Role of sustainable public procurement in promoting uptake of Sustainable Palm Oil in India

Public procurement is the process of purchasing goods, services or works by the public sector from the private sector. According to the World Bank, public procurement represents on average 13% to 20% of GDP of a country.^[1] It can play a key role in helping countries pursue green, resilient, and inclusive development. Traditionally, the sourcing decisions of companies were driven by short-term profitability and cost-efficiency. However, with growing awareness about sustainability worldwide there is an increasing interest to see how public agencies can also promote sustainability and inclusivity through their procurement practices.

The procurement decision makers are now conscious of not just the potential loss of brand value and consumer trust, but also that unsustainably sourced products and negligence around sustainability can lead to regulatory and monetary risks.^[2] This process that internalizes environmental and social concerns besides economic efficiency into purchasing decisions by a public authority is referred to as Sustainable Public Procurement (SPP). Maturity of the sustainable procurement program has a wide variation across the region depending on the awareness of stakeholders in the value chain on sustainability issues which in turn is reflected in the willingness to pay for purchasing sustainable products, works and services.

Looking at good practices of sustainable public procurement, Europe adopted the Green Public Procurement (GPP) initiative, which is a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle.^[3] Some countries in Europe have matured sustainable public procurement programs and techniques. For example, in Sweden, the government sets its own procurement policy, in 2017 Sweden published a National Public Procurement Strategy with seven goals. Two of the goals (public procurement that drives innovation and promotes alternative solutions, and environmentally responsible public procurement) directly contribute to an environmental transition, especially in the road and construction sector.

Furthermore, the Swedish Procurement Agency (SPA), created in 2015, is tasked with supporting the implementation and follow-up of the strategy. Lastly, in October 2021, the Swedish government proposed a law requiring local authorities to consider climate, environmental, human health, animal rights, and social and labour laws in public procurement.^[4]

In Netherlands, the landscape of Sustainable Public Procurement (SPP) is determined by several governmental departments, including circular economy, climate, and sustainability (Ministry of Infrastructure and Water Management), social return and central government procurement (Ministry of the Interior and Kingdom Relations), green transitions and social enterprises (Ministry of Economic Affairs and Climate Policy). Additionally, the amended Dutch Public Procurement Act, enacted in 2016, allows procurements to include environmental and social criteria. The recent amendment to the Dutch National Plan on Sustainable Public Procurement, which spans 2021 to 2025, highlights the positive trends,  with 67% of public purchases including environmental criteria.^[5] In the UK, the Government Buying Standards (GBS), a set of easy-to-use product specifications for public procurers are aligned to the European Commission’s Green Public Procurement programme initiative. By using the UK Government Buying Standards, people are also able to meet EU-wide criteria and comply with UK commitments and priorities.^[6]

Some countries in Asia like Korea^[7], Thailand^[8],Vietnam^[9] and Peru, Dominican Republic, Costa Rica amongst others in Latin America^[10] have adopted a certain standard of sustainable public procurement or SPP as well.

Sustainable Public Procurement – Indian context

Since public procurement in a country is driven by legislation and regulations, it is the primary requirement to have a conducive public procurement legal and regulatory framework that mandates integrations of economic, environmental, social sustainability concerns in purchasing decisions at different stages of the procurement cycle. Overall, integrating sustainable procurement practices into the public procurement policy aligns with broader national goals related to environmental conservation, social equity, and economic development. It ensures that government spending contributes to building a more sustainable and resilient society while delivering value for money for taxpayers.

The Thirteenth Finance Commission of India^[11] emphasized the need for India to grow with a lower environmental and resource footprint than at present. The Commission draws linkages between fiscal sustainability through fiscal deficits, debt sustainability and liquidity of the government and financial sustainability. It highlighted the importance of environmental sustainability as one of the centrepieces of development policy formulation and the role of incentives in securing such sustainability to be increased over time.

Over the years, certain initiatives (including policies and programmes) related to SPP, which have been favourable to the environment and the people have been implemented by the Government of India. The Government of India launched the Government e-Marketplace (GeM)^[12]for procurement of both Products and Services in 2016. GeM^[13] facilitates online procurement of common use Goods & Services required by various Government Departments /Organisations / PSUs. GeM aims to enhance transparency, efficiency, and speed in public procurement. It provides the tools of e-bidding, reverse e-auction, and demand aggregation to facilitate the government users, achieve the best value for their money. GeM is an end-to-end procurement system developed for the purchase of goods and services of common use by government buyers.

While there is no public procurement law at the national level, the Government of India issued a Public Procurement (Preference to Make in India) Order in 2017^[14] (revised in 2022) to encourage ‘Make in India’. Lastly, the Public Procurement Policy for Micro and Small Enterprises (MSEs) has mandated that every Central Ministry/Department/PSU shall set an annual goal of a minimum of 20 percent of the total annual purchases from the products or services produced or rendered by MSEs.^[15]

While there are some initiatives by the Government of India on SPP there are still some major barriers to the slow pace of the adoption of sustainable procurement policy and practices. There also seems to be a lack of awareness regarding sustainability. It then becomes imperative to build the capacity of manufacturers and consumers on the procurement of sustainable products and the holistic impact they can create including on the environment, biodiversity, value chain, etc. 

Sustainable Public Procurement and Palm Oil

Palm oil is the most widely produced, consumed, and traded vegetable oil in the world. About half of all packaged goods in the supermarket contain palm oil as an ingredient. This includes both food and non-food items. With increasing demand, palm oil production has grown tremendously over time. Oil palm is cultivated in almost all the tropical regions of the world. The main plantation areas are in Indonesia and Malaysia but, increasingly, it is also being cultivated in South America and Africa.

Highly versatile in usage and extremely efficient in yield, palm oil has seen a significant increase in global production and has become an important economic crop for many emerging and developing nations. Based on the data, it is estimated that global demand for palm oil will jump from 73.8 million MT in 2020 to 264.5 million MT by 2050, exacerbating the environmental and social impacts associated with palm oil production.

In India, palm oil is mostly procured by Governments for distribution to people below the poverty line under the Public Distribution System as a cooking medium and consumed by low-income segments of the population, particularly in the states of Andhra, Tamil Nadu, Telangana, Chhattisgarh, Odisha and West Bengal. As per the Indian Economy Survey 2021-22, the import of edible oil will continue to grow at 3.4% per annum till 2030 due to urbanization and changing dietary habits. India is the second largest consumer and biggest importer of palm oil with the volume of imports in 2022-23 being 9.45 MMT largely from Malaysia & Indonesia.

When grown unsustainably, palm oil can damage forests and endanger communities and wildlife. Palm oil has been and continues to be a major driver of deforestation in some of the world’s most biodiverse forests, destroying the habitat of already endangered species and affecting forest bond communities. The forest loss coupled with the conversion of carbon-rich peat soils throws out millions of tonnes of greenhouse gases into the atmosphere and contributes to climate change. There is an urgent need to promote the uptake of sustainable palm oil across the stakeholders of the palm oil value chain.

The three pillars of sustainable palm oil (SPO) production are accountability, transparency, and traceability. Several palm oil certification systems have established principles and criteria to be followed by companies to meet the requirements of the three pillars of SPO and get certified. Certification from these bodies indicates that an organisation is adhering to the given standards and working towards sustainability in producing palm oil. The presence of Voluntary Sustainability Standards (VSSs) in the sector increased dramatically following the establishment of the Roundtable on Sustainable Palm Oil (RSPO) in 2004, which aims to provide major palm oil sourcing companies, such as L’Oréal, PepsiCo, and Unilever, with a more sustainable alternative to conventional palm oil that is produced in large-scale palm oil plantations.

Indonesia and Malaysia both have established their national regulations to strengthen the competitiveness of their palm oil operations and improve their sustainability performance. The Indonesian Sustainable Palm Oil (ISPO) was launched in 2011, and the Malaysian Sustainable Palm Oil (MSPO) was launched in 2013. Both are mandatory targeting plantation operators and smallholders (by 2025 for ISPO).

With the sustainability knowledge and expertise that are available today, companies can source sustainable palm oil without negatively impacting the environment and the communities within which it is grown. Sustainable palm oil can be produced legally, protects forests and nature’s biodiversity, and improves the lives of the millions of people who depend on the industry for their livelihood along with ensuring food security for growing populations around the world.

The Government of India too can work towards promoting the production and consumption of sustainable palm oil as a fundamental to protecting rainforests, safeguarding their vulnerable biodiversity, and helping to create fair socio-economic conditions in the global palm oil supply chain. A shared responsibility approach to bring the shift by working together with food industries, importers, retailers, NGOs, and governments could be the most preferred approach.

The Government of India could also look at promoting the best management practices in production, standards, and certification of palm oil from the very beginning to arrest associated sustainability risks in palm oil production.

• Develop a comprehensive policy that outlines the government’s commitment to promoting sustainable palm oil production, importation, and consumption in India. The policy should integrate environmental, social, and economic considerations and set clear targets for sustainability.
• Implement regulations mandating that all palm oil imported, processed, and sold in India must be certified as sustainable by recognized certification bodies such as RSPO or equivalent standards. This would encourage the adoption of sustainable practices throughout the palm oil supply chain.
• Introduce fiscal incentives, subsidies, or tax breaks to encourage investments in sustainable palm oil production and processing facilities. This could include tax credits for adopting sustainable practices, subsidies for investing in renewable energy technologies, or grants for implementing environmental conservation measures.

The need of the hour is a multipronged collaborative stakeholder approach that involves communities, local governments, standard-setting organizations, and demand-side actors.

India, being the largest importer of palm oil, is in a strategic position to take on a stewardship role in regional trade to drive the demand for responsibly/sustainably sourced palm oil. SPP is a proven method used by governments globally to drive different aspects of sustainability, this can encourage other businesses to do the same.