Yes it will be more expensive, so what?

A couple of years ago I attended a sustainable public procurement conference and asked one of the speakers about the tradeoffs adding more sustainable objectives to procurement would entail. In short, there are no free lunches and as such - on aggregate and at scale - this is likely to mean either higher prices or lower quality for whatever was being bought. His reply took me aback: "Yes, it will be more expensive, so what? So what?"

I do not think my question warranted such a response, but it did highlight two significant points. First, finally there was some recognition by its proponents that adding more sustainability into public procurement incurs on tradeoffs. That was a departure from my previous engagements with colleagues in the field. Second that such considerations on efficiency and efficacy were, well, beneath their station and that the ends justified the means.

There is an evident problem with this position. Increased prices on anything the state buys means either less money going around for the remainder of state activities or higher taxes. Furthermore, if you do not care about efficiency when buying then the market will absolutely fleece you at any opportunity, compounding the previous problem. That was my thinking at the time. From then on I have reflected further on the implications of such world view, fueled perhaps by reading Tirole's pieces on this topic.

The sustainability agenda implies a paradigm shift between how we did things until now and how their proponents want us to do in the future. Any transition based on paradigm shifts will always face resistance: someone is prone to lose out or at least think they might lose out since costs will be borne by someone (even if the total cost didn't change, who bears it does). Paradoxically then, the more efficient you are in the transition the less resistance you are likely to face because you are imposing the minimum cost possible on anyone affected by it. Now there are other ways to go around this by directly compensating those affected by the transition, which, once more, means the more efficient you are the less costs there are to compensate.

This lack of foresight from proponents of the sustainability agenda is now coming home to roost. All those surveys asking people if they support the transition are very nice and dandy but worthless since they do not tell exactly how much that would cost the respondent. If it is a public good paid by someone else, of course respondents support it! But this smokescreen can take you only so far and at some point those costs do start to be felt. And that's where we've arrived in the second half of 2023 and now in 2024.

Did the protests from farmers in the Netherlands, Germany, Spain or Portugal come from nowhere? No, of course not. They were predictable and as those sustainability costs start to creep in it was only a question of time until this would happen.

And it is not just farmers, Germany is apparently moving to kill off the Corporate Sustainability Due Diligence Directive right at the final hurdle. At the very least it has been kicked into the long grass.

Is the scrapping in the UK to the 'boiler tax' that was evidently passed by suppliers to consumers unexpected? No, because no one wants to pick that tab up. Worse, it seems that even the fines for missing on heat pump targets are to be dropped as well.

Will you be surprised if far right parties in the EU do well in June on the back of a green agenda backlash? Perhaps you shouldn't.

I'm well aware the examples I picked up upon are from outside the real of public procurement, but the point holds: ignore efficiency at your peril. Yes, even the peril of being able to achieve your stated policy goals. It is not a magic bullet but it is certainly a cheap(er) one.

Read more