Observatory on European Studies _ "Steering the future: Green, Sustainable and Digital Procurement"

 

*Nuno Cunha Rodrigues [1]

 

The world is at a tipping point.

Last year we were suddenly faced with a pandemic that no one expected. Suddenly, the world froze.

One of the surprising effects of the pandemic was that, in some places, nature recaptured cities and the pollution incredibly slowed down.

At that moment, many realized what some had already understood: we can still revert climate change and the negative human’s impact in nature.

We all know that politics will be needed.

Something was already done.

The approval of international legal instruments such as the Paris agreement[2] or the Kyoto Protocol[3] and, in an EU level, the European Green deal[4], went in the right direction.

This multilevel legal system aims to materialize the principle of environment protection.

But those instruments still need to be implemented.

Within the European Union, the principle of environmental protection is clearly stated in Article 11 of the Treaty on the Functioning of the European Union[5] and it’s the only EU policy that is transversal to all other EU policies.

This is a market failure for which public intervention is necessary.

Here, one has to ask if public procurement can be used as a tool to correct market failures and, if so, how far should it go in the implementation of the so-called horizontal policies, such as environmental or social ones.

The problem was identified and discussed in the past by the European Court of Justice, namely in the 2002 Concordia Bus case[6] and, afterwards, in many others like the Weinstrom[7] or Max Havelaar[8] cases.

The inclusion of horizontal policies such as environmental or social ones in public procurement procedures remains highly insufficient.

The fact that those horizontal policies are optional for contracting authorities contributes to that insufficiency.

Moreover, many contracting authorities are not aware of the possible use of green public procurement despite the efforts made in the last years by the European Commission in order to increase green public procurement, namely by editing guidelines, defining Green Public Procurement criteria and disseminating good practices and projects.[9]

Other reasons come from the fact that some contracting authorities fear facing some “public procurement experimentalism” and that others think that green and social public procurement leads to higher prices in a short term.

It’s time to change this mindset and to overcome what some refer to as the tyranny of low purchasing prices.[10]

New ways to enhance green, sustainable and social public procurement are needed.

I would suggest three different ways:

The first based on soft law; the second, on conditionality; and the third on mandatory requirements.

I will briefly explain each of them.

The first approach aims to change all the stakeholder’s behavior.

We know how tempting, easy and safe can be for contracting authorities to repeat the same specifications through different public tenders.

This behavior influences economic operators and harms innovation.

In order to overcome this obstacle, I do think more guidance is needed.

Recently, the European Commission has highlighted this need.

In the 2020 Communication “A new Circular Economy Action Plan”[11] the Commission refers the need to support capacity building with guidance, training and dissemination of good practices and encourages public buyers to take part in a “Public Buyers for Climate and Environment” initiative.

By doing so, the Commission intends to facilitate exchanges among public buyers committed to green public procurement implementation.

Nevertheless, the 2014 EU Directives had already paved the way for new possibilities in the field of green and social public procurement.[12]

I refer, for example, to the possible use of eco-labels[13]; to consider the life cycle cost when defining the award criteria[14]; to set requirements for extended warranty for products or to assure, in public procurement procedures, the transition to a circular economy.

These objectives are to be used on a wide scale.

EU guidelines in this area should be known and developed at national, regional and local levels, so that all the stakeholders are fully aware of the possibilities and paths to develop green and sustainable public procurement policies.

Here, the immediate creation of incentives that enhance the use of EU soft law and best practices by contracting authorities could be considered.

The stakeholders should also have a clearer understanding of the environment impact of public procurement.

For this purpose, it should be perceived the footprint of each individual procurement.

This could be achieved through the use of digital solutions, similarly to what has been proposed, in October 2020, in Denmark.[15]

Another suggestion – the second - is based on conditionality, linking the possible access to EU funds to the application of sustainable public procurement policies.

This seems to be the case of the Next Generation EU knowing that compromises more than 50% of the EU funds for green and digital transformation.[16]

It is expected that green criteria will be set mandatory in requirements in order to have access to much of the Next Generation EU funding.

The third suggestion is based on the possible inclusion of mandatory requirements in EU law.

Until now, the EU has tried to implement green or sustainable public procurement through soft law and, only in some sectorial areas, by mandatory rules.

One can ask if this conception should not be changed by creating mandatory rules that would force contracting authorities to include green criteria in public procurement procedures.

This is already the case in Japan and Korea.[17]

In the EU, this would imply changing the EU directives.

Here, it could be considered the possible definition of a “go green or explain” principle.

This would be parallel to the “divide or explain” principle that was established by the 2014 directives when referring to the division into lots in order to foster the participation of SMEs in public tenders.[18]

Similarly, it could be considered the possible creation of a “go green or explain” principle by which the contracting authorities would be obliged to include green criteria or, if not, substantiate why.

Other proposals are known and can be discussed such as the possible break of the demand to link the award criteria to the subject-matter of the contract.

Here, I wouldn’t go so far.

Let me now move to another key point of today’s conference: the importance of digitalization of public procurement.

I would refer three short topics that I consider to be essential to today’s discussion: (i) transparency; (ii) digital ledger technology and (iii) EU regulation of digital markets.

The first – transparency – is known as one keyword that stands behinds public procurement rules.

If, on the one hand, digitalization has helped to enhance transparency, it’s also known, on the other hand, that an excess of transparency can raise concerns on data protection and create incentives to economic operators´ collusion.[19]

In fact, the Holy Grail of public procurement is to achieve the fine-tuned level of transparency. We all know how the EU directives have always aimed for the right balance in this field.

The second topic refers to the possible use of new technologies, such as blockchain.

In certain cases, the use of digital ledger technology can be useful such as by central purchasing bodies or in the context of framework agreements.

But in many cases the possible use of blockchain technology in a legal environment can lead to unsolved problems.

For example, the use of blockchain in land registry remains unclear when dealing with retroactive effects in the event of cancellation of a legal transaction (for example because a third party invoked adverse possession - usucapio).[20]

Accordingly, the approach to the use of this technology in a legal atmosphere, such as public procurement, has to be made carefully.

The third challenge comes from the future EU regulation of digital markets.

Just recently, the EC approved three important proposals: the Digital Services Act; the Digital Markets Act[21] and the Artificial Intelligence Act.[22]

Knowing the importance that digital economy has nowadays I do think that all these proposals will have a huge impact in our future.

Still, the interception of the proposals with public procurement rules remains to be studied.

I refer, inter alia, to the interception of these new regulations with electronic procurement platforms or even the impact of automated decisions within public procurement decisions.

Many of these topics will be addressed at today’s conference.

 

[1] The text corresponds to the Keynote speech presented at the EU Public Procurement High-Level Conference entitled "Steering the future: Green, Sustainable and Digital Procurement" that took place in Lisbon, on the 7^th may 2021, under the Portuguese Presidency of the EU Council.

[2] See https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement

[3] See https://unfccc.int/resource/docs/convkp/kpeng.pdf

[4] See https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1596443911913&uri=CELEX:52019DC0640#document2

[5] See https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12012E/TXT

[6] See ECJ case C-513/99 available at https://curia.europa.eu/juris/liste.jsf?language=en&num=C-513/99

[7] See ECJ case C-448/01 available at https://curia.europa.eu/juris/liste.jsf?language=en&num=c-448/01

[8] See ECJ case C-368/10 available at https://curia.europa.eu/juris/document/document.jsf?docid=122644&doclang=EN

[9] See all the documents publicezed by the EC available at https://ec.europa.eu/environment/gpp/index_en.htm

[10] See Steven Schooner, 60 Contract Management, Issue 10, 32 (October 2020), available at  https://scholarship.law.gwu.edu/faculty_publications/1514/

[11] See https://ec.europa.eu/environment/topics/circular-economy/first-circular-economy-action-plan_en

[12] See https://ec.europa.eu/environment/gpp/eu_public_directives_en.htm

[13] See considering 75 of the Directive 2014/24/EU.

[14] See article 68 of the Directive 2014/24/EU.

[15] See https://stateofgreen.com/en/partners/state-of-green/news/green-purchasing-for-a-green-future-the-danish-government-flexes-the-public-procurement-muscle/

[16] See https://ec.europa.eu/info/strategy/recovery-plan-europe_en

[17] See https://www.oneplanetnetwork.org/sites/default/files/case_studies_140317_web.pdf

[18] See article 46 of the Directive 2014/24/EU.

[19] See NUNO CUNHA RODRIGUES, Contratação Pública e Concorrência, AAFDL, 2019, pp. 82 e segs.

[20] See NUNO CUNHA RODRIGUES, Contratos inteligentes (smart contracts) e mercado imobiliário: a caminho de um novo blockchain?, p. 543, available at https://drive.google.com/file/d/1UhO7qD_TO_OCarb_CMKb_h_lOzqU6C6P/view

[21] See https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package

[22] See https://digital-strategy.ec.europa.eu/en/library/proposal-regulation-laying-down-harmonised-rules-artificial-intelligence-artificial-intelligence

 

*Nuno Cunha Rodrigues

Associate Professor at the Law Faculty of the University of Lisbon.  Jean Monnet Chair. Lawyer. nunorodrigues@fd.ulisboa.pt