Buying Green: Harnessing Large-Scale Procurement Power
Large purchasers have incredible power to push markets in socially beneficial directions. Yet harnessing this purchasing power often isn’t easy. By Jim Motavalli and Josh Harkinson
It’s right there in President Clinton’s 1998 Executive Order 13101. “Agencies,” it says, “are encouraged to use all of the options available to them to determine the environmentally preferable attributes of products and services…” Unfortunately, the key word is “encouraged,” rather than “required,” and that means the federal government is moving at its usual incredibly slow pace. But there’s no doubt that “green purchasing” -- by all levels of government, hospitals, schools and corporations -- could make a big difference. In the early 1980s, the technology was available to install airbags in automobiles, but American car manufacturers claimed that consumers didn’t want them. Then, in 1985, Ralph Nader successfully lobbied the government’s General Services Administration to order 5,000 airbag-equipped cars. Ford turned in a winning bid, and soon other manufacturers started offering the airbag option to stay competitive. Once car companies saw a market for the innovation, airbags were in the majority of American cars within a few years.
Large purchasers have incredible power to push markets in socially beneficial directions. The nation’s 87,000 federal, state and local governments spend $385 billion a year on goods and services, including everything from paint to office paper. “This is one in every five dollars spent in the economy,” says Scot Case, director of procurement strategies at the Center for a New American Dream (CNAD). According to The American Prospect, government purchases of everything from cars and office equipment to food and energy amount to no less than 18 percent of the Gross Domestic Product. Furthermore, the nation’s 3,700 colleges and universities spend about $300 billion yearly on supplies, more than the budgets of all but 20 countries in the world.
Yet harnessing this purchasing power often isn’t easy. Nader lobbied for years before the federal government adopted airbags. Likewise, students across the country convinced university administrators to purchase sweatshop-free apparel only after incessant engagement through meetings, protests and sit-ins. Historically, procurement policies have been reformed only after large coalitions of concerned citizens mobilized to fight for change.
Now there is growing pressure from nonprofit groups, student alliances and green businesses to persuade large buyers to support environmentally preferable purchasing (EPP). As Case puts it, “We’re trying to direct those purchasing dollars to create a market for more environmentally friendly goods and services.” Corporate buying practices are also coming under scrutiny from well-organized activists.
Targeting The Big Guys
Buying green won’t become an American habit without extensive education, even if the benefits may seem obvious. “We’re not talking about products that don’t work,” says Mike Shore, a spokesperson for the environmental product certifier Green Seal. “There is a performance requisite in each of our standards that the product must work at least as well as similar products in its category. There’s no point in having a product that is environmentally friendly but doesn’t work.”
Nevertheless, many quality environmental products have not caught on in the marketplace, because they’re up against well-funded marketing campaigns from mainstream brands. Also, large producers are loathe to green their products unless they see a competitive advantage to doing so. Meanwhile, many innovative green products don’t make it into the supermarket, and remain consigned to specialty stores and e-commerce websites. The market for eco-products remains a niche, catering to the small percentage of the population that values environmental issues enough to seek them out.
Targeting large manufacturers to green up their product lines is a tactic that can work side-by-side with encouraging purchases from the smaller companies. “It definitely helps to move the market,” says Betsy Lydon, who was program director of the now-defunct Mothers & Others. “You really need to be working on both levels.” Large consistent buyers are very important, says Lydon, who cites the example of organic cotton. If farmers know they can sell organic cotton to producers with a constant demand, she says, they will bring more acreage under cultivation. This initiates a cycle whereby economies of scale decrease the price of organic cotton, resulting in better, cheaper products. Consumers take the cue, and suddenly Hanes Beefy Tees are pesticide-free.
“The gold standard would be if you have big purchasers that are willing to be proud of this involvement,” says Lydon. Patagonia, for example, uses only organic cotton, employs recycled plastic bottles to make its fleece and regularly publicizes its accomplishments, which distinguish it from less eco-friendly competitors.
The fight for green procurement has advanced dramatically in the last two years, despite the lack of strong support from the Bush Administration. As Betsy Taylor, CNAD’s executive director, points out, “Green activists have been fighting over the last 20 years for policy change, and they’ve been forced into a defensive stance. By switching to a market-based approach, we can do a form of aikido -- harnessing our opponents’ power. Procurement is a wonderful tool for tapping into the existing system, which is all about finance, markets and buying. We can affect billions of dollars of purchasing demand, and make real change.” Last April, the Center held a “North American Conference on Green Purchasing” that attracted 130 attendees from the U.S., Europe, South America and Asia (representing governments, nonprofits and the private sector). Growing out of the conference, the Center established three working groups -- on paper, nontoxic cleaning products and energy (especially green power).
CNAD also holds bimonthly conference calls with as many as 200 purchasing officers (from government and Fortune 500 companies) in 30 states. The calls put purchasers in touch with experts in such fields as paper use, cleaning products, green electricity and integrated pest management, and include lively discussions about concrete purchasing reforms that can often be accomplished without spending extra money. (Indeed, many result in actual savings.)
As an example, Susan Kinsella of Conservatree led a call on paper purchasing last year. She pointed out, “The bottom line is to insist on recycled, no matter what. A lot of purchasers don’t even bother to ask for price comparisons anymore, they just specify recycled, and that’s an essential tactic when we’re trying to build up markets.”
The conference calls are very well organized. Participants are sent Power Point presentations prior to the calls, and can direct questions to the experts in an electronic queue. The Center’s website (at www.newdream.org/procure) hosts an extensive database not only of environmental purchasing policies, but of purchasing progress around the country, sorted by category, state and region.
The Carter Administration was a leader on many green issues, including government procurement. In 1976, Congress passed the Carter-supported Resource Conservation and Recovery Act (RCRA), which required that all paper purchased by federal agencies contain at least 30 percent post-consumer content.
RCRA was ahead of its time, and it showed. In 1992, 16 years after the law passed, only 12 percent of paper purchased by the government complied with the law. Agencies claimed that high prices, individual preferences for certain types of paper, and availability effectively prevented them from being able to purchase recycled.
But it was also in 1992 during the Clinton Administration that Executive Order 12873 established the White House Task Force on Green Goods, Waste Prevention and Recycling. A subsequent executive order proclaimed that buying recycled was possible and relatively painless, and dismissed as spurious complaints about the price, preferability and availability of recycled paper.
Now, 98 percent of the 10,000 sheets of paper the government purchases every hour contain at least 30 percent post-consumer content. Major contractors, and state and local governments, which must abide by federal purchasing standards when they use U.S. funds, have also followed the national lead. The huge government contract has stabilized market standards and price, and has also elevated Great White, a major government paper contractor, to become one of the country’s most respected paper companies. Seeing that purchasing recycled was safe and cost-competitive, many large corporations and private universities have also begun to purchase recycled, and individual consumers may soon follow suit.
When it comes to policy tools promoting green procurement, RCRA does not stand alone. A catalog of laws and executive orders instruct the government to factor environmental concerns into almost all purchasing decisions, including several executive orders and Office of Management and Budget (OMB) regulations.
Despite the sheer number of directives for green purchasing, and the fact that many of them have been around for years, activists say progress has been limited at best outside of the RCRA success story. According to Ned Daly, forests policy director at the Consumers Choice Council, “Some of the laws on the books right now are not being implemented very well, mainly because it’s just more of a good publicity stunt than good policy.” Green Seal’s Mike Shore adds, “While there is a firm policy in the federal government to consider the environment both in laws and regulations by the OMB, and while there are people in the trenches who want to carry them out, there is very little information available to them, thanks partly to bureaucratic sludge and partly to the lack of interest of the EPA in advancing the program it’s chartered to carry out.”
A good example of how the federal government has failed on green procurement is contained in the Energy Policy Act of 1992, which required agencies to acquire an escalating number of alternative-fueled vehicles beginning with fiscal year 1993. Government agencies were to have purchased and introduced to federal fleets some 10,000 light-duty alternative-fueled vehicles in 1995 alone, and by fiscal 1999, 75 percent of all federal purchases would be of “green” cars and trucks. In Executive Order 13149, President Clinton reiterated this policy, and further declared that every agency with 20 or more vehicles was to reduce its fleet-wide petroleum consumption 20 percent by 2005.
By 2000, however, the federal government owned only 846 electric vehicles (EVs). The numbers were much better for cars powered by compressed natural gas (14,462) and an ethanol blend (16,287), but these vehicles are “bifuel,” meaning they can also run on pump gasoline, and there’s little indication they actually were running on these alternative fuels.
The federal agencies’ sluggishness is not surprising, given that it took the EPA more than 15 years to act on RCRA. Environmentalists from CNAD, Co-op America, the Consumers Choice Council and others have met with federal environmental officials to push green purchasing, and some greens have high hopes for John Howard, the new federal environmental executive, who is said to be enthusiastic about green procurement.
EPA regulations say that if two products cost and work the same, agencies should purchase the one that is more eco-friendly. In some cases, environmental preferability could override cost concerns, giving the advantage to the greener product. But that’s hypothetical, because the EPA hasn’t yet taken any such action.
Instead, the EPA responded to procurement-based federal orders by implementing pilot projects to determine guidelines for evaluating the green score of goods in each product category. These pilot projects continue, and the EPA has yet to require agencies to take concrete steps towards greening their purchasing habits.
EPA administrators say the issue is not clear-cut, and cite the dilemma of volatile organic compound (VOC) levels versus recycled content in paint. Recycled paints close the loop and capture waste products that would otherwise contaminate the environment, but they contain high levels of VOCs. Low-VOC paint solves the toxicity problem, but most of it does not have recycled content. The EPA has spent five years studying issues such as this, and administrators do not give any indications that they will move beyond the pilot project stage anytime soon.
Industry maintains a strong voice in the way the EPA deals with “greening” its purchasing. Meanwhile, the issue flies beneath most people’s radar screen. “It’s not a project that has attracted a great deal of consumer awareness,” admits Fran McPoland, the former chair of the White House Task Force on Green Goods, Waste Prevention and Recycling.
State by State
What the federal government can’t or won’t do, the states can, and both Massachusetts and California have been leaders. Marcia Deegler, Massachusetts’ environmental purchasing program manager, says the state bought $68 million in recycled goods and $18 million in environmentally preferable products and services for two dozen state agencies and municipalities in two dozen categories in 2001. Massachusetts has employed green procurement people since the early 1990s, when the state bought only $3 million in recycled goods annually. The growth of green purchases in Massachusetts is likely to continue, though Deegler says the rate may slow down because “we’ve already reached most of the low-hanging fruit.”
Buying recycled has been public policy in Massachusetts since 1993, when then-Governor William Weld issued an executive order directing all state departments to develop guidelines. Among the hundreds of recycled products now available through state contracts are recycled paper and office supplies, plastic lumber benches and tables, re-refined motor oil, recycled safety vests and traffic cones. The state makes purchases only after determining that the performance of the recycled item equals or exceeds its virgin equivalent.
All Massachusetts state paper offers at least 30 percent post-consumer content, and tree-free paper is available under city contract. Each ton of 30 percent post-consumer recycled paper the state buys saves seven trees, say the state’s recycling advocates. The state now owns 37 zero-emission electric vehicles and 82 powered by compressed natural gas. Its sustainable design initiative saves $17 million in operation, maintenance and utility costs annually. Massachusetts is one of five states (in concert with local governments) that have adopted environmental standards for their cleaning products. The standards, pioneered by the City of Santa Monica in California, rate 18 products on a pass-fail basis. In addition, Massachusetts has a statewide Integrated Pest Management (IPM) program to reduce pesticide use, the result of an executive order signed by the governor.
“We’re one of about 12 states that are active in establishing statewide purchasing programs,” Deegler says. “In some cases, major cities are active and states are not. Cost is a barrier for some, but it doesn’t have to be because many environmental products can actually save money. For example, benches made of plastic lumber can last 25 to 50 years, while wooden ones will start to deteriorate in two to five years. And plastic lumber doesn’t need maintenance. Another example is computers with Energy Star ratings, because they’ll save money on the electric bill.”
Eric Friedman, who founded the procurement program with Deegler and is now Massachusetts’ director of state sustainability, says more can be done. He identifies computers as an area of major concern. Beyond the issue of Energy Star compliance, he says, is the computers’ end-of-life recyclability, including the types of plastic it contains. He also points out that many state vehicles contain potentially hazardous mercury switches, and that a statewide effort is underway not only to stop buying cars with mercury in them, but to capture the toxic metal in the fleet now. “The reality is that we have to continually revisit our standards,” Friedman says. “The market is always a moving target. For instance, we’re expanding what we’re looking for in carpets, because what’s being offered has changed.”
With just 90,000 people, the City of Santa Monica (which is next to Los Angeles) is not a huge purchaser like the state of Massachusetts, but it has become a disproportionately significant model for the rest of the U.S. and the world. “It’s exciting how many calls and queries we get,” says Karl Bruskotter, the city’s environmental program officer.
“The question is not why we have a big program, but why other cities and states don’t,” says Brian Johnson, manager of Santa Monica’s environmental programs division. “Green procurement provides cost savings, is easily implementable, and enhances public health and the environment. Some of these purchases are simply no-brainers. If you have a choice between a carcinogenic bathroom cleaner and one that isn’t, I can’t imagine not choosing the safe alternative. It’s simply unconscionable to expose children to dangerous chemicals unnecessarily.”
As noted in an EPA case study, “Santa Monica has shown how one local government can alter its purchasing policies in a short time to produce win/win situations that benefit end users and the environment.” Santa Monica replaced traditional cleaning products with safe alternatives in 15 of 17 categories, reducing spending by five percent. The city also switched to an IPM approach for its municipal facilities, saving 30 percent of its previous budget and greatly reducing its citizens’ toxic exposure. Santa Monica has not only converted 75 percent of its 500-vehicle fleet to alternative fuels, but also uses re-refined motor oil and less-toxic propylene glycol antifreeze in 67.5 percent of those cars and trucks.
Santa Monica’s governing council pledged to become a “sustainable city” in 1994, and for procurement that’s meant definite target dates and indicators. “Saving money is always important to government agencies,” Johnson says, “but you can’t simply take a ‘lowest, best cost’ approach. Another way to look at it is ‘highest value purchasing,’ meaning not just what it costs but its whole lifecycle, from extraction to disposal. You can use what’s called ‘triple bottom line financing’ to monetize all the costs normally left out of the equation. We’re doing that in a project with Vancouver to determine the true costs and values of using recycled motor oil. Unfortunately, many municipalities are risk-averse, and that leads them to a mode of lesser action.”
The indelible media image of dangerous medical waste washing up on popular beaches a decade ago put the spotlight on a problem that is being creatively addressed through green procurement. As hospitals have realized their clout as collective purchasers, they’ve formed Group Purchasing Organizations (GPOs), some of which buy for hundreds or even thousands of health care organizations.
According to Charlotte Brody, the registered nurse who serves as executive director of Health Care Without Harm (HCWH), three of the biggest GPOs -- Premier, Broadlane and Consorta -- have been persuaded to support EPP and minimize use of products containing latex, polyvinyl chloride (PVC), mercury and chlorine. Premier alone represents 1,800 hospitals and health care organizations; Broadlane represents 450 hospitals and more than 1,400 other facilities. “These are big players,” she says. “They’re big enough to not just signal the market, but move the market. The goal isn’t simply products that are less toxic, but totally nontoxic. And it’s our job to help the professionals see the connection between taking a patient’s temperature and a tuna fish swimming in the ocean 2,000 miles away. Do we now have half of the health care profession engaged with this? Yes. We still need to do more.”
One of the most powerful forces pushing health care agencies to reform their purchasing is grassroots activism by nurses. HCWH’s medical campaign began four years ago with a group of nurses who no longer wanted to give fever thermometers containing mercury as gifts to new parents. “What we’ve been able to accomplish has been through the extraordinary persistence of nurses,” says Brody. The Switzerland-based International Council of Nurses (ICN) supports a variety of environmental initiatives, including reducing the toxicity of products and the packaging waste that goes with it. ICN also pushes for alternatives to PVC, mercury and latex, and waste segregation to reduce the amount of medical waste needing special treatment.
HCWH has influenced the largest for-profit hospital chain, HCA, to phase out its purchase of mercury-containing medical products. Jamie Harvie, mercury workgroup leader for HCWH, says, “The market for mercury products is drying up…Since many hospitals are demanding mercury-free alternatives, the time is right for greener purchasing.” Celia Deloach, HCWH’s Washington campaign director, adds, “We help sponsor a conference called Clean Med on environmentally preferable medical products and green building supplies, and last year we had 70 percent of the hospital buying power in the country on a panel. And we’re also working with pharmacies -- most of the major drug stores have agreed to no longer sell mercury-containing products.” HCWH is also proactively collaborating with the Association of Healthcare Resource and Material Managers, as well as Hospitals for a Healthy Environment, to develop new green products. It works closely with the Sustainable Hospitals Project, which has developed detailed lists of non-mercury products, as well as information about alternatives to the more common toxic chemicals used in healthcare.
Universities Flex Buying Power
Considering that the combined procurement budget of America’s colleges and universities exceeds that of the federal government, these institutions have tremendous potential to make an impact through purchasing policies.
Universities have all of the ingredients to make green procurement possible: resident scientists, relatively streamlined bureaucracies, budding student environmentalists, and discretionary funds. A few schools have capitalized on these resources with magnificent results. For others, the total achievement pales compared to the potential.
Nonprofit groups like the National Wildlife Federation (NWF) can help. NWF doesn’t restrict itself to working with animals; it’s also working to green campuses across America. It’s national online “Driving Sustainable Markets Teach-In,” in partnership with the National Association of Educational Buyers, is designed to influence decision-makers in the administration, faculty and student body. According to Julian Keniry, senior manager of NWF’s Campus Ecology program (established in 1989), “By supporting the markets for environmentally preferable products, institutions throughout the nation have demonstrated a commitment to environmental and fiscal responsibility.”
Despite help from such programs, many schools have instituted procurement reforms haphazardly -- excelling in some areas and failing in others. Energy efficiency, not surprisingly, is one of the first places universities have begun to change, because it saves money. Duke University, for example, has installed energy-efficient bulbs in most of its buildings and motion sensors to turn off lights. Yet Duke lags behind even the federal government in its paper purchasing policy. Despite years of advocacy from the campus Environmental Alliance, the majority of paper purchased by the university contains zero recycled content.
Rutgers University is a national leader in green purchasing, thanks to the pioneering work of Kevin Lyons, the Camden campus’ purchasing head and author of Buying for the Future: Contract Management and the Environmental Challenge. Lyons, who describes himself as “an environmentalist who happens to work in purchasing,” has developed a campus program that requires vendors to adopt such practices as minimizing waste and using sustainable materials. He also draws on the expertise of university scientists, holds roundtable discussions with vendors to familiarize them with the university’s policies, actively seeks “closed-loop” contracts (meaning that recycling is part of the package), and conducts rigorous lifecycle analysis on potential purchases, resulting in a 2.4 percent drop in procurement costs over the past 10 years.
The program, Lyons says, has saved Rutgers millions of dollars. As University Business magazine pointed out, “By paying attention to lighting, heating, water use, waste disposal, transport and purchases, every college and university can cut costs and be green. Lyons provides a lot of practical advice about everything from better purchasing and contract writing for suppliers to outsourcing.”
American corporations are accountable mostly to their shareholders, but they’ve also been shown to be extremely sensitive about their public images. Some savvy groups that focus on corporate buying practices have seen an impressive response to their campaigns. The Rainforest Action Network (RAN), for instance, has used its targeted activism to change purchasing practices at several major retailers and homebuilders. Working with the Student Environmental Action Coalition, Rainforest Relief, the Sierra Student Coalition, the Action Resource Center and Free the Planet, RAN obtained major concessions from industry giants like Home Depot, Ikea, Centex Homes and Lowe’s Companies to phase out the use of old-growth wood in all operations. “We applaud Lowe’s for showing uncommon courage and decisiveness in using its purchasing power to leverage change within the logging industry,” says RAN’s Michael Brune, old growth campaign director.
Another group, the GrassRoots Recycling Network (GRRN), has targeted Coca-Cola for its political opposition to state bottle bills, and for its failure to keep a 1990 promise to use significant quantities of recycled plastic in its bottles. GRRN is also putting pressure on the Miller Brewing Company to use at least 25 percent recycled plastic in its bottles. Pressure from the recycling advocates may have helped convince Miller to scrap plans for non-recyclable plastic bottles.
The Long Reach of Globalization
Progress on both the government and corporate fronts faces a big obstacle in the World Trade Organization (WTO), whose policies can inhibit environmentally preferable purchasing. To date, 26 member countries and 37 U.S. states have signed the Government Procurement Agreement (GPA), which prohibits obstacles to international trade imposed by government purchasing policies. If interpreted strictly, the agreement could dismantle almost all government progress on green purchasing and effectively ban procurement of many environmentally preferable goods.
According to David Korten, author of When Corporations Rule the World, “The WTO told the U.S. it must relax its clean air standards and allow the import of dirtier gasoline. It told Japan that it must reduce its testing for pesticides on imported produce. And it told Europeans that they can’t ban the import of genetically modified food products until they can prove conclusively they are harmful to human and environmental health.”
The GPA does not prohibit preference between products based on their appearance, price or durability, but it does include language that could severely limit green purchasing, saying that buyers cannot discriminate between products based on the way they are made. Governments abiding by GPA may not require the purchase of paper with 30 percent post-consumer content, because the presence of recycled paper has no significant impact on whether the paper will feed though a copier or laser printer.
A list of WTO’s crimes by Russell Mokhiber of the Corporate Crime Reporter and Robert Weissman of Multinational Monitor puts procurement issues front and center. “The WTO limits governments’ ability to use their purchasing dollar for human rights, environmental causes, worker rights and other non-commercial purposes,” they write.
Environmentalists are not unified on how to fight the WTO. Some believe that it may be best to green WTO policy -- as a way to work towards commonly accepted international environmental standards. Many, like Gross, disagree. “I don’t know if I would advocate trying to manipulate the WTO to serve this broader goal,” she says. “I would rather have limited roles for international bodies and their agreements and let us do the work in other ways to help our respective countries do the right thing.”
Green purchasing is a war with many fronts, and it will take an all-out push to make sure it appears on the nation’s radar screens. Of all the battles waged by the environmental movement, this one is hardly the most dramatic, but it is certainly one of the most important.
Jim Motavalli is editor of E; Josh Harkinson is a former E intern.