels that relate to one particular environmental issue like energy use or emission levels. Oftentimes these are run by government agencies, hence are designated as ‘public’. There are two different types of single-issue labels. • The first type is based on one or more pass/fail criteria linked to a specific issue, e.g. energy efficiency. If a product meets those criteria, then it may display the label. Examples of this type of label are the EU organic label or the ‘Energy star’ label for office equipment.
18 Data provided in www.ecolabelindex.com
27 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• The second type of label works by grading products or services according to their environmental performance on the issue in question. Examples of the second type include the EU energy label, which grades household goods according to their energy efficiency, with A++ as the most efficient and G as the least efficient.
Single-issue labels can be very useful if a step-by-step approach to greening procurement is begin followed because they allow for gradual improvement. For example, using energy efficiency standards and the Energy Star eco-label would be a good first step towards a wider green purchasing programme, where they are available. The different grades allow purchasers to decide easily how far they would like to go.
B. Private or Voluntary labels In addition to the major public labels, there are a number of voluntary private labels, run by NGOs, industry groups, or combinations of stakeholders. Examples include forestry certification schemes, such as the FSC (Forest Stewardship Council) or PEFC (Pan European Forest Certification Council) schemes, organic food labels (as accredited by IFOAM), or multiple-criteria labels such as the Swedish label ‘Bra Miljöval.’
C. Social Labels A social label is a broad term relating to the social or socio-economic capacity of the producer/supplier and can cover both fair trade and ethical aspects such as child labour. Social labels are a useful source of information and can help procurers to make more ethical choices. Though not as numerous as ecolabels, however some social labels are beginning to emerge in a number of market sectors, such as “Fairtrade” in coffee. However, it should be noted that there is no common standard applied across social labels and each one will focus more or less on different socio- economic issues. It is therefore left to the procurer to review the standards used in the chosen social label. In many instances, social labels have even less scrutiny applied than eco-labels and as such need thorough research before use. Social labels tend to target the supplier’s performance more than the products’ performance. In other words, they may not relate specifically to a product or service but rather how it is produced, manufactured or distributed. Therefore, social labels and criteria can be challenging to use as specifications.
2.2.6. International Organization of Standardization (ISO) 20400:2017 Sustainable Procurement Guideline Given that this paper has a special focus on standards, it is worth including the ISO 20400 Sustainable Procurement Guidelines as it illustrates a slightly different approach from the other implementing organizations discussed in this section. Also, given ISO’s national membership characteristics, this guideline may also be adopted at national level.
The purpose of ISO guidance standards is to build a global consensus on the definition of key terms used within a professional practice. Like ISO 26000 – Social Responsibility, ISO 20400 sought to achieve common definitions and processes among global organizations. It is important to note that ISO 20400 is prescriptive, rather than performance-based standards. Prescriptive standards are usually oriented around compliance and key threshold.
28 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
According to EcoVadis19, ISO 20400 is not intended for certification, but it may lead to performance assessments. It is relevant to organizations of all sizes, in both the public and private sectors and applies to any purchasing decision and every stakeholder in the procurement process (EcoVadis, 2018)
Similar to the World Bank’s Sustainable Procurement Guidance, ISO 20400 looks at integrating sustainability into the existing process without creating parallel process.
Figure 10: Extracted from ISO 20400:2017 – Overview of a typical procurement process flow and the integration of sustainability into the process.
The purpose of the planning stage is essentially to integrate sustainability considerations at the outset by identifying stakeholders, analysing business needs, analysing the supply market and analysing profitability based on the approach of product lifecycle and product cost data.
Integrating sustainability requirements into the specifications help to define precise criteria reflecting the key sustainability issues and include details of specific technical environmental features, production methods, the use of specific criteria, as well as procedures for verification of compliance.
Selecting suppliers should be on the basis of a pre-agreed scoring methodology that includes principles of sustainability, sustainability practices, life cycle approach and of goods and services lifecycle costs.
Managing contract sustainably means that the order issuance, execution monitoring and supplier payment performance are based on the contractual clauses that includes the agreed sustainability criteria. It is also important that sustainable elements and associated performance targets are communicated and understood by relevant internal stakeholders to ensure that any sustainability commitments made in the contract are fully implemented and compliance are monitored.
Finally, when the contract is being reviewed, it assesses the experience acquired and suppliers’ performance on all relevant criteria including sustainability, capture input from customers then adjust policy based on findings and finally, develop recommendations with a view to continual improvement.
19 EcoVadis is a provider of business sustainability ratings, intelligence and collaborative performance improvement tools for global supply chains. EcoVadis’ sustainability scorecards provide detailed insight into environmental, social and ethical risks across 190 purchasing categories and 150 countries.
29 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
For ease of reference, the promotion of the use of sustainability standards for each framework have been summarised in the table below:
Framework Form Link to Sustainability Promotion of Sustainability Standards OECD Guidance Principles • Not directly linked None Recommendation of the Recommendations to sustainability, Council on Public & Procurement Toolbox however there are Procurement aspects in the principles that indirectly promotes sustainability. • The toolbox promotes best practices and assessment tools such as MAPS.
WTO GPA Plurilateral Trade • Not directly linked None Agreement to sustainability but endorses “Green” procurement that promotes the conservation of natural resources and environmental protection and the support for developing countries for phasing-in of market access commitments.
World Bank Sustainable Guidance for • Yes. • Yes, in the Procurement Guidance “Borrowers” with 6 key • Each stage of the requirements stage stages of the procurement of the procurement procurement process process specifically process. provides ways of integrating • Regards sustainable certification as an considerations important verification of the necessary technical and professional qualification of a supplier.
• Criteria could be used to draft conformance certifications and verify compliance. EU GPP Built from the EU • Yes. • Yes, to draw Directive 2014/24/EU • Provides criteria for technical and Directive each of the 21 specifications and 2014/25/EU as a binding Product Groups check compliance with the
30 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
obligation for EU requirements by member states accepting the label as means of proof with the technical specifications UNEP 10YFP SPP Multi-stakeholder • Yes, in particular • Yes, platform that supports sustainable public implementation of the implementation of procurement eco-labels can and SPP, mainly in implementation for do serve as developing countries. developing information Provides capacity countries intended to facilitate building, technical and SPP decisions. financial assistance ISO 20400:2017 Prescriptive Guidance/ • Yes, a guidance to • Yes, indeed this Sustainable Procurement Standards, not a achieve the document itself is a Guidance performance-based integration of type of standard to standard. sustainability implement criteria into the sustainable existing process. procurement practice. • May not specifically be intended for certification but may lead to performance assessment.
Table 4: Summary of the frameworks discussed in Section 2.2.
2.3. Barriers of SPP Despite SPP’s proclaimed benefits, there are however several potential barriers that have contributed to the reluctance of SPP uptake at national level. As a starting point, the barriers listed here have been extracted from Walker & Brammer (2011)’s conceptual framework on the model of the influences of procurement directives upon compliance among procurement professionals in the EU (Gelderman et al., 2006), which provides a useful general framework for examining how public procurement policy translates into practice.
The first cause of barrier has been influenced by the perceived costs and benefits engagement with SPP. Although there are examples of win-win situations when examined as a longer-term goal perspective, sustainable options are often perceived to be more expensive. Given the tight budget constraints and countervailing objectives faced by most public sector organizations, perceptions regarding financial viability and cost-effectiveness of SPP are expected to play a particularly important role (Walker & Brammer, 2011).
The second perceived barrier concerns familiarity with SPP which suggested that for an organisation to be able to effectively implement SPP, it is necessary to understand the concept of SPP and related government policies. Without the necessary skills, competencies and tools to make SPP effective, the whole concept may collapse, causing additional workload to reimplement and internalise. A recent survey found that 83% of purchasing professionals considered themselves ill equipped to deliver sustainability through procurement (Walker & Brammer, 2011; Snell, 2006).
31 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The third barrier concerns the availability of sustainably produced goods and services. Given that many of the goods and services procured by public sector are highly specialized, identifying sustainable sources of supply chain may be very challenging in some context (Walker & Brammer, 2011). This adds on to higher costs as for certain products or in certain countries, the availability of such goods and services are rare. However, with the increasing use of sustainability standards, this barrier may subside but even so, traceability of sustainable operations throughout the supply chain is still an on-going concern.
The final barrier that brings no justice to SPP, is the lack of government incentives and/or pressures. Organisational culture and the degree of organizational support in sustainability can influence the general adoption of SPP practices (ibid.). The degree of institutionalization of SPP framework may have linkages to the maturity levels of SPP which is technically the main purpose of this paper, before connecting the analysis to the uptake of sustainability standards.
Figure 11: Extracted from Walker & Brammer (2011), which was adapted from their analysis through Gelderman et al. (2006).
In addition to these perceived barriers, other obstacles listed in the EU GPP website also includes: lack of political support, lack of legal expertise in applying environmental criteria, lack of practical tools and information, the need for systematic implementation and integration into management systems, lack of training (in understanding the concept of life-cycle costing and for end users on sustainable use of products), lack of co-operation between authorities (lack of coordinated exchange of best practices) and limited established environmental criteria for products/ services (EC GPP website20, 2019).
Roos (2012) have also provided a compilation of the barriers to SPP in developing countries analysed following the approach developed by the European research project RELIEF. This compilation used the general barriers and by incorporation some issues considered to play a role in developing countries such as the potential impact of donor guidelines, lack of capacity, market readiness and the negative impact of small and medium-sized local companies. From the open questionnaire conducted by Roos (2012), the list of potential barriers to implement SPP principles in developing countries include:
20 The barriers to the uptake of GPP can be found here https://ec.europa.eu/environment/gpp/barriers_en.htm
32 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
- Legal framework does not allow or encourage SPP - Donor Guidelines do not allow or encourage SPP - Lack of capacity - Lack of guidance material and practical tools - SPP is too complex - SPP is expected to increase the cost of public procurement - Inflexible budgetary mechanisms - Lack of knowledge related to the environmental and social policies - Lack of monitoring tools - Market is not prepared to deliver sustainable products and series - Negative impacts on small and medium sized local companies
To sum up the bottlenecks of procurement reforms from the barriers above, one can consider that, i) the human capacity development remains a key issue since the quality of every system depends on having qualified and knowledgeable people to manage and implement it; ii) decentralisation presents a challenge that affect a well-functioning procurement system since capacity and skills are usually less developed in decentralised structures; iii) there is a need to consider the effective use of technology as it increases transparency and efficiency and provides information to stakeholders and managers that can be used to monitor and manage performance; iv) reforms require resources, take time and require long-term government commitment in order to bring about successful change; v) the need to look into procurement reform initiatives via country led and part of a broader public administration reform process, which helps to ensure integration and prioritization reforms; vi) the role of donors is evident in supporting reform initiatives and in providing advice and knowledge to countries, but lack of donor coordination and a reluctance to use country systems can have a negative impact on reform; and viii) the need to include stakeholders from civil society and from the private sector as they play an important role to drive change and overseeing results (Roos, 2012; OECD; 2011).
2.4. Sustainability standards as an instrument to drive effectiveness in SPP While there are many ways of integrating sustainability standards in public policy, three of which that have been raised by several academic literatures would be through i) Trade Policy (Marx, 2018), ii) Regulation and iii) Public Procurement (Marx, Sharma & Bécault, 2015). Trade policy could look upon the different tariffs to incentivize certified products over non-certified products, it will however raise debates in the World Trade Organization (WTO) context. A softer approach on trade policy would be the provisions of sustainability standards under the commitments of bilateral trade agreements. Regulation on the other hand, is having the role of sustainability standards tied to the enforcement, implementation and monitoring regulation mechanisms. For example, the European Union (EU) Renewable Energy Directive (RED) recognizes 14 Voluntary schemes21 that are used as proves that the biofuels are sustainable when they enter the European market. The integration of sustainability standards in public procurement, which is the emphasis of this paper, could also indirectly (or directly) impact the trade policy and regulation dynamics as well.
21 The list of the 14 Voluntary Schemes can be found in the European Commission Website: https://ec.europa.eu/energy/en/topics/renewable-energy/biofuels/voluntary-schemes 33 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The integration of sustainability standards in SPP can be denoted from its indirect approach: through i) integration of sustainability standards criteria into public tenders; or ii) the referencing of sustainability standards as a ‘proof of compliance’ in public tenders (Marx, 2017). When including environmental and social dimensions in procurement, contracting authorities would normally rely on the sustainability criteria developed by the sustainability standards systems (D’Hollander and Marx, 2014), which would technically counter the perception that integrating sustainability standards in SPP is expensive and difficult to monitor. Using sustainability standards and third-party certification processes have been rather effective as contracting authorities do not need to reinvent the wheel or the need to conduct resource-heavy monitoring. Essentially, this allows public authorities to outsource some of the more burdensome aspects of policy implementation and by adopting sustainability standards, governments are able to utilize systems that are already adhering to internationally recognized best practices (UNFSS 2016; Carey and Guttenstein, 2008).
3. Comparative Analysis between Germany and Viet Nam
The main purpose of this study is to understand if the maturity of sustainable public procurement would have an impact on the usages of sustainability standards. In order to identify the maturity of SPP in a given country, this paper has adapted the UNEP’s 10YFP SPP Programme’s metrics of the maturity levels of SPP from the study of eight case studies on the impacts of SPP.
Table 5: UNEP (2012a) – Maturity levels of Sustainable Public Procurement
Although the initial idea was to provide a rating score between high, medium and low levels of maturity for each of the selected country in this study, UNEP (2012a) however did not provide enough
34 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
information on how this metric was developed and what are the indicative criteria used under each of the key element that will help to determine the rating score.
Against this background, this study will instead adapt the key elements as overarching criteria that would allow a general analysis of the maturity of SPP in a given country, without the scoring procedure. The deliberate consideration to adapt the UNEP metrics on the maturity levels of SPP was mainly because of its simple and straight forward application. This is important because when comparing countries, especially between developed and developing markets, the capacity advancements from the developed world may not be relatable to the developing world, thus it is important to consider a more simplistic view that accommodates the different country dynamics and use this as a starting point and later expand to other areas.
Based on the description provided in the table above for each of the elements that determines the maturity levels of SPP as well as information from other research papers, these elements can be defined as follows:
1. Political Willingness According to UNEP (2012a), a high maturity level of political willingness sees a strong political will to promote SPP. In that sense, high-level government commitment has been regarded as the most important prerequisite for SPP. SPP programmes require high-level political commitment as well as a bottom-up ownership; a commitment to learning (knowledge of SPP), the involvement of stakeholders (Legal Framework) in optimizing the design of SPP initiatives and informal SPP instruments (Roos, 2012). The other elements mentioned here may also be highly dependent on the political willingness and commitment in order to achieve positive impact.
2. Adoption of a global strategy On the same note, a high maturity level of adopting a global strategy is to ensure that SPP activities are undertaken with long term perspectives integrated in a more comprehensive approach that is embedded in the overarching sustainable development or green economy strategies. In that sense, it has been adapted to emphasize strategies around the sustainable procurement process itself, the recognition of sustainability standards, especially the international ones such as tools to foster green exports and to motivate innovative solutions for green economy.
3. Knowledge of SPP With a high maturity level of knowledge in SPP, it is evident to say that procurers have a good experience and expertise in the field such that they are well aware of the good practices of the procuring process and the strategic approaches of SPP, such as integrating sustainability into the procuring process.
4. Legal Framework When the legal framework includes regulation that promotes environmental and social criteria into the procurement process, this can be considered as a high maturity level of SPP, even more when the concept has been well integrated as a regulated policy. Thus, with a high level of maturity in the legal framework, it considers the sustainability aspects in a procurement process with the recognition and promotion of sustainability standards.
35 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
5. Monitoring According to UNEP (2016b) on ‘Monitoring Sustainable Public Procurement Implementation’, five monitoring aspects have been highlighted along with its key indicators as a way to systematically measure the performance of SPP implementation: i) SPP institutionalisation; ii) procurements with sustainability criteria (value and quantities); iii) sustainable products and services, or works purchased; iv) contract or purchase with from preferred companies and; v) direct generation of employment opportunities (UNEP, 2016)22.
Although these indicators could have been used for this study, there are still limitations to collect such data. Thus, understanding of monitoring for a given country in this study is to elucidate the monitoring system that has been put in place to assess the impacts of SPP activities. This is also important because without rigorous legal framework and a consistent approach to data gathering, countries forego an important opportunity to increase the performance of their procurement systems. Concrete opportunities for improvement might not be visible because the lack of quality data that does not allow for meaningful monitoring. Systemic data collecting would enhance the ability of countries to assess the indirect impacts or trade-offs resulting from policies (OECD, 2019).
6. Market Readiness The market readiness analysis assesses the availability of sustainable products and services, the responsiveness of the market, the national business sector response to potential SPP tenders and the capacity to meet current and future public procurement requirements for sustainable products and services (Roos, 2012). Market readiness has also been described as one of the potential barriers of SPP. Although market readiness could also be an exhaustive research on its own, especially when analysing developing countries’ uptake of SPP based on their market readiness, for this paper however, market readiness can be identified as how SPP has advanced in a given country. The analysis for this may not be consistent between Germany and Viet Nam but it will give a good snapshot of market readiness in both countries.
Note: Some of the elements mentioned above may overlap one another when analysed qualitatively such as the extent of monitoring could also depend on the legal framework and knowledge of SPP.
22 Refer to Annex 6 to view the full table of the indicators. 36 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
3.1 The Maturity of SPP in Germany The German Federal Government has adopted the new version of the German Sustainable Development Strategy (GSDS) on 11 January 2017. This was the first step that provided the framework for the implementation of the 2030 Agenda for Sustainable Development. For Germany, Sustainable Development poses challenges for a large number of policy areas, three of such topic examples include: i) strengthening social cohesion – leaving no one behind; ii) climate policy and; iii) Innovation and digitisation. Each of these topics will be further discussed under the ‘Adoption of a Global Strategy’ component. The strong political willingness for Germany towards the 2030 Agenda for Sustainable Development can set as starting point that the country’s commitment towards “sustainability, must be borne in mind in all policy areas and the diverse interrelationships taken into account.” – Federal Chancellor Dr. Angela Merkel, 4 June 2018 at the Annual Conference of the Sustainable Development Council (The German Development Strategy, 2018).
In addition, a study conducted through benchmarking of best practices between the EU GPP mandate and 3 other countries - United Kingdom (UK), Germany and the Netherlands by the AEA Group (2010), Germany scored an excellent rank when it comes to its political aim towards SPP. The aim has been expressed comprehensively in the National Sustainable Development Strategy with each procuring entity defined on the basis of national eco laws. Mandatory targets have also been set to use Lifecycle criteria for wood products. The Federal Environment Agency aims to cover 20-30% of products (Roos, 2012).
However, Germany’s procurement system is highly decentralised and segmented, where the sub- central level of the government are the ones conducting approximately 78% of the public procurement (ibid P.14). This proportion is above average for OECD countries where just over 63% of procurement takes place at the sub-central level on average (ibid P.14). In the German system, the federal state sets out the overarching legal framework, but the autonomy is still prevalent at different levels of government which creates a very complex legal and regulatory framework of public procurement. Due to the strong subsidiarity in Germany, municipalities and Länder (German states) have the authority to shape public procurement law by transposing federal-level laws. In addition, both municipalities and Länder can create their own laws (ibid P.74). Municipalities also have a degree of autonomy ascribed to them in the constitution. The constitution states that municipalities are primarily responsible for matters in their communities (OECD, 2019).
Figure 12: OECD (2019).
37 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
At federal level, responsibilities are broadly split between the BMWi , which takes the lead on policy development and the overarching legal and regulatory framework, and the Federal Ministry of the Interior, Building and Community (BMI), which leads the e-procurement, the centralisation of procurement and the rules for the procurement of public works. The BMI also formed a competence centre on sustainable procurement whereas the BMWi leads the competence centre for innovation. The Federal Ministry of Finance (BMF) is responsible for financing and financial compensation of different federal governmental levels (ibid P.86). In any case, there is no supervisory authority who is responsible for coordinating vertically between the ministries at federal, state and municipal levels. Due to the complex co-operation mechanism, the division of the procurement functions between the different ministries often create a risk of overlap and a lack of cohesion. Germany has no central co- ordinating body or agreed-upon protocols for coordinating between the ministries. The Federal Chancellery is located at the highest level of government and provides federal oversight over many government functions (ibid P.86). The reason why procurement entities developed independently from each other is mainly because of the fear of losing decision-making power (ibid P.87). Therefore, the lack of institutionalised communication and co-ordinating entity has led to low levels of co-ordination and cooperation (ibid P.87), despite the excellent ranking Germany fared when it comes to their communication tools such as websites, newsletters and PR activities (Roos, 2012; AEA Group 2010).
At Länder level, responsibilities are strongly divided between ministries. As every state government can decide on the structure and responsibilities of ministries, the setup offers between states. Ministries of the economy in all Länder are responsible for legal and regulatory politics, while e-procurement is typically managed by ministries of the interior (OECD, 2019).
Table 6: OECD (2019) – Division of responsibilities between ministries derived from OECD questionnaire and interviews.
38 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
On the flipside, decentralised models are often aligned with users’ expectations, making them better suited to users’ needs. Decentralised models also provide reduced time to completion for individual procurement processes (OECD, 2019: P113). At the same time, from system-wide perspective, decentralised models run the risk of duplication and fragmentation, resulting in isolated and sometimes contradictory procurement policies. The only main arguments in favour of centralisation are savings - centralisation creates economies of scale through aggregation, reduces duplications and decreases the number of transactions between suppliers and buyers (ibid.). Beyond direct financial savings, centralisation provides economic benefits that are linked to gains in process costs and increased productivity because of more concentrated expertise (ibid.). Moreover, there are studies (Albano & Sparro, 2010) that have described the following disadvantages of centralised models for public procurement: higher coordination and set-up costs; serious barriers to satisfying unique requirements and meeting different realities; loss of relationships with local suppliers; possible barrier to entry for SMEs; potential lock-in phenomena where contracting authorities collectively locked with one supplier; inefficient engagement of unit charged with centrally managing operational planning processes; and complex coordination processes (ibid.).
Thus, from this analysis, although most organizations would favour being centralised, decentralised governance in public procurement could also prove legitimate.
3.1.1 Political Willingness In comparison to the EU proposition to have 50% level of GPP uptake by the member states, Germany only fares good as they managed to get 30% uptake by value and 46% by number of green contracts, compared to UK (75% by value and 59% by number of green contracts) (Roos, 2012; AEA, 2010). Therefore, in 2016, Germany went through a public procurement reform that significantly streamlined the legal framework procurement and aligned its system with the new EU directives on procurement. These directives became the catalyst for the modernisation of German public procurement laws. As one of the biggest economies in Europe, Germany’s public procurement represents 15% of the German GDP, an immense sum of EUR500 billion per year (OECD, 2019). Germany’s Federal Ministry for Economic Affairs and Energy (BMWi) identified the following 11 objectives for the reform of the country’s public procurement framework (OECD, 2019: P76; BMWi, 2015):
1. Simplify the procurement process and make it more flexible 2. Strengthen sustainable and innovative procurement 3. Simplify the rules regarding the suitability of participants 4. Respect the work and social obligations (especially the principle of conforming with collective wage agreements and minimum wage laws) 5. Uphold leeway for public authorities 6. Facilitate procurement for social services 7. Ensure SME-friendly procurement 8. Serve the needs of people with disabilities 9. Fight economic crime effectively 10. Use electronic communication in the procurement process 11. Generate reliable data on public procurement
The Competence Centre for Sustainable Procurement (KNB) was set up to provide contracting authorities with local assistance and advice. The KNB provides information on all sustainable procurement issues centrally on the web-based platform (www.nachhaltige-beschaffung.info). The
39 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
online platform was activated by the German Chancellor on 13 May 2013 as part of the Sustainable Development Council’s annual conference. The “Sustainability Compass” (www.kompass- nachhaltigkeit.de/) provides contracting authorities in the Federal Government, Länder (German states) and local authorities with another tangible tool for integrating sustainability criteria into the procurement process. Sustainable public procurement is a priority of the programme of sustainability measures. In light of their procurement volume, the master agreements of the Federal Government’s electronic order platform, the Kaufhaus des Bundes (KdB), may exert particular leverage for sustainable public procurement (German Sustainable Development Strategy, 2016).
Based on the Sustainability Compass, the integration of sustainability criteria in the procurement process have been identified as follows:
1. Needs analysis – a systematic examination in order to identify the solution to the right product based on answering these questions: i) Do we need this product; ii) Can the needs be met differently? i.e through recycling, exchanges, repair of an existing product etc.; iii) Life cycle costs (LCC) of the selected product (tools and work aids for calculating the LCC are available in German); iv) which social and ecological challenges are relevant to this product; v) Are all equipment elements really necessary; vi) prioritize the individual function device (eg. energy-efficiency).
2. Market analysis – an understanding of the existing alternatives and if necessary, to enter into a dialogue with the market. This is done through internet searches based on the following measures: i) information on events for companies on public procurement practice; ii) visits to trade fairs and information talks with producers; iii) gather information about products that are subject to quality marks23 and standards – compare them in the quality mark finder24; iv) publication of preliminary information with the required sustainability criteria; v) exploratory talks with long-term contract partners and finally; vi) analyse which products have a particularly high social and ecological risks. The body highly encourages transparency and accessibility to all potential bidders.
3. Object of the order – Based on the object of the order, the subject of the contract should be carefully formulated since it determines which criteria can be included in the service description and award criteria. A precisely formulated subject of the contract should already contain environmental and social references in order to underline their relevance for the tender examples: Fair trade coffee, organic food etc.
4. Service description – the service description forms the basis for the preparation of offers by bidders. In the service description, the subject of the order must be described as clearly and exhaustively as possible so that it is understandable in the same sense for all companies and the offers can be compared with each other. Quality marks and labels can be requested as evidence of the fulfilment of sustainability criteria in the service description if they meet certain requirements. The sustainability compass supports the revision of these requirements for the selected labels from several product groups.
23 According to the Sustainability Compass, quality marks are an important tool to promote sustainable production worldwide. However, the increasing number of certificates, seals and standards makes it increasingly difficult to keep an overview. 24 Online portal that lists all the relevant labels and standards based on product type - https://www.kompass- nachhaltigkeit.de/produktsuche/oft-gesucht/
40 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
5. Exclusion criteria & aptitude test – this is where the bidders demonstrate that they have the necessary specialist knowledge and ability to carry out the order. The sustainability criteria for procedures above the threshold values may only concern the following: i) qualification and permission to practice the profession; ii) economic and financial capacity and; iii) technical and professional performance. In addition to the criteria for economic performance such as sales, balance sheets and necessary insurance, sustainability-related aspects such as information on supply chain management can also be checked within the scope of technical and professional performance.
6. Award criteria – every offer from the suitable bidders which has the characteristics of the service description is assessed on the basis of the award criteria. Additional sustainability aspects can be included in the award decision using award criteria. In principle, the most economical offer i.e. the offer with the best price-performance ratio shall be awarded with the contract. The award criteria can also be assessed based on the LCC of the service.
7. Order execution – once the order has been placed, the placement process is complete. The execution order is thus the downstream of the actual award procedure. Examples of the selected sustainability aspects can be taken into account for the execution of the order in the contract such as: i) payment of the statutory minimum wage or higher wages; ii) compliance with the International Labor Organization (ILO) standards along the supply chain by requesting credible evidence or regular reports from subcontractors in non-EU countries; iii) Fair trade criteria; iv) preservation of existing quality labels and; v) requirements regarding the employment of long-term unemployed or disadvantaged population groups as well as implementation of further training measures.
8. Contract management and monitoring – means the monitoring, control and documentation of the contracts awarded over the entire contract period, as well as the planning of contract extensions and follow-up contracts. This ensures permanent quality and conformity with the service description and the contract. Well-designed contract management makes it possible to monitor sustainability criteria identified by the bidder and, if necessary, to make corrections after the award. These instruments have been listed in the portal that can be used for contract management and monitoring: i) random checks and random checks of the production facilities by the procurer himself or other employees of the contracting authority; ii) regular review of social and environmental requirements by external experts; iii) questionnaire for monitoring the progress and documentation of the production; iv) regular reporting on social and environmental standards by the providers; v) evaluation of the results of services; vi) intermediate negotiations: which additional improvements in sustainability can the contractor already achieve in the current contract; vii) review of performance parameters for LCC.
3.1.2 Adoption of a global strategy Coming back to the three topic examples that has posed a challenge in several policy areas, i) in strengthening social cohesion, leaving no one behind for Germany also means that even those who cannot achieve sociocultural subsistence level by themselves must be able to share in the wealth generated in society as a whole. This requires society to provide security against particular risks in the welfare state. In addition, the welfare state must be geared towards (re-) enabling people to live self- determined lives while helping to create equal opportunities for all. Achievements and individual skills should determine a person’s future, not social background. Education is therefore key to participation. ii) Climate policy, for Germany needs to be intensified, as the consequences of climate change are already having an impact on the economy and society (crop failures, interruption of national and global
41 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
supply chains due to extreme weather damage to private property and production facilities); and iii) the issue around innovation and digitisation is that, who will lead the development and design of the technology is currently a matter of debate, given its decentralised manner. Nonetheless, Germany, with its significant industrial sector and excellent research institutions, they are very well positioned in this regard. The Federal Government has implemented the coalition by appointing a Digital Council with ten members comprising of Germany and other countries from the fields of science and research as well as the private sector. Since March 2018, tasks for digital policy and strategic IT management have been pooled at the Federal Chancellery (The German Development Strategy, 2018).
Environmental policies have been regarded as a burden on the economic activity for a long time, but now it is increasingly argued that a well-designed environmental policy can encourage innovation and bring about gains in profitability and productivity. However, measuring the impact of GPP is challenging due to the intangible complex nature of the effects and consequences (OECD, 2019, P. 35).
On another hand, SMEs make up a high proportion of businesses across a number of economic dimensions in Germany. 99.6% of companies in Germany are SMEs; 82% of trainees gain their experience with SMEs; nearly 59% of the workforce is employed by SMEs (OECD, 2019; BMWi, 2017). SMEs also account for a much larger proportion (48%) of the value of contracts awarded through public procurement in Germany than the European average (29%). Thus, this high proportion of contracts awarded to SMEs demonstrates the significance of their role in the national economy and in delivering goods and services to government (OECD, 2019: P. 33; EC, 2016). The development of SMEs therefore contributes to human and social capital by generating job opportunities. This in turn, helps develop people’s knowledge and skills, and can lead to improvements in social inclusion (OECD, 2019).
3.1.3 Knowledge of SPP Compared to the UK, Germany rates better in terms of SPP training and trainings are provided for non-national level schemes with a political commitment for close cooperation and exchange of good practice between the federal and regional governments (Roos, 2012; AEA, 2010). Although this result may be backdated, it is also important to note that capacity building measures were already in place at that time.
However, the more recent complexity of the Germany’s procurement legislation has hindered the application of the new procurement policy, especially at the lower levels of government where practitioners often lack the capacity and qualifications to understand and implement policy changes. As the procurement process became increasingly complex through more complex demands and expectations, practitioners faced an increasingly large burden (OECD, 2019). Although German laws increasingly encourage the use of complementary policy objectives and other non-price considerations as award criteria (such as quality and life-cycle costs), price is still the prevailing criteria in the awards of tenders in Germany (OECD, 2019). Procurers frequently highlighted that an implementation gap can result from a lack of capacity. Contracting authorities at lower levels of government do no always employ full-time procurement positions. If government officials are conducting procurement on a part- time basis, they are less specialised and often act under time constraints. Germany faces an increasing need for public procurers with specialised skills and this leaves less room for becoming familiar with new regulations and policy options (ibid. P 82).
42 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Most matters related to human resource management and the professional status of public procurers follow the general employment rules of civil service. As such, only limited considerations exist that are specific to procurers (ibid. P 217). In October 2017, the EU adopted a recommendation on the professionalisation of public procurers as a part of its public procurement package. This was to address the 2015 academic survey which revealed that public procurers in Germany have a variety of educational backgrounds but limited educational specialisation in public procurement. This diversity is not surprising, considering that there is no dedicated profile for public procurers in Germany, and procurers are hired from within the general public service. Furthermore, just over half of procurers have conducted degree-level studies in the country; roughly the other half have conducted an apprenticeship (ibid. P. 218).
The challenge is even more amplified when it comes to strategic procurement i.e. GPP/SPP. The broader challenges include increasing demands to incorporate complementary policy objectives into procurement processes in addition to the increased push for centralised public procurement process in Germany, which has drastically changed the types of skills procurers must possess (ibid. P. 221).
Table 7: OECD (2019). Availability of guidance at the state level in Germany based on a compilation of responses from the German federal and state-level institutions to an OECD questionnaire and interviews.
When the new public procurement law came into force, Länder institutions organised workshops and peer exchanges to inform contracting authorities of the changes. Often, the institutions tasked with public procurement also served as help desks, available for questions from other institutions. Ministries at different levels of government also developed circulars, guidance materials and handbooks, and distributed them on an ad hoc basis.
43 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
3.1.4 Legal Framework In a nutshell, Germany’s public procurement legal framework is split between: i) the different levels of government and, ii) regulations that govern procurement above and below the EU thresholds (OECD, 2019).
The principal goal of procurement law in Germany is to ensure the cost-effective and efficient use of budgetary resources meet the needs of the public sector (OECD, 2019). The German legal and regulatory framework for public procurement has a complex structure due to its decentralised nature formed in the three divisions of government (federal, Länder and municipal levels) and public procurement in Germany is not regulated by a single law. One part of procurement is included in competition law, which covers many other matters beyond procurement and the other part in integrated in budgetary law. This is an uncommon arrangement, as a stand-alone law regulates procurement in most OECD countries (OECD, 2019). That said, the federal law can only set standards where the Länder level cannot regulate. This means that lower levels of government can create legislations in domains that have not been regulated at a higher level (OECD, 2019). Similarly, the Länder are also limited in what they can impose on municipalities.
In Germany, there is a duality in the public procurement system where procurement below the EU thresholds (90% of all public procurement procedures, 75% of overall financial volumes) follows the budgetary law, which is a procedural/administrative regulation under the Code of Procedure for procuring supplies and services. In this process, Länder have the freedom to decide whether they want to transpose a federal-level law or whether they prefer to regulate through state-level procurement laws. For public procurement above the EU thresholds (10% of all procedures, 25% of overall financial volume) follows the Law against Restraints of Competition (GWB). Whether a public tender has to be published and awarded within an open procedure depends on the contract value. All Länder have their own thresholds which regulate whether and where a tender notice has to be published. In many cases a publication is compulsory for tenders above a contract value of Eur 50,000 for supply and service contracts and Eur 100,000 for public works contracts. There is no compulsory database for all public tenders below EU threshold, however the most comprehensive database is www.bund.ge. Where else for all tenders above the EU threshold, it is compulsory to publish within the Tenders Electronic Daily (TED) portal – www.ted.europa.eu.
On a separate note, public procurement committees are unique elements of the German public procurement framework. These bodies serve as forums for stakeholders from the federal, Länder and municipal levels to contribute to the drafting of procurement legislation. Among the members of the committees are representatives from the public sector, private sector, chambers of industry and commerce and unions (OECD, 2019: P 81). The main purpose of this committee-based approach is to capture the concerns of different stakeholders while the BMWi is the main institution responsible for devising public procurement policy and drafting primary legislation in Germany, procurement committees draft tertiary legislation. The procurement committees have been criticised for their lack of democratic legitimacy (Deutscher Bundestag, 2016). Yet, they have allowed for the integration of businesses and other stakeholder interests into contract regulations (OECD, 2019).
Legislation generally requires that public procurement be conducted through a fair and transparent process that uses competition to decrease the cost and increase the quality of the goods and services that the government needs. For the most part, a procurement process is initiated once a government has already established the priorities and budgets that will dictate the goods and services it will buy. 44 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
In its simplest form, procurement delivers value for money by generating competition amongst suppliers in order to drive down unit prices (OECD, 2019).
The EU directives have also sparked major revision of Germany’s legal framework. Not only are the directives meant as a catalyst for the modernisation of the German public procurement laws to i) reduce red tape by making procedures simpler and more flexible; ii) to encourage innovation; and iii) to serve society by facilitating the inclusion of social, environment and other considerations in procurement decisions (EC, 2014), but also to iv) facilitate the inclusion of SMEs in procurement; v) combat favouritism and corruption and vi) create a simplified regime for social services (OECD, 2019).
In relation to standards, the European Committee for Standardization (CEN) develops voluntary European Standards as a key instrument for consolidating the Single Market and facilitating cross- border trade. In Germany, the DIN Standards Committee represents the country’s interest within CEN (CENELEC for electrotechnical standards) and ISO (IEC for electrotechnical projects) to ensure the uniformity and consistency of the German standards with the European and international standards. These European standards have claimed to contribute to achieving the SDGs of the 2030 Agenda and to help businesses in making the transition towards a circular, low carbon and climate resilient economy.
In GPP, the EU relies on common sustainable product criteria and product sheets for priority products to facilitate drafting the technical specifications and the award criteria. Germany, as an example, prefer to use eco- or social labels such as Blue Angel, Energy Star or Fairtrade to ensure the procurement of sustainable products is compliant with the environmental requirements and/or core labour standards (Roos, 2012). In any case, the use of sustainability standards have been incorporated into Germany’s public procurement legal framework (refer to figure 13).
Figure 13: Extracted from a presentation on ‘Eco Labelling and Green Public Procurement in Germany’ delivered by the German Environment Agency in Tokyo 2016.
However, with the EU-wide legal framework that requires stringent data collection is still a challenge in Germany. This is particularly due to the limitations with the e-procurement systems in Germany that does not have a mechanism to automatically collect and transmit procurement data (OECD, 2019).
45 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
3.1.5 Monitoring Germany, like many other OECD countries, must overcome barriers for effective measurement. Monitoring of public policies in Germany is limited. As such, Germany does not measure procurement activity at a comprehensive national or system-wide level. The current data collection process for public procurement in Germany is human resource-intensive and error-prone. According to the BMWi’s estimates, EUR 1.8 billion in administrative costs can be saved by process improvements for procurement below the EU threshold (OECD, 2019: P 89).
Due to limitations with the e-procurement systems in Germany, there is currently no mechanism to automatically collect and transmit procurement data. Contracting authorities are currently required to submit data manually, until the necessary infrastructure is in place. A template in Excel format is sent to contracting authorities on an annual basis to facilitate data collection. According to OECD interviews with its stakeholders, response rates (particularly at the Länder level, i.e. the level of the states) to the data requests have been low. As a result, the dataset on procurement activity across Germany is incomplete and potentially inaccurate (ibid. P. 27). Policies can enable or hinder the collection of public procurement data. This is particularly clear in the EU, where an EU-wide framework requires stringent data collection. The consistent legal framework in place in the EU theoretically allow for cross-country comparisons. However, different interpretations regarding implementation of these rules can hinder this goal.
There are a number of public procurement activities that can be measured and monitored by policy makers within a country. The Applicability of each measure within a certain country is dependent on its relevance to the work of the government and the Central Purchasing Body (CPB), and the availability of data (OECD, 2019).
Table 8: OECD (2019). Snapshot of the metrics for measuring procurement objectives at different levels of government by the OECD Methodology for Assessing Procurement Systems (MAPS). Full table can be found in Annex 7).
46 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The German government has already taken decisive steps towards digitalising procurement processes. The implementation of the revised legal framework has also presented opportunities to enhance data collection (OECD, 2019: P 167).
On a separate note, the World Economic Forum’s Global Competitiveness Report ranks Germany 21st out of 190 countries in terms of the quality of its institutions (OECD, 2019: P 43; WEF, 2017). Germany scores high in the context of the quality of government at the sub-central level as well. Germany has achieved this high performance on transparency and integrity indicators despite the fact that the country lags behind in the use of information and communication technologies (ICT) in public procurement (OECD, 2019: P43).
In addition, one of the most important institutional design in sustainability standards are the monitoring systems. For obvious reasons, monitoring is required for the certification process (UNFSS, 2018). Although there may be different monitoring arrangements but described as ‘third-party’ certifications in the EU directive, the certification body technically draws up the criteria in consultation with the stakeholders and a certificate is issued after an approved testing and verification process. As an example, the ISO 14024 environmental labelling stipulated criteria that relates to the life cycle perspective that was developed based on scientific principles. What this means is that, third- party certification can be perceived as an important tool to strengthen monitoring and quality control. The criteria from the sustainability standards requirements can (and should) be integrated into the SPP monitoring system. This is in fact, aligned to one of EU GPP’s method of integrating sustainability standards into the technical specification of the tender contract, however little has been elaborated on the monitoring of these criteria.
3.1.6 Market Readiness Given the limitations to retrieve relevant data with regard to green procurement products and sector, this section will be inferences derived from different sources that are not be directly linked to the market readiness of sustainable and green products for public procurement.
Data retrieved from opentender.eu between 2014-2019, Germany’s public procurement spending has been dominated by the construction work sector (Eur 58.6 Billion for 55,461 number of tenders). However, based on opentender.eu ‘Good Procurement Score’, which comprises of; i) transparency score - the share of non-missing key fields indicator (number of key missing is the ration of fields with missing values in the call for tender and contract award announcement related to a given tender); ii) integrity score with indicators that includes call for tenders publication, procedure type, length of advertisement period, length of decision period, new company inclusion, tax haven; and iii) administrative capacity indicators which includes joint or centralised procurement, use of framework agreements, electronic auction, use of WTO framework, English as foreign language and discrepancies between call for tenders and contract award notices, the clothing and footwear sector scores highest even though their share in the public spending is one of the smallest (Eur 151 million with only 903 number of tenders between 2014-2019). The total number of tenders between 2014- 2019 amount to 194,199 where 2018 has the highest number- 41,574 compared to 2019, the lowest number of tenders – 17,858 (data retrieved from opentender.eu).
Another interesting data derived from the opentender.eu is the discrepancies between the call for tender and contract award notices which happens to account as one of the highest within the Administrative Capacity Indicators – 78.14%. Although it is not clear what are the discrepancies,
47 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
agricultural, forestry, horticultural, aquaculture and apicultural services tend to have the highest number of discrepancies on average.
The data above may not directly relate to the market readiness of sustainable and green products and services in Germany for public procurement purposes. However, it gives a good indication in terms of products and sectors significant in the public procurement dimension.
In relation to standards used in public procurement, eCertis25 online database has been used as reference. Compared to all the EU countries, Germany scores the highest for the use of certification in a public procurement contract and the overall use of evidence mechanism (refer to Figure 14). This is also linked to Germany’s declaration of environmental management measures with the use of certification based on the following mandate, ‘Where contracting authorities require candidates or tenderers to produce certificates drawn up by independent bodies attesting that they comply with certain quality assurance or environmental management standards, they shall refer 1. either to the Eco-Management and Audit Scheme (EMAS) of the European Union or 2. to other environmental management systems as recognized in accordance with Article 45 of Regulation (EC) No 1221/2009 or 3. to other environmental management standards based on the relevant European or International Standards and certified by accredited bodies. They shall also recognize equivalent certificates from bodies established in other Member States. Where an enterprise had demonstrably no access to such certificates, or no possibility of obtaining them within the relevant time limits for reasons that are not attributable to that enterprise, the contracting authority shall also accept other evidence of environmental management measures, provided that the enterprise proves that these measures are equivalent to those required under the applicable environmental management system or standard.’
By independent bodies, the mandate states, ‘Depending on the nature, purpose and quantity or scope of supplies or services to be provided, the contracting authority can solely require one or more of the following documents to be submitted as proof that candidates or tenderers have the necessary technical and professional ability: 11. in the cases of supplies: a) samples, descriptions or photographs of the goods to be delivered, the authenticity of which must be certified if the contracting authority so requests; b) certificates drawn up by official quality control institutes or agencies of recognised competence attesting the conformity of products clearly identified by references to technical specifications or standards.’
25 eCertis is an online database listing the eligibility criteria and documentary evidence needed in each European Economic Area (EEA) country for companies to take part in public procurement.
48 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Figure 14: Data retrieved from eCertis based on evidence recorded. Data is however not the best representation as the total number of items of evidence entered varies significantly from 2 in Norway and Belgium to 45 in Germany.
When it comes to the actual sustainable product in the EU as a single market (although not limited only for public procurement purchases), the emphasis on environmentally friendly products, fair and ethical trade, and decent jobs in SMEs have strong consumer support. Based on ITC’s 2019 report on the European Union Market for Sustainable Products, a study of 550 retailers across 5 surveyed EU markets (France, Germany, Italy, Netherlands and Spain) demonstrated that on average 85% of retailers have reported an increased sales on sustainable products over the past five years, while an average of 92% of these retailers also expect their sales in sustainable products to increase in the next five years.
Figure 15: ITC (2019) – Study of 550 retailers across 5 surveyed EU markets (France, Germany, Italy, Netherlands and Spain) on their sales of sustainable products.
49 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
By analysing the data above, Germany seems to top the chart when it comes to retailers’ expectation of sales for the next five years. This positive response infer that sustainably produced products are a demand in the market. Although these figures do not directly link to the purchases in public procurement, it is interesting to see this from a generic market readiness point of view.
Based on the share of sustainability standards used in Germany, data extracted from the ITC Market Trends26 portal showed that Organic certification has been very prevalent in the agriculture sector, followed by GLOBALGAP, ProTerra and Rainforest Alliance. At the same time, Germany has also relied heavily on the Blue Angel label (Roos, 2019) which has been established since 1978. The institutions behind the Blue Angel includes the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety, the Environmental Label Jury, the Germany Environment Agency and RAL gGmbH.
Similarly, SME participation in public procurement in the German federal states is relatively high. This is also evident by the preferential treatment for SMEs in the public procurement process. Often, the majority of companies winning bids at the state level are SMEs (OECD, 2019), thus it paints a good picture that the supply offer on the market is not limited.
Table 9: OECD (2019). Available quantitative estimates on SME participation and complementary policy objectives in public procurement in different German states (2016 and 2017) based on the compilation of information.
From this analysis, we can make an inference that the market readiness for sustainable products in Germany is definitely not limited. Even if the production in Germany is limited, the sourcing from the other EU states, as a single market is also possible.
It is also worth noting that the German Council for Sustainable Development produces a ‘Sustainability Code’ as a benchmarking tool for sustainable business. The EU directive that expanded
26 Data has been sourced from here - https://sustainabilitymap.org/trends
50 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
reporting requirements to include non-financial aspects and aspects related to diversity (2014/95/EU) has been adopted in the German law by way of the Corporate Social Responsibility (CSR) Directive Implementation Act (German Council for Sustainable Development, 2017). Although this point denotes the business orientation in Germany, it is also a good way to gauge the criticality of sustainable products and services made available in the country.
51 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
3.2 The Maturity of SPP in Viet Nam Viet Nam has achieved significant results of socio-economic developing, with a good growth average rate of 7% over 2006-2010. The national GDP in 2010 doubled in comparison to 2000 and have now been officially recognised as a middle-income country (Binh & Trung, 2017). Viet Nam’s “Doi Moi” (renovation or renewal) policy launched in 1986 marked the beginning of the transition from central planning to market economy, returning agricultural land to households for farming and opening Viet Nam to foreign trade and investment. Increasing its integration into the global economy, Viet Nam joined the Association of Southeast Asian Nations (ASEAN) in 1995 and the WTO in 2007 (Dang, 2011).
Procurement was generally carried out by the national government, 58 provinces, five municipalities and numerous local government entities (ibid. P.12). Being part of the Asia Pacific Economic Cooperation (APEC), comprising of 21 Asia-Pacific economies27 with the aim of becoming the region’s leading economic forum, Viet Nam has also agreed to implement the Transparency Standards on Government Procurement in 2004.
In 2012, the total public procurement in Viet Nam was estimated at USD 21.9 million, which represents a share of 16% of Viet Nam’s GDP (Binh & Trung, 2017). The GDP of Viet Name grew from USD 71 billion in 2007 to USD 156 billion in 2012 and the total number and value of procurement contracts awarded has risen from USD 6.22 million to USD 21.8 million during 2007- 2012 (ibid.).
Table 10: Binh & Trung (2017) – Economic Indicators of Viet Nam 2007-2012 sourced from SPP Legal Review Report (VEA, 2016)
The 5-year socio-economic development plan for the period of 2011-2015 defined the following as Viet Nam’s main objectives: i) the need for rapid and sustainable economic development, in line with renovation of the growth model and economic restructuring towards increasing quality, effectiveness and competitiveness; ii) ensuring social utilities and security, enhancing and improving living conditions of people; iii) creating firm foundation to make Viet Nam become a modern, industrial country by 2020 (Binh & Trung, 2017).
27 APEC has grown to 21 members: Australia, Brunei, Canada, Chile, People’s Republic of China, Hong Kong, Indonesia, Japan, Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States, and Vietnam. Anti-corruption efforts in various areas have been a crucial part of APEC’s mission to support sustainable economic growth and prosperity in the Asia-Pacific region. One area of focus is government procurement, where systemic corruption commonly undermines competition, wastes public resources, and ultimately hampers economic growth and development.
52 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Viet Nam’s procurement structure was initially decentralised which followed the following procurement steps: i) development of the procurement plan for organisation; ii) development of the detailed bidding content for each tender in the procurement plan; iii) submission of the procurement plan to the Ministry of Finance (MOF) approval and; iv) approval of the procurement plan for implementation by MOF (UNEP, 2015). However, the decentralised procurement approach was modified by the decision issued by the Prime Minister dated 26 November 2007 on “issue the regulations on good purchasing and procuring with state budget following the centralised approach.” (ibid.)
The objectives of applying centralised public procurement was to (ibid, as per decision by the Prime Minister number 179/2007/QD-TTg):
• Practice savings, anti-corruption, prevent wasting in state budget spending • Ensuring the complex equipment of modern public goods and properties best satisfy the better need for regular operation activities of the governmental bodies • Ensure the transparency in procurement, equipment and use of public goods and properties
Moreover, the implementation of centralised public procurement had saved about VND 469 billion for the state budget during the 5 years of piloting, from 2008 to 2012 (UNEP, 2015).
Figure 16: UNEP (2015b) – State budget saving resulting from centralised public procurement, source: Bidding Review (Unit VND billion)
3.2.1 Political Willingness The Vietnamese government had already expressed their interest in environmental sustainability since the early 90s. This became evident when the government issued the National Action Plan on the environment and sustainable development in 1991. This was considered as the first legal document which formally addressed environmental issues and directed policy approaches for sustainable development in Viet Nam (KEI, 2017).
In the context of socio-economic development objectives for Viet Nam for the period of 2011-2020, SPP were meant to focus on sustainable economic development, economic restructuring toward increasing quality, natural resource effectiveness and competitiveness and ensuring social security. The key environmental goals are reducing greenhouse gas emissions, improving energy and water efficiency, forest protection, and supporting recycling. The aim for SPP in Viet Nam was also meant to help reduce poverty and improve equity (i.e. gender, ethnic minorities, and people with different
53 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
abilities (UNEP, 2015). From an economic standpoint SPP should enable and enhance the involvement and participation of SMEs in the sustainable development of the country (ibid.).
The integration of sustainability criteria in the public tender procedure, however, is not evident in the Law on Procurement. The evaluation methods of public procurement bidding documents include, the service price, state budget contribution method, state benefit and social benefit method, and integrated approach. The main criteria for evaluating the bidding documents are experience and capacity assessment, technical criteria, financial criteria and capacity to supply (UNEP, 2015). Sustainable criteria such as social and environmental are not listed in the main criteria for evaluating tenderers. Although some criteria were developed, they were still under no obligation to be integrated into the public procurement procedures. Thus, the neglect in most cases (ibid.).
However, there are incentives in the selection of tenderers for example, the tenderer has more than 25% of the total labour is female or has more than 25% of the total labour is invalids, people with disabilities and/or small enterprises.
In 2013, the Government of Viet Nam adopted the National Action Plan for sustainable development for the period 2013-2015 followed by the introduction of a set of indicators to be used for monitoring and evaluating sustainable development performance at the local level. Institutionally, the National Council for Sustainable Development was established and authorised by the government to act as a counsellor in directing, regulating, supervising and evaluating the implementation of Viet Nam’s Agenda 21. The National Sustainable Development Office was established and attached to the Ministry of Planning and Investment (MPI) to support the Council in their daily work, At ministerial and local (provincial) level, the Committee for Sustainable Development was also established to help line ministries and provinces implement their strategies and action plans for sustainable development. In addition, a Business Council for Sustainable Development was formed under the auspices of the Chamber of Commerce and Industry (VCCI) with the mission to promote the implementation of Vietnam’s sustainable development strategy and effective use of natural resources by encouraging domestic firms to apply environmental-friendly technology and contributing to the development of renewable energy industry (KEI, 2017; Vu & Dang, 2015).
The National Assembly, Viet Nam Fatherland Front and social organizations also play an important role in monitoring the implementation of the SDG process.
Figure 17: Viet Nam’s VNR on the implementation of the SDGs (2018) – Institutional arrangement for SDG implementation in Viet Nam 54 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Since the inception of the establishment National Council for Sustainable Development in 2013, a few key points have been highlighted in the Viet Nam’s Voluntary National Review (VNR) on the implementation of the SDGs (2018). The first being the importance to have a strong commitment from the government for sustainable development is the political determination and consensus between the National Assembly and the government in their thinking and actions. This commitment was an essential contribution to Viet Nam’s successful achievement of many MDGs (initial) recognised by the international community. The second point was the importance of involving all stakeholders in the implementation of the SDGs. The system of diversified social organizations and the business community in Viet Nam has played an important role in the sustainable development process. The combination of “bottom up” and “top down” approaches have motivated communities to participate in designing and formulating development programmes, policies and projects. And the final point that was highlighted, was the promotion of both domestic resource and international cooperation (Viet Nam’s VNR on the implementation of the SDGs, 2018).
In addition to the SDGs, the initial efforts of the Government of Viet Nam and related ministries in introducing SPP and raising its awareness have been considered a remarkable starting point. Among the government agencies, the Ministry of Natural Resource and Environment (MONRE) is the leading institution to promote the implementation of SPP in Viet Nam through conducting many researches, projects as well as managing the Green Label Programme (further elaboration in section 4.2.6) at national level. However, the integration of the sustainable criteria in the procurement process needs to be approached with a stronger stance.
Box 3: Extracted from UNEP (2015b) Public Agencies in Viet Nam involved in the National public procurement system
Public procurement accounts for a large share of expenditures incurred by the Government of Viet Nam. The Ministry of Planning and Investment (MPI) performs state management functions in the fields of planning and investment, including the provision of general advisory services on strategies and planning initiatives. The Ministry of Natural Resources and Environment (MONRE) performs state management functions in the fields of natural resources and environment protection. The Viet Nam Environment Administration (VEA) under MONRE is responsible for the environment protection activities at national level, including the management of the Green Label scheme. Ministry of Industry and Trade (MOIT) performs state management functions in the fields of 12 industrial sectors and 11 trading areas, and the state management of public services in the branches and domains under the Ministry’s state Management. The Ministry of Agriculture and Rural Development (MARD) performs state management functions in the field of agriculture, forestry, salt production, fishery, water drainage and rural development. The forestry sector is very important in relation the public procurement of office furniture. The Ministry of Finance (MOF) performs state management functions in finance. Under MOF, the General Department of Tax Policy and the department of Public Asset Management are most relevant in terms of product innovation for sustainable development. The Department of Tax Policy is responsible for the government financing system and is responsible for considering the mechanism to promote cleaner production applications in Viet Nam, while the Department of Asset Management is responsible for managing and implementing public procurement systems in the country. Those agencies are also the biggest public buyers and are thus highly involved in the national public procurement system.
According to the Law on Procurement, the MPI is responsible for the comprehensive state management of all procurement activities nationwide, including public procurement. The Department of Procurement Management (DPM) has been appointed by the MPI in 2009 to directly manage procurement activities nationwide. DPM is also responsible for organising training activities for public procurers.
55 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
The procurement activities in Viet Nam in general follows a centralised system – managed by the DPM. However, with the active involvement of the other ministerial actors in charge of particular areas led to a very complex coordination management. The low coordination, as a result created many difficulties to integrate the sustainable criteria into public procurement procedure (UNEP, 2015). This could potentially be the reason behind the challenges in trying to impose sustainability criteria into the procurement process.
3.2.2 Adoption of a global strategy Strategies and national plans such as Green Growth, Green Economy, Environment Protection, Sustainable Development etc. have been part of Viet Nam’s political dialogue. At the global scale, the Agenda 21 has developed a framework with prioritised objectives including poverty and hunger alleviation, develop recycle and environmentally friendly products, protect and manage natural resources, which has also built a firm foundation for the development of Viet Nam Sustainable Development Strategy of 2011-2020 (UNEP, 2015b).
Over the last decades, Viet Nam’s economic expansion was accompanied by a drastic shift in the composition of GDP. The economic activities shifted from agriculture toward services and manufacturing. Key industries in Vietnam currently include food processing, garments and apparel, machinery, mining, coal, steel, concrete, chemical fertilizers, glass, tyres, oil and paper (Thong et al., 2017). These industries have significant negative impact on the environment. In realising the urgent need to promote a shift toward more sustainable industrial development pathways, Viet Nam’s government has paid special attention to the promotion of green industry. Viet Nam signed the Manila Declaration on Green Industry in Asia in 2009, participated in the Tokyo Green Industry Conference in 2011 and the United Nations Conference on Sustainable Development in June 2012 when the government pledged to promote green industrial development (ibid. P 337).
The government has approved the Viet Nam Green Growth Strategy for the period 2011-2020 with a vision to 2050, as “a decisive tendency in sustainable economic development.” The overall objective is to achieve a low carbon economy, enrich natural capital, and direct sustainable economic development (ibid.). The Strategy focuses on three priorities: i) climate change mitigation; ii) green production and green lifestyle. The targets and actions set for the Green Growth Strategy in promoting sustainable consumption and building green lifestyle include:
1. promoting eco-labelling and disseminating information on environmentally friendly products to the entire society (i.e. formulating a roadmap towards 2020 to initiate green procurement)
2. regulating public expenditure leading to the development and use of green economy standards (i.e. all motorised vehicles purchased under public budget will need to meet the emission standards
3. applying economic and technical instrument to encourage sustainable consumption in the business sector and by the society (ibid.)
As part of the cooperation on sustainable development, the EU has funded eight projects in Vietnam under the SWITCH-Asia Programme to promote the transition towards Sustainable Consumption and Production (SCP) patterns. The projects have been active in areas such as sustainable use of forest resources, corporate social responsibility (CSR), energy efficiency, sustainable aquaculture, and awareness raising for sustainable lifestyles (ibid. P 343).
56 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
3.2.3 Knowledge of SPP From the assessment report conducted by UNEP in 2015, there was no official and comprehensive training document for procurement management and implementation. All training organisations have developed their own materials for their trainers and participants. According to the Centre for Procurement Supporting (under the MPI), the training mainly focused on presenting relevant legal documents linked to the public procurement system and instructing the basic principles and procedures of public procurement. Due to the lack of SPP guidelines or legal documents, SPP aspects at that time have not incorporated in the training courses for procurement officers, at both national and provincial levels (UNEP, 2015). This aspect may have changed but there are currently no updated reports (in English) stating otherwise.
In that same report (UNEP, 2015), a survey was conducted with interviewees through self-evaluation and found that these practitioners have limited knowledge on SPP and have also expressed their high interest for participating in SPP and/or informed programmes. They also stated that there is the need to develop an awareness raising programme at national level for both procurement officials and goods/services (UNEP, 2015).
Meanwhile, the experience from international donors and organisations showed that the implementation of environmental protection regulations requires additional resources, including human and financial resources. Viet Nam, during the time this report was published, lacks both resources. In the case of public procurement, there is no additional budget for SPP implementation as well as a low awareness and capacity on how to integrate sustainable criteria into public procurement (ibid. P. 27). The concerns expressed by procurement officers of Central Agencies include (ibid.):
1. The technical specifications of products to be purchased by the central agencies have been developed mostly based on financial and quality terms. The environmental and social impacts have not been considered as the major criteria for tenderer’s selection.
2. The procurement officers of all organisations have participated in training courses on procurement, bidding and contracting delivered by training organisations specialised in public procurement and contracting delivered by training organisations specialised in public procurement and certified by the DPM. However, the contents of the training courses were limited in the scope of instructing procurement procedure and related legal documents. The contents of SPP introduction, integrating sustainable criteria into public procurement were not covered in the training courses. Although the procurement officers expressed their awareness on the importance of environmental protection and the interests of implementing SPP, there was no instruction on integrating sustainable criteria into public procurement available for referencing.
3. The cost for applying SPP is perceived as being much higher than the procurement of conventional products and services currently conducted in the central agencies’ offices. All of the interviewees raised their ideas that sustainable or eco-friendly products have higher prices than the conventional ones. This could be of great impact to the annual expenditure plan of their agencies and might create more work for the budget planners.
Additionally, the decentralisation of procurement responsibilities has revealed problems with capacity of public officials to conduct tenders according to the law. There are Public Procurement Management
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Training courses offered by several training institutions. However, the amount of training is limited by the lack of experienced trainers (Dang, 2011: P17).
A larger problem was the lack of expertise at the provincial and local levels. Provincial and local authorities have the right to issue internal rules governing procurement. However, the provincial Departments of Planning and Investment generally have no specialized procurement unit that can control and support procurement activities in the province. As a result, there is no standardized method of conducting procurement activities in the province. The lack of standardization causes confusion and inconsistent application of the national legal framework (ibid.).
3.2.4 Legal Framework According to the Law on Procurement, the selection of public goods and services is conducted through the following mechanisms- public bidding, limited bidding, bidding appointment, competitive quotation offer, direct purchasing, self-procuring and special selection of tenderer (UNEP, 2015).
1. Public (or open) bidding: All procurement plans must be implemented through public bidding, except for the cases listed in 2-7.
2. Limited bidding is a method applied to projects funded by Official Development Assistance (ODA) and in accordance with the donors’ requirements; and to specifications that are too complicated. Thus, the technical project requires qualified tenderers (at least five qualified tenderers).
3. Bidding appointment is a method applicable to urgent cases including natural disasters or serious fires, in accordance with agreements with international donors, for purposes of national security and/ or national secrets, for buying particular materials and equipment for maintenance from one single supplier which has provided the materials and equipment before and, buying consulting services valued under VND 500 million, or construction works under VND 1 billion, or buying recurrent goods under VND 100 million.
4. Direct purchasing is a method applied in case the same bidding procurement has been done in the last six months, and for the same supplier.
5. Competitive quotation offer is a method applied in cases where the amount of spending is less than VND 2 billion and the goods are prevailing in the market.
6. Self-procuring happens when the project owner or investor is capable of being the main contractor. In this case, the cost estimation for the procurement must be approved in accordance with the regulations, and the supervisor of the procurement must be independent form the owner/ contractor.
7. Special selection of tenderer happens in the case when there are special requirements for a procurement case which make methods 1-6 impossible, the authorised agency may prepare a special bidding plan and submit to the prime minister for approval (UNEP, 2015b).
Meanwhile, mainstreaming environmental factors in the process of procuring public assets and goods may be a new process for Viet Nam. State agencies using their budget for procuring assets and infrastructure do not seem to be interested in environmental issues (Lam et al., 2012). This is partly
58 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
due to the legal instruments on procurement that do not happen to have any specific requirements on environmental criteria.
Although there are sustainability standards being included, it is only mean to be included in the technical specifications of the bids which means that they are dependent on every project and that every procurer can choose what type of sustainability criteria to include. However, only integrating standards at the specification stage leaves out an important tactic to encourage markets to address their processes in a more sustainable, long-term manner (Lam et al., 2012). Some suggestions include having sustainability criteria in the listing process or as a pre-selection in a centralised government setup.
There are currently three types of standards system/ eco-label in Viet Nam, Green Label, Energy Saving Label and Green Lotus Label.
The Green Label is an initiative of the Ministry of Natural Resources and Environment (MONRE) with the support of UNEP and other international donors. It has been operating at national scale since March 2009. The overall objective is to improve and maintain the good living environment through reducing energy and material consumption, reducing waste and pollution from production, trading and using of goods and services. This label has been applied to different products such as packaging, cleaning chemical, lamps and light balls, printing ink, batteries, paint, stationery, office appliances and construction materials (UNEP, 2015b). Image 1: Vietnam Green Label
The Vietnam Energy Star Label is a project under the Vietnam Energy Efficiency Programme (VNEEP) managed by the Ministry of Industry and Trade (MOIT). There are two types of Energy Efficiency Label – the certifying label and the comparative label. The certifying label is applied for the products having the same or higher energy efficiency level than the pre-defined energy consumption standard regulated by the MOIT in their respective period. The labelled products have to go through a test on quality, durability and energy efficiency in accordance to TVCN 7896:2008 (UNEP, 2015b). Image 2: Vietnam Energy Efficiency Certifying Label (Vietnam Energy Star) The Comparative Energy Efficiency Label is the label providing comparison of the energy consumption label among a group of similar products. The comparative label is expected to help the consumers to select the products with higher energy efficiency. The level of energy efficiency is illustrated by the number of stars on the label, where the more stars express the higher energy efficiency (UNEP, 2015b).
59 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Image 3: Vietnam Comparative Energy Efficiency Label
The Sustainable Tourism Green Lotus Label (in short, the Green Lotus) is the label granted to the tourism accommodation service providers (TASP) which satisfies the criteria for environment protection and sustainable development. The certified TASP is required to ensure the criteria on environmental protection and the efficient use of natural resources and energy, contribute to the protection of historical heritages and socio-economic development of the Image 4: The Green Lotus Label localities as well as sustainable tourism development (UNEP, 2015b).
This is the only label that certifies the tourism service in Viet Nam. Beyond tourism, the objectives of the Green Lotus Label are to:
• Achieve significant improvements in environmental protection practices at tourism attractions • Protect and conserve biodiversity in both land and aquarium environment, in the area where Green Lotus Label certified services are located • Achieve significant decrease of energy and water consumption rate • Promote the use of renewable energy • Promote the application of appropriate waste-water disposal • Enhance the public awareness on the needs and benefits of environmental protection and develop cultural sensitiveness of tourists, accommodation service clerks and local communities
These existing eco-labels programmes can be integrated in the SPP programme. This would require a closer coordination between the relevant ministries and sectors (eg. MPI and MONRE).
3.2.5 Monitoring The DPM has the responsibility to coordinate the reporting procedure on procurement activities of all agencies at national level. Annually, an official letter is sent by the DPM to all ministries, central agencies and committees to request for their report which includes a monitoring section. The main aspects covered by the report include (UNEP, 2015b):
• Training on public procurement (including the number of training workshops, courses, organisers, number of participants in each workshop)
60 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• Capacity of procurement officers (especially the ratio of officers having procurement certificate per the total number of procurement officers), and assessment of capacity building needs (knowledge, skill, profession) • Procurement activities (including number of tenders, procurement methods, procurement goods/ services, total number of tenders, sources of budget) • Activities linked to the resolution of complaints, denunciations and handling of the violations made to the legislative regulations on procurement
The report did not obviously include any information related to the integration of sustainability criteria in the procurement process.
3.2.6 Market Readiness The market readiness analysis has been elaborately studied by Binh & Trung (2017), under the project on “Stimulating the demand and supply of sustainable products through sustainable public procurement and ecolabelling” (SPPEL). Based on the suggested 15 product categories listed in the EU GPP site and consultations with the Viet Nam Green Label Office and Department of Procurement Management, the prioritised products concluded with 1) Office paper, 2) Compact Fluorescent Lamps (CFL) and 3) LED light bulbs. All of these products are produced domestically by Vietnamese enterprises (Binh & Trung, 2017).
The Viet Nam Green Label Office has developed criteria for printing papers and CFL but there are no criteria yet developed to certify LED products.
For paper, there could be thousands of enterprises working on paper producing, processing, recycling and importing. However, there are only 91 enterprises officially registered as a member of the Viet Nam Pulp and Paper Association (VPPA) and from the VPPA source, there is no statistical data of the number of enterprises producing recycled paper and/or eco-friendly paper.
Table 11: Binh & Trung (2017) – Volume of paper sold in Viet Nam in 2015, source from VPPA
61 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
From the table above, the volume of the paper produced domestically was not adequate for national consumption. Viet Nam needed to import more than 1 billion tons of paper to meet the needs (Binh & Trung, 2017). The average price of eco-friendly papers is also relatively higher, about 19% more expensive than the conventional paper. Although sustainability criteria are not at the top of the procurer’s purchasing decision, they have expressed the willingness to buy eco-friendly paper from sustainably managed forest or certified well-known label.
For the CFL and LED bulbs, there are approximately 200 enterprises in Viet Nam, according to the Viet Nam Lighting Association (VLA) (Binh & Trung, 2017). Lamp and light bulb market in Viet Nam composed by 60% of domestic products and 40% of foreign products (ibid.). Most of the producers self-declared energy saving, long lasting, eye-sight safety and non-toxic on their products, although none of them has been certified with Vietnam Green Label, Vietnam Energy Star or any equivalent international label. In fact, in almost all office building, the ceiling lighting systems are installed with tube fluorescent (ibid.). The demand for LED lighting is mostly from the civil construction and engineering sector. The public sector seems to hesitate to purchase LED lights through the public procurement system, since the office facilities were built long time ago with the installation of CFL and fluorescent tube lighting system. CFLs and fluorescent are usually purchased by the procurement officers for maintenance purposes (ibid.).
From the evaluation of the perspective of goods/service providers on SPP in Viet Nam conducted by UNEP (2015b), it is interesting to see that the first impressions of these providers towards SPP we rather perceived with much hesitation. Many of them was not interested to participate in the survey questionnaire. The ones that do respond mostly claimed that they are either not interested in/or have adequate knowledge about the field of public procurement, and in SPP. These suppliers also claimed that sustainable products are currently available on the Vietnamese market, but have just not been integrated to the public procurement system (UNEP, 2015b). Another issue is that most of the sustainably produced products tend to be bought in smaller quantities, and that there are no specific criteria to define what a sustainable product is, thus there are little incentives to push more of these products into the market.
4. Evaluation of the Comparative Analysis Based on the analysis above, a Table 12 has been drawn up for ease of SPP maturity comparisons for both countries. This section will discuss the different set ups with regards to the procurement system’s integration of sustainability standards and the gaps and opportunities for both countries. As mentioned in the earlier sections, one way where sustainability standards can interact with public policy is through the public procurement process. However, after conducting the analysis, integrating sustainability standards is not as straightforward as it seems. There are many underlying layers beyond the procurement process in itself that requires deliberate actions in order to achieve SPP. This analysis will be evaluated against two key factors: political factor and socio-economic factor.
Given the purpose of this study has a specific emphasis on the use of sustainability standards, Table 13 provides a snapshot of the standards that have/can be considered in the SPP process in the given country.
62 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Table 12: Table of Comparison for SPP maturity analysis between Germany and Viet Nam Germany Criteria Viet Nam • Decentralised System Background • Centralised System • Federal State sets overarching legal framework • Initially decentralised but was modified by the decision issued o BMWi (policy development) by the Prime Minister on 26 November 2007 to follow the o BMF (financing) regulations on good purchasing and procuring o BMI (centralised e-procurement system) • Depending on the procurement above and below EU thresholds, Centralisation approach was motivated by: Primary responsibility still sits at Municipalities & Länder • Practice savings, anti-corruption, prevent wasting in state (German States) – can also create their own law budget spending • Above EU thresholds – Act Against Restraints of Competition • Ensure the complex equipment of modern public goods and (GWB) properties best satisfy the better need for regular operation • Below EU thresholds – national budgetary law activities of the government bodies • No central coordinating body or agreed protocols for • Ensure the transparency in procurement, equipment and use of coordination public goods and properties • Savings of VND 469 billion was recorded during the piloting of Advantages: the centralised system during 2008-2012 • Reduced time for individual procurement process • Lower coordination and set up costs • DPM manages the centralised procurement activities but the • Reduced barriers to satisfy unique requirements and different active involvement of other (too many) ministerial actors in realities in each municipalities/Länder charge of particular areas led to a very complex coordination • Closer relationship with local suppliers management • Reduced barrier for entry for SMEs • Thus, sustainability integration becomes an added complexity centralised Disadvantages • Does not satisfy economies of scale (overall reduced cost) • Tendencies of duplications and sometimes contradictory procurement policies
• 2010 Report – Germany only managed to get 30% GPP uptake Political • 2011-2020 objective for SPP by value and 46% of green contracts Willingness of o Focus on sustainable economic development • Thus, reformed in 2016 to streamline the legal procurement SPP/GPP o Economic restructuring toward increasing quality framework with the EU directives/ GPP framework o Natural resource effectiveness and competitiveness
63 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• KNB was set up as a central web-based platform for all o Ensuring social security information about sustainable procurement (www.nachhaltige- o Reduce poverty and improve equity beschaffung.info ) o Enable and enhance SME participation in sustainable • Sustainability Compass was later set up as another central tool on development integrating sustainability criteria into the procurement process – SPP portal (www.kompass-nachhaltigkeit.de/) • However, the integration of sustainability criteria in public tender procedure is still not evident in the Law on Procurement • Evaluation of tenderer methods still do not include criteria such as social and environmental • Even if there was, it’s still of no obligation – thus neglected in most cases. • Incentives however given to tenderers with more than 25% female labour or more than 25% invalids
Adoption of National Plan for sustainable development 2013-2015 • Introduced indicators to be used for monitoring and evaluating sustainable development performance • Established National Sustainable Development Office • The Committee for Sustainable Development helps to line ministries and provinces implement strategies for sustainable development
• Adopted EU GPP built from the 2004 Directives (Directive Adoption of a • Signed the Manila Declaration on Green Industry in Asia in 2004/17/CE and Directive 2004/18/CE) as core legislation global strategy 2009 governing the public procurement in the EU. • Participated in the Tokyo Green Industry Conference • Member of the WTO, obligation towards WTO GPA • Participated in the UN Convention against Corruption signed in 2003 Strategy Shaped by 2030 SDGs • Being a WTO member since 2005 – WTO GPA • Intensify environmental/ climate policies • Member of the APEC Procurement Forum • Social inclusivity i.e. SME promotion/ job creation • UN Conference on Sustainable Development in 2011 when Viet • Improvement in R&D and innovation for procurement policy Nam pledged to promote green industrial development • Green Growth Strategy (2011-2020) for a vision to 2050 o Climate change mitigation
64 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
o Green production and green lifestyle o Promote eco-labelling o Regulate public expenditure and use green economy standards o Applying economic and technical instrument to encourage sustainable consumption • SWITCH-Asia Programme under EU funds for 8 projects • 2010 Report – Germany rates better than UK in terms of SPP Knowledge of SPP UNEP Assessment Report 2015 training and trainings for non-national level schemes with a • No official and comprehensive training document for political commitment for close cooperation and exchange of good procurement management and implementation practice between the federal and regional governments • Each organization develop their own material for their trainers • Practitioners at lower levels of government often lack capacity and participants and qualifications • Lack of SPP guidelines or legal documents • Price tend to still be the prevailing criteria • Therefore, no SPP aspects incorporated in any training • Part-time procurement practitioners instead of full-time positions, materials weakens specialization • Bottom line: Lack of SPP knowledge and awareness of SPP as • Limited academic specialization in public procurement a whole • Becomes even more complex when integrating strategic/ • The cost of applying SPP is perceived to be much higher than sustainable procurement processes conventional products and services – more work for budget • Workshops/ peer exchanges have been organized at Länder level planners • Ad hoc circulars, guidance materials and handbooks have been • Lack of expertise at the provincial and local levels circulated by Ministries at different levels of the government • MPI generally have no specialised procurement unit that can control and support procurement activities • As a result, no standardized methods of conducting procurement activities. • Lack of standardization causes confusion and inconsistent application of national legal framework
• Public procurement is not regulated by a single law Legal Framework • Still a new process to mainstream environmental factors in • Federal law can only set standards where the Länder level cannot procurement process regulate. This means that the lower levels of the government can • Thus, no specific requirements on environmental criteria in create legislation in domains that have not been regulated at a legal instruments higher level
65 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• Establishment of Public Procurement Committees – forums for • Sustainability standards criteria can be included in the technical stakeholders to contribute to the drafting of procurement specifications (by project basis) legislation – main purpose is to capture concerns from different • However, only integrating in specification stage leaves out an stakeholders and BMWi is the responsible institution for devising important tactic to encourage markets to address their processes and drafting the primary legislation in a more sustainable long-term manner • Though the committee has been criticised for their lack of • Need to consider sustainability criteria in listing process or as democratic legitimacy pre-selection (could work well in centralised set up) • Incorporation of sustainability standards in public procurement legal framework • 3 recognised Viet Nam labels (still underutilised at procurement • The DIN Standards Committee represents the country’s interest stages) within CEN (CENELEC for electrotechnical standards) and ISO o Viet Nam Green Label (IEC for electrotechnical projects) to ensure the uniformity and o Energy Saving Label consistency of the German standards with the European and o Green Lotus Label (tourism) international standards. • Integrating these labels would require closer coordination • The Germany’s declaration of environmental management between relevant ministries and sectors measures in public procurement mandated the use of • Internationally recognised sustainability standards are not environmental management standards such as Eco-Management mentioned as they have been perceived to have cost implication and Audit Scheme (EMAS) and other environmental management systems as recognized in accordance with Article 45 of Regulation (EC) No 1221/2009 or other environmental management standards based on the relevant European or International Standards and certified by accredited bodies • Does not measure procurement activity at a comprehensive Monitoring • Through reporting by the DPM national or system-wide level • An official letter will be sent by DPM to all ministries to • Current data collection process is human resource-intensive and request for their report error prone • Report covers number of trainings on public procurement • Limitation with the e-procurement system – no mechanism to • Capacity of procurement officers – ration of procurers with automatically collect and transmit procurement data certificate over total number of procurers • Data are submitted manually – excel format on an annual basis • Number of tenders, methods, budget etc. • Data requests have been low – dataset on procurement activity • Activities linked to resolution of complaints, denunciations across Germany is incomplete and potentially inaccurate • Report did not include any information related to sustainability criteria
66 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• However, the government has already taken decisive steps towards digitalising procurement processes- revising legal framework • Given the mandate for tenderers to produce certification in Market Readiness • Viet Nam Label Office has developed criteria for printing environmental management systems, products and services are by papers and CFL lights but not for LED – study based on default certified in this area prioritised products • Construction work scores the highest number of tenders between • Paper produced in Viet Nam is apparently not adequate for 2014-2019 while national consumption • Clothing and footwear sector scores the highest for ‘Good • Also, the average price of eco-friendly papers is also relatively procurement’ high, about 19% more expensive than conventional paper. • Preferential treatment for SMEs, thus, participation of SMEs is • Sustainability criteria is still not at the top of the procurer’s very high in public procurement tender. decision • In terms of sustainability standards, organic certification is • Most of the suppliers self-declared energy savings for CFL and prevalent in the agricultural sector followed by GLOBALGAP, LED and out of the 200 enterprises in Viet Nam, none have ProTerra and RainForest Alliance been certified with Vietnam Green Label or Vietnam Energy • While Germany also rely heavily on Blue Angel labels Star • SPP in general has been perceived with much hesitation (UNEP, 2015) • Sustainable products are normally bought in smaller quantities thus little incentives to push these products into the market
67 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Table 13: Sustainability Standards used in both countries Germany Viet Nam Listing in Sustainability Compass: Viet Nam does not have any online portal to By Product Category promote the use of sustainability standards. 1. Apparel & Textiles Thus, this list is a compilation of used • Better Cotton Initiative standards in Viet Nam (not limited to public • Blue Angel Textiles procurement) listed in Ecolabel index and • Cotton made in Africa (CmiA) Sustainability Map. • Cradle to Cradle textiles • EU Ecolable textiles Ecolabel Index list of ecolabels used in Viet • Fairtrade Cotton Nam. • Fairtrade textile production • 4C Association • Global Organic Textile Standard • Audubon International (GOTS) • Best Aquaculture Practices • Global Recycled Standard (GRS) • Bio Suisse • Naturland textiles • CAFÉ Practices • Naturtextil IVN certified BEST • EarthCheck • OEKO-TEX 100 • Fairtrade • OEKO-TEX Made in Green • FSC • World Fair Trade Organization (WTFO) • Global Organic Textile Standard • Bluedesign product (GOTS) • Eco-institute-upholstered • Greenguard furniture/textile • IMO Certified • Business Social Compliance Initiative • LEAF Marque (BSCI) • MSC • Ethical Trading Initiative (ETI) • Sustainable Furnishings Council (SFC) • Fair Labor Association (FLA) • Singapore Green Label Scheme • FairWear Foundation (FWF) (SGLS) 2. Paper • Sustainable Agricultural Network • Blue angel paper • EU Ecolabel paper Sustainability Map – other sustainability standards not mentioned above • Nordic Ecolabel paper BRC Global Standard for Food Safety • Austrian Ecolabel paper • Issue 7 3. Mobile Devices Baseline Code – Global Coffee • TCO Certified Smartphones 2.0 • Platform • TüV Rheinland Green Product Mark
4. Leather & Leather Products • Business Social Compliance Initiative Code of Conduct -BSCI • Blue angel leather • Clean Clothes campaign – Code of • IVN natural leather Labour Practices 5. Computer • EU Organic Farming • Blue angel laptops & Co • EcoVadis • EU Ecolabel laptops & Co • Electronic Industry Citizenship • Nordic Ecolabel Laptops & Co Coalition (EICC) • TCO Certified Notebooks 5.0 • European Feed Ingredients Safety
• TÜV Rheinland Green Product Mark Certification (EFISC) (laptops) • Friends of the SEA (FOS) • EPEAT • Fair Labor Association 6. Wood & Wood Products • Fair Stone • PEFC • Fair Wear Foundation • FSC • Fair for Life • Malaysian Timber Certification Council (MTCC)
68 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
• Sustainable Forestry Initiative • Food Safety System Certification 7. Food (not limited to) 22000 – adopted from ISO 22000, ISO • UTZ Certified 22003 • Rainforest Alliance • Global GAP Aquaculture • Natureland • Global Social Compliance Programme • Fair for life • Global Aquaculture Alliance • 4C • Global Sustainable Tourism Criteria • The Fair Trade Company for Destinations • Organic Rapunzel Fairtrade • Global Sustainable Tourism Criteria • EU Ecolabel for Hotel and Tour Operators • Bio • IFOAM • Fairtrade • ILO Labour Standards 8. Natural Stone • Made in Green OEKO-TEX • Fair Stone • Rainforest Alliance • IGEP • SAI – Farm Sustainability Assessment • Xertifix • USDA National Organic Program • Xertifix PLUS • UTZ 9. Detergents & Cleaning Agents • Unilever Sustainable Agriculture Code • Blue Angel detergent • Verified Carbon Standard (VCS) • Cradle to Cradle detergent & cleaning agent Viet Nam ecolabel • ECO guarantee • Vietnam Green Label • ECOCERT • Vietnam Energy Star • EU Ecolabel detergent & cleaning agent • Green Lotus Label • AISE sustainability initiative – seal with green wreath The Directorate for Standards, Metrology and • Nordic Ecolabel – detergent & cleaning Quality (STAMEQ) Viet Nam agent • National Standards (TCVNs) in theory with principle of standard development Other Standards, as mandatory criteria: based on ISO/IEC Guides • EMAS • Organization Standards (TCCSs) • Environmental Management Standards • National Technical Regulations recognized in accordance with Article (QCVNs) 45 of Regulation (EC) No 1221/2009 or • Local technical regulations (QCDPs) other environmental management standards based on the relevant European or International Standards and certified by accredited bodies
DIN Standards Committee represents the country’s interest within the European Committee for Standardization (CEN) • CENELEC for electrotechnical standards and • ISO (IEC for electrotechnical projects) to ensure the uniformity and consistency of the German standards with the European and international standards.
69 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
Given the lack of up-to-date academic research resources with regards to SPP case studies, the relatively new concept of SPP and the extreme geo-political differences between Germany and Viet Nam, to conduct a comparative analysis based on similarities and differences is not straightforward. As there are no specific indicators to effectively juxtapose between these two countries, the UNEP’s 6 indicators for the maturity of SPP have been identified to be the most effective method to conduct a comparative analysis between these two countries. However, it is clear from the cases that the policies were more inclined towards ‘Green’ which is the environmental aspect, more than the other two pillars defined in sustainability. The evaluation from the comparative analysis above will thus, approach two key factors: political factor and socio-economic factor as they can be perceived as the potential pull factor towards internalising the use of sustainability standards in public procurement.
Political Factors Where political willingness is concerned, this analysis is based upon other relevant research case studies where the establishment of the different modes of information dissemination have been critical to promote the use of sustainability standards in the public procurement process. Without the support or mandate from the high-level political commitment and long-term government vision, these strategies will not surface as a needed mechanism to acquiesce to the global sustainable development agenda. While SPP is still a rather new concept, there are still many components that have yet to be looked upon. Given Germany’s decentralised structure, online tools such as the Sustainability Compass and other web-based sustainable procurement platform provides procurers in the different municipalities and Länder states the same information and best practices on SPP. This tool is in effect an instrument that centralizes sustainability practices across the country. The list of sustainability standards promoted in the website has been listed in table 13.
On the other hand, Viet Nam does not have any online portal that encourages the use of sustainability standards. The list of standards listed in the table above are standards that have been identified by Ecolabel Index and Sustainability Map that are present within the country though it may not provide a good indication in terms of its market share and its purpose of use (i.e. Market access, buyers requirements etc.). Viet Nam´s ecolabels such as the Vietnam Green Label, Vietnam Energy Star and the Green Lotus Label has been more prominent in the collated academic researches. It is also useful to note that the Directorate for Standards, Metrology and Quality (STAMEQ) in Viet Nam is the national standards body that develop national standards (TCVNs) namely with the ISO/IEC principles. The conundrum here is the fact that these standards were mentioned as ´Standards for Trade´28, mainly for export, thus it is still unclear if these standards are also being encouraged for internal use, such as public procurement. In any case, the integration of sustainability criteria in public procurement procedure is still not evident in the Law of Procurement in Viet Nam. Evaluation of tenderer methods still do not include any form of sustainability criteria related to social and environment. Even if there was, it is still of no obligation which makes sustainability criteria neglected in most cases.
In terms of the adoption of a global strategy, both Germany and Viet Nam are a member of the WTO, which assumes the obligation towards the WTO GPA. Though the WTO GPA does not specifically have direct sustainability criteria, as mentioned in section 2.2.2, it does have a component that describes the encouragement of using specifications based on international standards that have been perceived as highly preferable good ethics. Similarly, the WTO GPA also highlights the promotion od conservation of natural resources or protect the environment although the term ´encourage´ and ´promote´ is however not a clear-cut mandatory measure. Unlike the EU GPP, which technically
28 Refer to this website: https://www.export.gov/article?id=Vietnam-Standards-for-Trade 70 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
reinforces the WTO GPA and the EU Directives on Public Procurement, the strategy has been aimed to internalise sustainability practices into the procurement procedure, mainly by setting technical specifications based on the 21 selected product groups. Germany, through the Competence Centre for Sustainability Procurement (KNB) uses the same approach by categorising sustainability standards based on the product groups listed in table 13. In political terms, Germany has complied to the needed transformation in its public procurement process, as both an obligation from the European Commission mandate as well as their national interest towards meeting the global SDGs.
Similar to Viet Nam, their deliberate strategy towards centralising public procurement was a revelation towards its SPP momentum. Being one of the beneficiary countries under the UNEP 10YFP SPP, this collaboration was a motivation to help reduce poverty and improve equity, while from an economic standpoint, Viet Nam believes the SPP should enable and enhance the involvement and participation of SMEs in the sustainable development of the country. As a starting point, the studies conducted by UNEP have provided an interesting insight on how SPP has been perceived by the national procurers. It is clear that the need for capacity building would be an effective activity in regard to SPP implementation. The integration of sustainability standards criteria in the procurement process would be complementary to this activity. However, further research on this field with regards to the uptake of sustainability standards may be needed to suffice such implementation. Some of these challenges are linked to the socio-economic factors discussed below.
Socio-Economic Factors In reference to table 12, the deliberate push for a centralised public procurement system is still much to be debated. Germany’s procurement system is highly decentralised and often complex due to its federal system, but its framework is very effective to achieve the primary goals of realising value for money and promoting open and fair competition between the tenderers which brings about a solid anti-corruption framework. According to the study on public procurement’s administrative capacity on Germany’s country profile conducted by (EC, 2016), the corruption widespread in procurement at national level accounts 37%, while at local level up to 49%, which is considered low, and that some weaknesses persist notably in the area of major construction works, the sector that dominates Germany’s public spending. On the other hand, Viet Nam’s deliberate transition towards a more centralised system was largely motivated by price savings, anti-corruption and preventing any waste in the state budget spending. Though there are no records thus far about corruption, there were however savings of up to VND 469 billion during 2008-2012. To put emphasis on anti-corruption, Viet Nam has also endorsed the United Nations Convention against Corruption as part of its strategy for combatting or preventing corruption, as well as strengthening integrity in numerous government activities (Dang, 2011).
Germany’s public procurement system has been recognised as an efficient instrument to attain the objectives of the Single Market and the current political objectives, such as socio-economic goals with respect to SMEs and sustainable requirements. However, much of the contention lies with the fact that decentralised system does not satisfy economies of scale and that there are tendencies of duplications and contradictory procurement policies. According to the public procurement report by the European Commission, the most significant weaknesses n the German procurement system are the inefficiencies resulting from the separation of legal and institutional structures both among and between the various federal and regional administrations where duplication of efforts and the incongruities in procedures and requirements among product categories and between the various kinds of contracting authorities impose additional management and compliance costs (EU, 2016). Where else in Viet Nam, although
71 Masters in Standardization, Social Regulation and Sustainable Development Faculty of Social Sciences – University of Geneva Master Thesis
the procurement system is centralised, the active involvement of many ministerial actors in charge of particular areas made the coordination of the system very complex, thus considered decentralised.
For Viet Nam, the SPP objective for 2011-2020 foresees an enabling environment for the involvement and participation of SMEs in the sustainable development of the country, one of the key motivators that drives the economic expansion. Similar to Germany, SPP tenders have a preferential treatment towards the local SMEs, thus it is evident to see the SMEs partaking in the tender process for most cases. However, in Viet Nam, a recent move embarking the Europe-Viet Nam Free Trade Agreement (EVFTA), Viet Nam has committed to give EU suppliers the right to bid up to 50 percent of the pharmaceutical purchases by the Ministry of Health and it will also provide access to other bid for contracts such as state-run Electricity of Viet Nam and those of other major infrastructure projects including roads, railways and airports (Hanoitimes, 2019). This may pose challenges for the Vietnamese SMEs in the construction work sector, but the regulation of threshold amount should still be able to protect the Vietnamese SMEs.
In terms of the knowledge of SPP, the two countries face different challenges. In Germany for example, procurement practitioners are often on a part-time basis as opposed to full time positions. This was proclaimed to weaken the specialization of the procurers, especially with the need to integrate strategic/ sustainable procurement processes. This may be due to the fact that Germany in general, submits a disproportionately low number of tenders for publication in Tenders Electronic Daily (TED). Or vice versa, given the lack of resource and/or specialization, it leads to a lower number of tenders. This issue limits competition and access to markets (EU, 2016). As mentioned in the case study, for tenders below the EU thresholds, there are no compulsory database which is essentially another issue when it comes to monitoring and reporting. Thus, besides the tenders published on TED which is significantly low value, the bulk of the tenders which are managed at the lower levels of the government tend to be disregarded. In Viet Nam, the lack of expertise in SPP is a general widespread, added with the lack of standardized methods of conducting procurement activities causes confusion and inconsistency in the application of the national legal framework.
Where sustainability standards are concerned, it is also important to study its adoption from a more general view (outside the public procurement domain). A study conducted in Viet Nam on the viability of certification in the aquaculture sector claimed that small producers typically face higher transaction costs, reduced marketing capacities and limited access to efficient production technology, additionally they face real sustainability challenges. Any small producer standard should reflect the sustainability challenges facing small producers and provide requirements with which small producers can work towards (Marschke & Wilkings, 2014). This study was based on three standards – the Global Partnership for Good Agricultural Practice (GLOBALG.A.P), the Aquaculture Stewardship Council´s (ASC) Shrimp Aquaculture Dialogue (ShAD) and Viet Nam´s standards, the Vietnamese Good Aquaculture Practices (VietG.A.P). According to the study, if certification is to enter mainstream markets, a re-visioning of how sustainability standards work for small producers is necessary. However, in the context of public procurement, it is highly unlikely that small producers would make the cut, but for the purpose of this study, it is clear that mainstreaming sustainability standards in a country like Viet Nam may pose certain socio-economic challenges, mainly for the SMEs.
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5. Conclusions In conclusion, the uptake of sustainability standards in public procurement process does take into account the maturity of SPP. The initial assumption that brought about the interest to conduct this study was that, the integration of sustainability standards was seen to be more straightforward. The idea of integrating sustainability standards into the procurement process is more than just merely selecting the standards that go along with the product. Trainings, harmonisation of procedures across the country, monitoring and assessment have also been added as prerequisites of SPP. Although Germany may seem to have a higher level of maturity in SPP compared to Viet Nam, its weakness in data collection still needs to be strategized. While there are many studies surrounding the implication of sustainability standards and its opportunities in the private sector, mostly related to international trade, little is known about the integration of sustainability standards for internal consumption purposes, like public procurement, especially in low-middle income country.
Thus, what we have seen in Germany, the promotion of using sustainability standards are more profound than it is in Viet Nam. Given Germany’s alliance with the EU, sustainability standards have been mostly addressed as an instrument to meet the environmental and social criteria, especially with regard to the EU Renewable Energy Directive (RED). The implicit recognition of several standards and certification schemes for biofuels and biomaterials have raised a significant awareness of sustainability standards used in regulation. Where else in Viet Nam, sustainability criteria have been mostly neglected or avoided given its additional requirement, capacity and expertise needed for such measures. In any case, both countries are still facing challenges when it comes to specialisation of SPP, thus the price factor still prevails in the purchasing decision in both countries.
For both countries, it is highly recommended to look into improving their coordination and harmonising the rules and systems. This is the best possible solution to also improve the data collection in order to produce accurate, timely and comparable data nationwide. For Viet Nam, a governmental body to monitor sustainability standards used in the country could be the steppingstone in mainstreaming the use of these standards. A monitoring body could potentially recognize some of the most prevalent standards that may be important to the country’s production and even facilitate the infrastructure to encourage and reduce the burden of SMEs to implement sustainability standards in their businesses.
With regards to this paper, though there may be several limitations that have challenged different aspects of this study, such as the limited updated resources, language barriers to study the procurement portal, especially where it links to the use of sustainability standards. Future researches should in fact be conducted on the field and observe the procurement processes critically in order to identify the best policy options in integrating sustainability standards into the procedure. By merely ‘promoting’ and ‘encouraging’ may not suffice its motivation. Furthermore, it would also be beneficial to study if the mandate of integrating sustainability standards in public procurement and the preferences towards SMEs in the tendering process would influence the widespread use of sustainability standards in the given country as an attempt to answer if it would be able contribute to the increase in supply, in order to foster market readiness for SPP.
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7. Annexures
Annex 1: 10 OECD Principles of Enhancing the integrity of public procurement (OECD, 2019). The 10 OECD principles are:
Principle 1: Provide an adequate degree of transparency in the entire procurement cycle in order to promote fair and equitable treatment for potential suppliers.
Principle 2: Maximise transparency in competitive tendering and take precautionary measures to enhance integrity, in particular for exceptions to competitive tendering
Principle 3: Ensure that public funds are used in public procurement according to the purposes intended.
Principle 4: Ensure that procurement officials meet high professional standards of knowledge, skills and integrity.
Principle 5: Put mechanisms in place to prevent risks to integrity in public procurement.
Principle 6: Encourage close co-operation between government and the private sector to maintain high standards of integrity, particularly in contract management.
Principle 7: Provide specific mechanisms to monitor public procurement as well as to detect misconduct and apply sanctions accordingly.
Principle 8: Establish a clear chain of responsibility together with effective control mechanisms.
Principle 9: Handle complaints from potential suppliers in a fair and timely manner.
Principle 10: Empower civil society organizations, media and the wider public to scrutinise public procurement.
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Annex 2: (WTO, 2019) WTO’s Revised Agreement on Government Procurement Non-Discrimination
1. With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of any other Party and to the suppliers of any other Party offering the goods or services of any Party, treatment no less favourable than the treatment the Party, including its procuring entities, accords to: (a) domestic goods, services and suppliers; and (b) goods, services and suppliers of any other Party.
2. With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: (a) treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership; or (b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of any other Party.
Annex 3: (WTO, 2019) WTO’s Revised Agreement on Government Procurement Article X: Technical Specifications
1. A procuring entity shall not prepare, adopt or apply any technical specification or prescribe any conformity assessment procedure with the purpose or the effect of creating unnecessary obstacles to international trade.
2. In prescribing the technical specifications for the goods or services being procured, a procuring entity shall, where appropriate: (a) set out the technical specification in terms of performance and functional requirements, rather than design or descriptive characteristics; and (b) base the technical specification on international standards, where such exist; otherwise, on national technical regulations, recognized national standards or building codes.
3. Where design or descriptive characteristics are used in the technical specifications, a procuring entity should indicate, where appropriate, that it will consider tenders of equivalent goods or services that demonstrably fulfil the requirements of the procurement by including words such as "or equivalent" in the tender documentation.
4. A procuring entity shall not prescribe technical specifications that require or refer to a particular trademark or trade name, patent, copyright, design, type, specific origin, producer or supplier, unless there is no other sufficiently precise or intelligible way of describing the procurement requirements and provided that, in such cases, the entity includes words such as "or equivalent" in the tender documentation.
5. A procuring entity shall not seek or accept, in a manner that would have the effect of precluding competition, advice that may be used in the preparation or adoption of any technical
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specification for a specific procurement from a person that may have a commercial interest in the procurement.
6. For greater certainty, a Party, including its procuring entities, may, in accordance with this Article, prepare, adopt or apply technical specifications to promote the conservation of natural resources or protect the environment.
Annex 4: (WTO, 2019) WTO’s Revised Agreement on Government Procurement Article IV: General Principles Conduct of Procurement
4. A procuring entity shall conduct covered procurement in a transparent and impartial manner that: (a) is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering; (b) avoids conflicts of interest; and (c) prevents corrupt practices.
Annex 5 – World Bank, 2019: Non-exhaustive list of labels and certification schemes
Labelling Procurement Example:
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Annex 6: UNEP (2016a) – Key Performance indicators by monitoring aspect or area
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Annex 7: Metrics for measuring procurement objectives at different levels of government by the OECD Methodology for Assessing Procurement Systems (MAPS).
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