Ecolabels and environmental considerations in public procurement
The interviewee today is Nat Green, a Shaw LLM Fellow at George Washington University in Washington DC. His publications to date focus on the legal and policy implications of large-scale hydropower development, and other renewables in Africa and Asia, in addition to a more recent foray into questions of sustainability in international procurement.
So, this is the first time that we’re interviewing here someone that is coming from outside the EU, and has a completely different perspective on a public procurement legal framework, so it’s great to have you on board. If I can start to get the ball rolling, what do you think are the main differences between the US and the EU at this level of sustainable public procurement?
In terms of main differences, it’s sort of an interesting question for me, because I’ve really, as you noted, I’ve come from more of an environment and energy law background that’s sort of, it’s really the potential in procurement mechanisms and you know, government contracting mechanisms in general, to help develop certain environmental, or even social safeguards that’s sort of, drawn me to this subject. So it’s actually the similarities that I’ve concentrated on more than anything. In terms of the differences, I do think a lot of it’s political. I think there’s more of a political will in the EU to open up the process to what we call our economic externalities, where we might also call, in much of the literature, market failures. In the US that is, we share many of the same principles, and providing for open competition and, sort of, fair value at pricing, and in-state procurement, but as I said, the political will to provide for a more open interpretation, and incorporation of externalities into the system is, it’s a little bit more difficult to attain I think, which is one of the reasons why I’ve come to focus on the potential in eco-labelling systems. You know, going forward, especially in this, and providing kind of, a shared sustainability network for the two models.
So, what are the similarities then between the US and the EU, in what concerns the use of eco-labels?
Well, interestingly, there’s certain, what I have come to think of as flexibility mechanisms or models that are built into those systems. The thing with eco-labels, you know, this is essentially something that allows us to harness market forces. One thing that the US and the EU share of course, is a push towards ever greater market liberalisation, and the idea is of course that if you have a third party, usually non-profit, that has a mandate to certify certain practices or services or products, as, you know, having sort of, a lower impact on the environment, it allows consumers to use their purchasing power essentially to help to achieve the goals that lie behind the certification. Right, so the similarities are pretty much found in what I’ve, and many others have called the Or Equal Standard. Well actually, that’s how you use it.
The similarity in the legal approach to eco-labels is actually, we have very similar statutory language. For the US FAR, the Federal Acquisition Regulations in, let’s see, that would be FAR 23.103, we actually, it encapsulates a series of recent executive orders that call for the greater use of eco-labels in government contracting. Actually it calls for very wide spread use, and you know, as I was trying to say earlier, the eco-labels, it’s an attractive way to do it, because like I said, politically it’s very difficult to even establish what sustainability is, and in fact the word sustainability, people shy away from it a little bit now in the environmental law world in the US. You know, here in Washington DC, the Environmental Law Institute, if you go and talk to the scholars there, they’ll tell you how about ten years ago it became a really big idea, and people just got tired of arguing over what the word sustainability even meant. These eco-labels kind of fixed that for you, they make the decision for you.
So, that sort of, jumps us past the political and policy wrangling over many steps and deciding what we mean by sustainability standards. So, the US FAR now provides that government contractors need to use products that are certified under certain labelling schemes, and similarly recent EU directives have called for a great incorporation of eco-labels, and some of these issues have also been incorporated in the GPA, so what really brings them together is the way that they allow the incorporation of eco-labels in such a way that anti-competition regulations are not upset.
There are a few points there for us to unpack a little bit more. I’m fully behind the idea that the word sustainability became pretty much meaningless, because it’s more of an umbrella term, or another term where you can project whatever you want into it, depending on your background, depending on your policy objectives, so on and so forth, and that’s not something that I originally envisioned, you know, or anticipated for that particular word, so I completely agree with your view that it’s preferable to use more precise terminology like eco-labels. Having said that, one of the fears that I have, in what concerns the use of environmental considerations in public procurement, and also social considerations in public procurement, at least here in Europe, is that they can be used in a way that it’s not market friendly. They can be used to actually restrict competition and restrict the market to certain suppliers.
Right, that’s a concern that I’m aware of, and I actually, I find it really interesting, because from my perspective, the use of eco-labels, it’s an interesting tension, because you know, on the one hand we’re trying to, if we want to start using eco-labels as a way to further policy ideas, and specifically sustainable policy ideas, it has to work as a market instrument. As you say, you know, many have raised the possibility that it could actually become, you know, certain member states in the EU for example, could start favouring certain eco-labels, and that could actually become a barrier to cross border traffic. I know that some… the idea’s been floated so that in future directions, or in future revisions of the GPA, they include competition guidelines that specifically address the use of eco-labels to counter against this. I can’t be sure how successful that would be. Again, from my perspective, as being a US environmental lawyers, and especially, you know, I have a strong interest in climate change issues, I don’t see the eco-label as a permanent fix.
I think that many scholars on the European side have looked at the potential for, sort of, long term systemic change, essentially to procurement culture, in providing more, kind of, sustainability safeguards, but I think they’re very correct in addressing the fact that this would require tiny, incremental steps at every stage of implementation, because you’re changing the driving forces in many ways. You know, you’re having to redefine just basic issues of value. The use of eco-labels, it’s sort of, a low hanging fruit. You could even see it as triage. It’s a way to help to start shifting certain, really commercial standards while other policy are implemented at sort of, a higher level. I guess I see that, sort of, two-stage process as having some potential to alleviate any anti-competitive side effects, if that makes any sense. It’s just a, it’s an idea I’ve come up with.
Well it does to a certain extent. I mean, on the other side of the argument you have the idea that eco-labels themselves may be considered anti-competitive, because effectively you’re giving a monopoly to an external organisation, even a standards setting body, whatever, to define what are the requirements that everyone operating in a certain market will have to comply with, because you’re requiring that eco-label, whatever it is. And if you think about the Max Havelaar case, let’s call it the Dutch coffee case, so it’s easier for the people that are going to listen to this, so if you think about the Dutch coffee case, the crux of the matter was precisely that it was a private standard that was being imposed on the market. And that was deemed to be anti-competitive, and that was seen to be as not compliant with EU law.
Right, right, and one thing that the court did with that decision, is they made a very small observation, which is that if, you know, if the contractor had simply included ‘or equal’ language in the contract… they included it in an annex to the contract, but that wasn’t clear enough, and I would agree with that, meaning that this private label became by its inclusion in the contracts, became not so much the label itself, but represented a certain standard. Now in terms of, you know, going forward, coming up with a standardised way for contractors to take a given eco-label, and decide exactly what standard it represents, that’s another issue, and I haven’t hit that yet. But that’s the decision the court came to, subsequent your EU directive essentially took that and tried to… said that if a private label is incorporated as a contracting requirement, then it’s to be taken automatically as representing a standard, rather than that label in particular. You know, that’s the stopgap measure in terms of preserving competition. And the US has this too.
You know, what I agree with is that it provides an opportunity for harmonisation between EU and US procurement systems specifically dealing with environmental issues. You know, I think that that’s a potentially powerful tool in providing, kind of, a shift in industry standards in quite a few different industries. I’d be interested to see how that worked out.
Okay, so if you dig a little bit deeper into that, how should the US and the EU change their use of eco-labels in public procurement?
Well, as I said, I think the next step is to see how this Or Equal Standard actually works out. You know, as you say, whether or not bodies in the EU and the US can, in a reasonable and cost effective and efficient fashion, take the principles inherent in private eco-labels and apply them as more general standards, that might require a certain growth in institutional capacity. It also will require close attention to its competitive effect vis-à-vis small and medium enterprises. I know less about this in the EU, but in the US of course we… that’s one area where a certain degree of, forgive me, anti-competitive… you know, preference is allowed, and because it’s seen as an important policy issue.
Can you tell us more about that?
Well, off the top of my head, the actual FAR part, small and medium business considerations, or small and medium enterprise considerations are, essentially it’s almost like we have an affirmative action to allow small and medium enterprises to compete on a more equal footing with your larger government contractors. And of course that shifts with the nature of what you’re… of the product. You know, we’re not going to work very hard to make it so that a mom-and-pop business can try to supply military hardware, although there are very small businesses that require less intensive, you know, military hardware that it’s less difficult to create, or make or research. I know that there are very small body armour companies for example, that are contracted to the US government. But you know, beyond that, when it comes to your basic supplies, say your coffee, or you know, services, people shoot for an equal playing field. So, obviously that policy consideration is still linked towards the whole idea of greater competition, so it’s hard to make a direct comparison, I suppose.
Moving forward to another topic, revisiting something that we’ve already mentioned, but not in detail, which is externalities. What is your view about the inclusion of externalities in public procurement? Pollution is an obvious example, but what else can you think of? Should we go down that route or not?
I’m not sure. Like I said, this is actually, fortunately your podcast is about, you know, emerging academics. This for me is a very emerging field. It’s actually a little bit difficult for me to generalise. I love the idea of using procurement and using these kinds of tightly controlled markets to further certain sustainability goals, and I see it as being, kind of, the opposite end of the spectrum from say, the Paris COP21 talks that are happening at this moment. I realise this is sort of, tangential, but just to take a quick observation, is that for the COP21 these talks are… it’s an old, established model for reaching international agreements. When it comes to environmental issues, the great success historically of course is the Montreal Protocol that eliminated… that gradually scaled down and eliminated the use of CFCs in aerosol cans, and had a very positive impact on preserving the Earth’s Ozone Layer.
With greenhouse gases it’s really, really a very different story because you’re dealing with a much greater range of practices and technologies, and they’re much more vital to the way we live our lives. The interesting thing to me about trying to [?? 14.51 attack] any externality, or you know, like I say you could call them market failures, through procurement is that it’s immediate. It can have an immediate and very wide ranging effect, on a wide range of industries. I was fascinated when I found out that Walmart here in the US is one of the largest government procuring providers, or suppliers.
Yeah, so I mean, think about it that way. Anything that… government procurement takes up enough of their businesses that it wouldn’t be cost effective to just shift part of their business towards requirements to bring them into compliance with government contracts. They’d probably have to do it across the whole range of their business.
That reminds me of something that happened maybe ten years ago, with the Reduction of Hazardous Substances, whatever Directive, which when it came into force and effectively led to a change in how suppliers based anywhere in the world could sell their products here in Europe, their electronics products, what I heard was that effectively there was an externality coming out of that process which led to the whole world benefiting from the changes imposed by the EU, because it became economical for a supplier to run two, effectively two different, let’s say production lines, one for Europe one for the US, or one for Europe and one for the rest of the world.
No, that’s exactly it, and actually on another angle, one of the reasons that I believe, I just, I’m… I’m pretty sure about this. One of the reasons is that the US has very low standards for cosmetics, especially perfumes.
Yeah, and perfumes can potentially have quite scary chemicals in them. They’re all constructed at this point from petrochemicals, and there are a lot of things that can go inside that are, you know, I mean, from my point of view a little bit unchecked, essentially. And, you know, we really don’t have much of what we call a cautionary principle. We don’t err on the side of caution, we err on the side of, you know, people exploring their options, which you know, has its plusses and its minuses. And the thing with perfumes is that most of them come from Europe.
We are piggybacking on your standards.
There are some… anyway, that’s completely tangential, but I find that very interesting, and yeah, at the same time I think, you know, we do allow for a certain amount of anti-competitive legislation where the public interest is really a concern, and hazardous materials is a perfect example. You know, in this case it’s slightly different, because we’re trying to wire externalities into a legal mechanism.
Yeah, yeah, of course.
The whole purpose of which is to uphold a certain level of competition. So I realise this is tricky, I really do, I just wanted to show how it can be done potentially, without breaking too many laws.
Yeah, or any!
Or any, or any. You know, just change the law, and that’s also, we’d [?? 17.59] to do.
Well, I don’t think we really do it at this point. I think you’ve got to actually employ eco-label systems for products and sell them pretty much effectively the same way between the US and the EU. I think it would lead to some cases certainly.
Yeah, I think so. Speaking of both jurisdictions, or both legal systems, we have something in the horizon coming fast towards us, or not, the TTIP, the Transatlantic… what does the acronym mean? I never know.
Don’t ask me!
Well, let’s just call it the TTIP, everyone knows the acronym, and no one knows what it means, or at least I don’t, I remember out of the top of my head. Anyway…
Yeah, Transatlantic Trade and Investment Partnership.
So should we consider, or should the negotiators in both sides of the table consider using the TTIP for example, to harmonise eco-labels across both the US and EU?
I think the potential is certainly there that we could. I understand that the TTIP negotiations between the US and the EU are based on the revised GPA. The revised GPA does include provisions for the inclusion of eco-labels, and includes this, you know, again the Or Equal Standard. The Or Equal Standard is simply just that when you write the contract, when you draft the thing, when you say, like, I want, you know, I want my coffee to be Fairtrade certified, you have to say Fairtrade certified, or equal.
Right? So, just to make that explicit. It’s there in the negotiations right now. It’s on the table, so that’s something that I feel could de facto harmonise the use of eco-labels in procurement, because I think that the legal structure internally in both the US and the EU is there to support that.
Okay, so if you think about an example, let’s say that we have an eco-label in Europe, and another one in the US, they’re not exactly identical, although they cover the same area. I mean, the problem with the ‘or equal’ approach, which I mean, it’s very common in Europe in many areas related with procurement, it’s not just with the eco-labels. The problem with that is, where do you draw the line on the equivalent?
I agree, I think that that’s the biggest stumbling block, and I think that honestly I’m not sure yet. I’d love to hear any ideas that anyone out there might have. You know, off the top of my head, that’s something I’ve been keeping as kind of, an open question. I think that in my dream of an ideal future, if eco-labels do become a means of commerce driven dialogue between the US and the EU, I consider it possible that the question, the tension that will inevitably be there regarding exactly as you say, how do we express individual eco-labels, and they are very individual, as given standards, will lead to greater legislative and policy dialogues. You know, I see it as a potential legislation and policy driver. That’s not to say that I think we should… I’m thinking of this as a monkey wrench that we throw into the machinery, you know, not at all. But it’s something that I think has been developing for some time. The EU itself has been putting significant resources into developing a very reliable EU-wide eco-label. I think that policy members, especially in the EU have had this transition, or this possibility of sort of, the basis for a dialogue, in mind for some time, and in the US we’re just beginning.
Eco-labels for us have usually involved on the legal level, have usually involved issues of international trade under the WTO. You know, we have the great tuna-dolphin, and shrimp-turtle cases. Tuna-dolphin at least is still on going, amazingly. And so in terms of using it specifically as a part of government administration, that’s a new idea. It really depends on probably who our next president is, how far we go with it. If it’s a Republican, not so much, if it’s a Democrat, maybe.
Okay, I think that’s a very good way to end the interview. Thank you very much for your time Nat, it was great having you.
I had a very good time, thanks for having me.
Before I close the podcast, I’ve got an announcement to make. You can find information about the Early Career Research Day Conference at the publicprocurementpodcast.eu website. Long story short, if you’re interested in presenting a short paper, please submit an abstract and CV by January 11th. We’re aiming to run the conference, I think on March 4th, which is a Friday, and it’s going to be done in London. We will be selecting ten early career researchers to take part in the conference, and the travel costs will be covered up to a maximum of £300. We will also offer one night accommodation at a known sumptuous hotel in London, so if you’re interested, just drop me a line, or submit an abstract and a CV. You should do so using the contact form available on the publicprocurementpodcast.eu website. Finally, as usual you can find me at my blog telles.eu or on Twitter where I use two handles, @Detig for general discussion and @publicprocure for public procurement related topics. Finally, I’m very grateful for the support of the British Academy Rising Star Engagement Awards, which make not only these podcasts possible, but also the conference.