Why public procurement must champion decarbonisation, innovation, and long-term value

By Alison Grace

By Federica Pozzi

Environmental organisation ECOS and think tank International Institute for Sustainable Development (IISD) explain how this transformation can add the right kind of value: reducing long-term costs while boosting EU demand for low-carbon, circular products.

Federica Pozzi, Senior Programme Manager at ECOS – Environmental Coalition on Standards, said:

Public procurement based only on price is like fast fashion: it’s tempting, but more polluting, and we shouldn’t be surprised when repairs and replacements cost us more in the long run. Real value is about more than price. For our wellbeing, the environment, and future-focused companies to thrive, the Public Procurement Act needs to take a more strategic approach and drive taxpayer money into decarbonisation.

Ronja Bechauf, Policy Advisor at the IISD – International Institute for Sustainable Development, said:

The true challenge of this procurement reform is creating a clearer legal framework that rewards long-term value, innovation and environmental performance, rather than focusing on risky ‘Made in Europe’ rules or the cheapest upfront price.

What is happening in European public procurement?

On 9 September, the European Commission plans to propose an update to the decade-old rulebook [1] that guides how public money is spent – from big public projects to everyday services. One new procurement regulation is expected to harmonise and replace the three existing directives.

The Public Procurement Act (PPA) – part of the EU’s broader competitiveness agenda – is set to ensure that taxpayer money is channelled to products and services that create significant added value – for innovative companies investing in decarbonisation, the environment, and workers.

If done well, refocusing public spending can save money in the long run, strengthen value chains, reduce dependencies, and help achieve the EU’s climate goals.

Why does it matter?

The Draghi and Letta reports and the Clean Industrial Deal [2] all reached the same conclusion: clear measures can grow demand for clean production, creating lead markets for low-carbon, circular products and services.

In practice, this is about:

• Steering how 16% of the EU’s yearly GDP is spent [3] – roughly 5 trillion euros.
• Spending across every sector – from infrastructure projects to food in schools.
• Redirecting how 250,000 public authorities across the EU spend taxpayer money.
• Fixing problems that exist in today’s public procurement frameworks.
• Creating the right conditions for existing cleaner, forward-looking technologies to scale.

Why does the EU need to update its procurement rules?

Public procurement in Europe today is not working well.

Public buyers often award projects to the cheapest offer. This happens too frequently – in more than 50% of procedures, according to the EU Court of Auditors [4]. But lowest price does not mean the best deal – and it can even be more costly in the long-term.

There is limited competition. Around 40% of public contracts in the EU have only one single bidder – a problem that is growing, with the average number of bidders falling from 5.7 to 3.2 between 2011 and 2021 [5]. This is not due to supply issues. Rather, it is an indicator that public markets are not attractive for EU companies, which are forced into a race to the bottom. Increasing competition can lead to 15% lower costs [6].

The result: processes are often inefficient and wasteful. Globally, inefficiencies cause delays and an estimated USD 1 trillion in wasted spending every year [7].

Why is focusing only on ‘lowest price’ not the best deal?

Lower prices can mean lower value and quality, with hidden costs. For example, for public buildings, 60-80% of costs are attributable to their operation, energy, and maintenance. However, this is not factored into upfront procurement prices. The real costs of projects reach much further than ‘cheapest price’ at the procurement stage.

Innovation and SME participation is discouraged [8]. When only price is considered, there is a race to the bottom that undermines fair competition and good working conditions. Large incumbent companies are often optimised for lowest prices, while innovative SMEs are penalised. This can be a barrier to reach economies of scale.

Green public procurement can bring significant benefits. Aligning EU public procurement with sustainability could cut CO₂ emissions by 34 million metric tons annually, mobilise 86 billion euros for green industries, and create 384,000 high-quality jobs [9]. Green public procurement, where contracts are awarded based on environmental performance, quality, and lifecycle costs rather than upfront price alone, is one of the most powerful tools available to deliver these benefits.

What are the risks of a bad public procurement framework?

The EU risks losing competitiveness unless public procurement creates reliable demand for cleaner products and services. Contributing factors include:

• Simplifying for the sake of simplifying carries a significant risk of increasing inefficiencies. Robust rules prevent corruption in procurement processes. EU-level sectoral legislation supports public authorities and can create substantial demand in key sectors – for solutions that already exist on the EU market.
• Existing procurement rules lack legal clarity and rewards for sustainability due to rules on awarding contracts that are too flexible. Factoring in sustainability can help save public money in the long run by simultaneously strengthening businesses, reducing emissions, protecting public health, and promoting economic growth.

Which sectors are most affected?

Public procurement covers how governments spend money across the entire economy – from construction and infrastructure to food, healthcare, IT and public transport. The reform is far broader than electric vehicles, batteries, and ‘Made in Europe’ rules.

Public procurement concerns every sector, but it affects some more than others due to volumes procured, impacts generated, and total costs [10]. The construction sector is crucial because public projects account for 31% of its activities. Introducing low-carbon procurement requirements can lower emissions by a staggering 43% with upfront cost increases by no more than 3-4%.

The Industrial Accelerator Act (IAA) [11] proposes procurement quotas for low-carbon concrete and steel. However, estimates show they are too low to create meaningful demand [12]. All procurement rules for construction must contain strong provisions to ensure bridges, hospitals, and roads are built with quality materials, last for a long time, and respect the environment.

Reforming procurement criteria in the food sector can also bring substantial benefits. Food procurement alone accounts for an estimated at 55 billion euros every year [13]. These are meals provided to healthcare facilities, schools, and public institutions. If crafted strategically, public procurement rules can deliver improved access to healthy and nutritious meals, more sustainable procurement methods, and support for local producers.

What causes today’s procurement challenges?

Public procurement rules across Europe are fragmented and the three existing directives lack a clear mandate to limit procurement on lowest price, which would facilitate a broader focus on value.

Current rules are a patchwork. National and local governments all follow different rules. Some place greater weight on long-term value and environmental impacts, whereas others focus primarily on lowest price. This means that bidders must comply with different legal frameworks across markets to certify the same product as ‘green’, raising the cost to do business and discouraging bids. The impact of these measures often goes unnoticed as monitoring of uptake and impacts is often patchy [14].

There are big differences between large and small public authorities. Different legal frameworks within Europe create a lack of clarity on the rules, discouraging public authorities from moving beyond price criteria to avoid being challenged in court.

The current system carries legal risks for local governments and businesses. Investors need predictability but in practice differing national approaches and criteria for public procurement can turn into an administrative barrier. This often leads to lengthy and costly litigation, even under a ‘safe’ lowest-price regime.

Green criteria are allowed but not required. The current framework permits the use of environmental criteria but does not mandate them. Only 21% of larger contracts include environmental considerations, and most are still awarded on lowest price, failing to send a clear demand signal to companies and missing a critical opportunity to drive European industry toward cleaner solutions.

Should governments “buy European” to maximise the value of procurement?

“Made in Europe” has become a central part of the procurement debate, often presented as a straightforward answer to competitiveness and resilience concerns. But origin rules can raise significant tensions and complexities – for example, around definitions, trade relationships, costs, and implementation. They could affect existing international commitments that currently allow companies from many countries to access the EU’s procurement market.

The ‘Made in Europe’ debate has given significant attention to electric vehicles and batteries. However, governments are not the primary buyers of electric vehicles and batteries. The EU’s €27 billion battery market is largely driven by private sector demand, not public procurement.

Made in Europe requirements can only support existing commitments and be effective for the clean transition when they are targeted towards high-impact sectors with global supply chains and paired with stringent green criteria. This is currently not the case under the proposed Industrial Accelerator Act which puts forward procurement measures for certain industrial sectors.

Made in Europe requirements alone are unlikely to deliver climate benefits. To do so, they need to be combined with strict environmental performance criteria (such as emission thresholds or circularity). The question is not “Made in Europe” or “Made Elsewhere” but rather whether what governments buy creates value for taxpayers and society at large – based on quality jobs, wellbeing, innovation, sustainability, and economic opportunity for clean industries.

Which public buyers are leading the way?

Public procurement is already being used strategically across Europe and beyond, saving money for taxpayers and delivering environmental benefits. For example:

• Italy has established mandatory Minimum Environmental Criteria (CAM) covering 21 sectors, including construction and food [16].
• Poland has introduced limitations to procurement based on lowest price since 2019 [17]. The weight of price (as award criterion) has been capped at 60%, with remaining weight given to quality and environmental impacts.
• Ireland uses embodied carbon targets to procure cleaner, higher-performance public buildings. The first Irish tender using the CO₂ Performance Ladder – a best-practice tool for green public procurement – cut emissions by 21% compared to a conventional approach, offering proof that the right criteria can drive measurable results. Ireland has also made green public procurement the default in all tenders [18].
• Lithuania scaled green procurement from 5% to over 90% of contract value in just three years, combining clear criteria with training and oversight [19].

The PPA offers an opportunity to build on these good examples on a larger scale.

How can the Public Procurement Act add value?

The EU has everything it needs to stimulate a clean industrial transition while advancing the bloc’s competitiveness – but industry needs clearer demand signals to scale up low-carbon, circular solutions. Member States are ready for a modern, more strategic approach to public procurement, and the EU can deliver it.

To succeed, the PPA must include a clear commitment to helping European citizens and businesses thrive and protecting the environment by making strategic use of public procurement. This should include:

• Limiting price-only procurement and embedding value by factoring in quality, innovation and the environment. Value-based procurement should be the default, not the exception.
• Making green public procurement the standard practice, especially in in high-impact sectors such as construction, food, and transport, with sectoral legislation used to deliver detail green criteria before 2030.
• Building capacity of public authorities so they can use procurement strategically to maximise value for taxpayers.
• Strengthening monitoring and transparency using existing data systems, so that the uptake and impact of green procurement can be tracked consistently across member states.

Notes to editors

[1] Public Procurement Directives (2014): https://eur-lex.europa.eu/eli/dir/2014/24/oj/eng

[2] The Draghi Report (September 2024): https://commission.europa.eu/topics/competitiveness/draghi-report_en, the Letta Report (April 2024): https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf, and the Clean Industrial Deal (February 2025): https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52025DC0085

[3] European Court of Auditors (2023): eca.europa.eu/ECAPublications/SR-2023-28/SR-2023-28_EN.pdf

[4] Ibid.

[5] Ibid.

[6] Finnish Competition and Consumer Authority: https://www.kkv.fi/en/research-and-advocacy/working-papers/are-we-paying-too-much-the-cost-of-low-competition-in-public-procurement-working-papers-1-2026

[7] World Bank: https://blogs.worldbank.org/en/voices/hidden-1-trillion-halting-waste-public-procurement

[8] European Court of Auditors, Special Report 28/2023: https://www.eca.europa.eu/en/publications?ref=SR-2023-28 (see page 25)

[9] https://www.carbone4.com/en/publication-buy-european-and-sustainable-act

[10] As the Letta report indicates: https://www.consilium.europa.eu/media/ny3j24sm/much-more-than-a-market-report-by-enrico-letta.pdf (see pages 25 and 44-45).

[11] European Commission, Industrial Accelerator Act proposal, March 2026: https://single-market-economy.ec.europa.eu/publications/industrial-accelerator-act_en

[12] ECOS analysis (May 2026), ‘Towards a meaningful quota for low-carbon concrete in the Industrial Accelerator Act’: https://ecostandard.org/publications/towards-a-meaningful-quota-for-low-carbon-concrete-in-the-industrial-accelerator-act/

[13] https://www.eatingcity.org/wp-content/uploads/2025/02/25.02.24_GreenPaths_PolicyPaper.pdf

[14] European Commission, Evaluation of the 2014 Public Procurement Directives, October 2025: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=celex:52025SC0333

[15] https://researchportal.vub.be/en/publications/public-procurement-of-steel-and-cement-for-construction-assessing/

[16] https://www.mase.gov.it/portale/cam-vigenti

[17] https://www.gov.pl/web/uzp-en/legal-framework2

[18] https://www.gov.ie/pdf/?file=https://assets.gov.ie/288344/3b6eece7-7d30-47c5-895e-0512a0e9b3f8.pdf#page=null and https://www.co2performanceladder.com/ and https://www.iisd.org/publications/digital-story/how-ireland-turned-green-public-procurement-standard-practice

[19] https://www.open-contracting.org/2023/12/06/how-lithuania-fast-tracked-green-procurement/

Key resources

• ECOS report (November 2024), ‘Buy better to build better: Driving public purchase towards green construction products’: https://ecostandard.org/publications/report-buy-better-to-build-better-driving-public-purchase-towards-green-construction-products/
• IISD report (May 2026), ‘Made in Europe Requirements in Public Procurement – Risks and opportunities for climate action, circularity, and competitiveness’: https://www.iisd.org/publications/report/made-in-europe-public-procurement
• ECOS and IISD joint letter (May 2026), ‘Securing a future-proof Public Procurement Act’: https://ecostandard.org/publications/securing-a-future-proof-public-procurement-act/

Contact

ECOS – Environmental Coalition on Standards is an international NGO with a network of members and experts advocating for environmentally friendly technical standards, policies, and laws around the world. In 2026, ECOS is celebrating 25 years of bringing the environmental voice to standards.

IISD – International Institute for Sustainable Development is a globally recognised non-profit think tank with three decades of experience working to solve the world’s most pressing sustainable development challenges. They combine deep expertise in a wide range of issues with a collaborative approach to research, policy advice, and hands-on support, with over 300 professionals working from offices in Canada, Switzerland, and other locations around the world.

If you have questions or would like to be put in touch with a spokesperson, please contact:

• Alison Grace, Senior Press & Communications Manager at ECOS: alison.grace@ecostandard.org, +32 493 19 22 59
• Sofia Strömgård, Communications Officer at IISD – International Institute for Sustainable Development: sstromgard@iisd.org, +49 15560 242843