Public procurements can expedite low-carbon circular economy

News 2020-02-12 at 10:07
Circular procurement can steer us towards low-carbon circular economy. © Päivi Tahvanainen

Public procurements and investments can be the force to steer us towards low-carbon circular economy. Their annual value amounts to about EUR 30 billion, and they cause nearly one fifth of the greenhouse gas emissions in Finland, calculated according to consumption, and slightly less than one quarter of the use of raw materials. Circular economy can be promoted through procurements by maintaining the value of products and materials in circulation and expediting low-carbon and resource-efficient operating models.

What is circular procurement?

Procurement promoting circular economy means that criteria are set for the competitive bidding process of a procurement to promote the long service life of the product or service, the recyclability and reuse of the materials and the intensity and harmlessness of the use. Such criteria include a long guarantee for products, availability of spare parts, repairability and recyclability or the share of recycled materials. The criteria related to circular economy are part of the sustainable procurement criteria set in the EU’s GPP criteria, among other things, and nationally applied by Motiva and the Swedish National Agency for Public Procurement (NAPP). The requirements of the environmental labels also include many criteria promoting circular economy. Including circular economy-related criteria in procurement is the first step towards circular procurement.

Strictly speaking, circular procurement refers to a situation where procurement has an extensive impact on the client’s and users’ ways of thinking and acting. For example, instead of ownership, people can pay for services or obtain product service concepts. The procurements of carsharing vehicles or used computers are examples of operating models that increase the intensity of use and decrease the need for ownership. On a wide scale, circular procurement may form a network of several operators, utilising material streams between operators. Local traffic, for example, may use locally produced biogas, or a road construction project may use local secondary flows. Procurement leading to system-level changes often requires months and years of planning and development as well as local pilots.

Each step of the procurement process is a chance for circular economy

Promoting circular economy is possible in all the stages of the procurement process. The key step is the preparation of procurement taking place before the competitive bidding where the client surveys the solutions that are available on the market, meet the client’s needs and comply with circular economy or the market’s preparedness to develop such solutions.

In competitive bidding, the circular perspective can be included in the object of the procurement, for example work uniforms made of recycled materials or reused computers. The object of procurement may also be a result or an impact, such as capture of nutrients or increase in recycling rate, whereupon the supplier is responsible for developing the solution. In that case, the procurement requires innovation and circular perspectives play a key role in the negotiation rounds or in the joint development process.

Mandatory requirements or scored criteria targeted at expanding the service life of the product, enhancing material circulation or questions of safety or final disposal may be set in the request for tenders. The criteria set in the request for tenders may not guarantee a solution in line with circular economy unless they are mandatory.

The implementation of goals and objectives based on circular economy during the contract period may be promoted through a bonus/sanction method and by agreeing on development during the contract period within the framework of the Finnish Act on Public Procurement. Monitoring during the contract period is a key method for assessing the realisation of circular perspectives in the procurement. However, impacts on the environment and resource efficiency may not be comprehensively evaluated until much later.

When to focus on circular economy in procurement?

Many industries are already conducting circular procurement. In terms of effectiveness, the key industries are infrastructure and housing construction. In construction, the key factors to consider are flexibility for changes, material choices and the demolition stage. In addition to the building itself, the related services and functions, such as traffic, food, cleaning and maintenance services, must be taken into consideration in order to realise circular economy. In Finland, the Green Building Council has developed a set of criteria for observing circular perspectives in construction projects, and the Ministry of the Environment has published a guide for the criteria of demolition work.

Waste management and water supply services have numerous opportunities for circular economy solutions. In procurements of biowaste and sewage sludge treatment services, the recovery and circulation of nutrients and the higher recycling rate and refining value of materials can be promoted. For example, the biogas created in the sewage sludge treatment service process, placed under competitive bidding by Oulun Vesi, is used to compensate for some of the company’s energy consumption and refined into traffic fuel. The end product is mainly used as soil products for landscaping and as soil conditioner.

The growth of low-emission traffic creates prerequisites for the use of biofuels in traffic. Circular economy can also be promoted through vehicles viable for shared use, such as carsharing vehicles and citybikes that have become an increasingly popular object of procurement for cities over the past few years.

Circular economy may also be realised in textile and furniture procurement. In Sweden, for example, the City of Malmö primarily requires its framework agreement suppliers to provide recycled furniture, if available in offices in the city and the surrounding areas. In the Finnish Sakupe textile procurement, the criteria included recyclability throughout the product’s service life, whereupon the supplier’s textile waste solution at the end of the product’s life cycle became a key factor for success in the competitive bidding.

New products to improve the durability of food chains and more efficient use of resources have been developed in food services. For example, public kitchens have also started serving patties made of carp. Reducing food waste is a vitally important action that can be invested in through supportive cooperation measures between the client and the supplier.

Circular procurement requires information, market dialogue, cooperation and new business models

The tools of ecodesign and life cycle thinking are applicable for planning circular procurement. The chemical content and potential hazardous substances in the products are also key questions to examine. Finding market opportunities is a prerequisite for implementing new products, skills or technologies. The supply chains and supplier networks are more complex than ever, and more information on them must be obtained from a circular perspective. This requires supplier market insights and market dialogue. Joint procurement units and procurement rings may enable circular procurement by bringing together competence between several organisations.

Circular procurement may become an everyday solution when the environment and infrastructure supports it. For example, a paper recycling system enables easy use of recycled materials in paper procurement. However, new operating methods and business models, such as storing and recycling surplus materials and managing the aftermarket in a profitable manner, are often needed in the procurement of circular economy solutions. New perspective is needed for coming up with ways to use expiring goods and materials. There is new need for small and agile operators able to offer solutions and profitable business models for functions not at the core of the client’s or supplier’s expertise. Solving such operating models often requires cross-organisational cooperation and developing and expanding the business operations of the companies.

Circular procurement is supported by experiments and pilots yielding new experiences and ideas. Innovative procurement can push new product development processes where the products are designed from a circular perspective. The spread of circular thinking and the demands of the clientèle force businesses to act. For businesses, the core of circular procurement is in the extension of the life cycle of the products through sensible planning. They must examine their operations from this perspective and provide information on the background of the products. Creative thinking and comprehensive solutions support these efforts and must be enabled in public competitive bidding.

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