Procurement professionals need to have an understanding of what green procurement or sustainable procurement means. Green Public Procurement takes a different approach to the private sector when it comes to integrating green considerations into its purchasing processes. In our view, the approach of the private sector is clearer and easier to understand than the opaque formats used in green public procurement guidance. Adopting a category by category approach, the public sector risks losing the wood for the trees. In this context, it is useful for public buyers in state bodies and state funded organisations like not-for-profits to understand how the private sector approaches the challenge of sustainability.
What is ESG and how is it different to Green Public Procurement?
ESG means Environmental and Social Governance and is the key umbrella term in the private sector. From a climate change perspective, the main focus is on what is referred to as scope 1, scope 2, and scope 3 emissions. These are three ways of categorising a company’s influence over the greenhouse gas (GHG) emissions used to measure environmental impact. Understanding the differences between these categorisations is essential for creating effective emissions reduction strategies, and for meeting targets for mitigating climate change.
Scope 1 emissions
Scope 1 emissions are direct emissions that result from a company’s own operations and activities. These emissions can come from a variety of sources, including manufacturing processes, transportation, and on-site energy generation. Some examples of scope 1 emissions include emissions from burning fossil fuels in boilers or vehicles, as well as emissions that arise from industrial processes such as cement production or food production (e.g. breweries, bakeries etc.).
Scope 2 emissions
Scope 2 emissions are indirect emissions that result from the consumption of purchased electricity, heat, or steam. These emissions are generated by the utility company that produces the energy, but they are attributed to the company that consumes the energy. This category of emissions is often called “energy indirect emissions” or “purchased electricity emissions”. Scope 2 emissions are calculated using the emission factor of the utility company that provides the energy. In simple terms, this means the energy/electricity employed to produce the concrete, beer or bread in the Scope 1 examples.
Scope 3 emissions
Scope 3 emissions are all other indirect emissions that are not included in scope 2. These emissions are generated from activities that are related to a company’s business operations, but are outside of the company’s direct control – they are not direct inputs to the production process but are essential to the running of the organisation. Examples of scope 3 emissions include emissions from the production of purchased goods and services, employee commuting, and waste disposal. Scope 3 emissions are often the largest source of emissions for many companies, and they are the most difficult to track and reduce as these are the greenhouse gases buried in supplier operations rather than the organisation’s own operations.
To summarise the differences between scope 1, scope 2, and scope 3 emissions for emphasis:
- Scope 1 emissions come from a company’s own operations and activities,
- Scope 2 emissions come from the consumption of purchased energy,
- Scope 3 emissions are generated by activities that are outside of a company’s direct control, but are related to operations.
Other differences between the emission categories
Another difference between the three categories of emissions is the level of control that a company has over them. Companies have the most control over their scope 1 emissions, since these emissions come directly from their own operations. Scope 2 emissions are less directly controlled by companies. Companies can choose to purchase energy from renewable sources or develop their own electricity resources (e.g. photovoltaic solar power). They can also improve the energy efficiency of their buildings and facilities (thereby reducing the amount of energy they consume). Scope 3 emissions are the least directly controlled by companies as they are generated outside of their direct control. However, companies can work with their suppliers and partners to reduce these emissions.
The importance of each category of emissions also differs as follows:
- Scope 1 emissions are important because they are a direct measure of a company’s environmental impact.
- Scope 2 emissions represent a significant portion of a company’s overall emissions. They can be reduced through energy efficiency measures and the use of renewable energy sources.
- Scope 3 emissions also represent a significant portion of a company’s overall emissions. They can have a significant impact on the environment and society.
In order to effectively reduce greenhouse gas emissions, companies need to address all three categories of emissions.
Considerations for green public procurement and public buyers
Thinking about how emissions are categorised as scope 1, 2, and 3 is useful for public procurement organisations as it disaggregates the climate challenge and allows public buyers to ask slightly more sophisticated questions of potential suppliers in tenders. When setting award criteria for green procurement, consideration can be put into asking suppliers:
- What are you doing to address climate change in your operations?
- What are you doing to ensure your energy usage is minimised / from renewable sources?
- How do you address sustainability in your selection of suppliers?
There are ten priority categories for green procurement in Ireland so where criteria are being applied, questions like those outlined above can be employed in selection and/or award criteria. Information on the ten categories is available here.
Additional reading
You can find more green procurement material on https://www.cips.org and elsewhere on the keystone site here.
