The circular economy is one strategy that has been taken up by societies striving to become more sustainable. In Sweden, the central government launched its national strategy for a circular economy in July 2020, and city governments, such as those of Umeå and Gothenburg , have similarly developed their own strategies for the creation of circular cities.

These plans often focus on an individual sector, such as construction or electronics, or on a certain strategy, for example repairing or repurposing goods. However, one of the most important areas for cities to look at is their own procurement practices. Sustainable procurement is a powerful tool for addressing consumption and influencing the market in a sustainable direction. Due to its ability to choose what type of products and services to procure, the public sector has significant market power when it comes to advancing circular strategies.

Between us, we have extensive and varied experience with circular approaches, having worked with city governments as researchers (for example through the UNLOCK project, the Viable Cities’ Finance project and the Municipal Footprint project), as employees (for Medway Council, in the UK , for instance), and also as reviewers of UK government’s commercial and contracting capability. Based on this, we want to share our insights into the potential, and challenges, of circular procurement at a city level.

What is circular procurement?

The term “circular procurement” describes the purchasing of products following the ideals of the circular economy. In the case of public procurement, this means that when public authorities such as city governments purchase goods and services, or invest in projects, they consider the negative environmental impacts that this might cause.

This requires factoring in potential waste creation across the product’s entire life cycle, including what will happen to it once its period of use comes to an end. By doing this, authorities can make purchases which minimize or, ideally, avoid any harmful environmental effects.

Circular procurement does not just happen at the transaction stage when the actual purchase takes place. Instead, the principles which guide it can be applied throughout the procurement process, from the evaluation of goods to the management of contracts.

To illustrate four approaches to circular public procurement

Four approaches to circular public procurement. Source: Syke, 2019

The importance of procurement at a city level and beyond

City governments spend a substantial amount of their annual expenditure procuring goods and services from external companies. In 2018, the total value of public procurement in Sweden was SEK 782 billion. In 2019, 18 379 procurement opportunities were announced overall, 68% of which were issued by local authorities.The scale on which procurement occurs means that making it a more sustainable process could have a significant impact, often beyond countries’ own borders.

The benefits that can be gained from circular procurement processes are numerous and extend beyond just the environmental. For example, the EU indicated in its Green Public Procurement Review that the benefits can also be financial, as these circular processes save money, set examples for private consumers, and incentivize industrial innovation.

Sweden’s public procurement strategy describes the government’s overall aim as being to “use public procurement as a tool for improving efficiency and quality in the public sector, at the same time as meeting Sweden’s international obligations within the EU, the WTO and our free trade agreements”. Procurement is also seen as a both a catalyst for achieving the UN Sustainable Development Goals and as a way of supporting Sweden’s Global Development Policy.

On the basis of its overarching objective, the Government has formulated seven policy objectives for its procurement strategy.

  1. Public procurement as a strategic tool for doing good business.
  2. Effective public purchasing.
  3. A multiplicity of suppliers and well-functioning competition.
  4. Legally certain public procurement.
  5. Public procurement that drives innovation and promotes alternative solutions.
  6. Public procurement that is environmentally responsible.
  7. Public procurement that contributes to a socially sustainable society.

Source: Sweden’s public procurement strategy

Challenges for municipal governments

Procurement processes in general can pose quite a few challenges for municipalities. This is particularly true when it comes to circular procurement, despite the many benefits and savings it can offer.

Firstly, municipalities often struggle to get a clear picture of what the needs of their various departments and concerns are before going to tender, meaning they frequently operate under incomplete and contradictory information. As concluded by the UNLOCK project , municipalities’ capacity to compile data from procurement needs to be strengthened; this will improve their understanding of the environmental impacts of their purchases and help them identify the measures needed to reduce them.

Secondly, understanding the possibilities of the circular economy, and the technologies available for building it, is challenging. Keeping up to date with the latest technological solutions and business model innovations requires expertise, knowledge, and time. There is also no clear overview yet of how each practice contributes to advancing circular economy strategies or how to evaluate the impact of different procurement practices. Together, these factors can make it difficult for municipalities to devise and implement effective circular procurement strategies.

Furthermore, assessing the success of procurement processes and policies and following up on their effectiveness is resource- and time-consuming. Often, financial results are the deciding factor in a process, and insufficient resources mean that the complex effects of different approaches are not fully explored.

Making circular procurement a success

Despite these challenges, constructing successful circular procurement processes is certainly possible, and can bring many advantages. As with all things in life, however, there are several elements which are required to achieve this:

1. Adding sustainability criteria

An increasing number of cities are joining in on the circular cities trend . To make it more than a trend, however, it is important that political leaders not only review the financial bottom line but also incorporate wider societal and environmental costs and benefits. These potential benefits are substantial: in Sweden, for example, over 30% of territorial emissions come from transportation, so reducing the overall number of vehicles and moving to fossil-fuel–free cars could have a substantial effect on emissions. Other criteria for consideration include reducing noise, improving atmosphere and quality of life, and avoiding stranded assets.

2. Thinking outside of the box

Given that the market often has more information than local governments on the latest product and service developments, cities could be more innovative in their procurement processes. The city of Tampere, Finland, for example, has altered its procurement strategy to involve going to the market and co-designing the content of the good or service it’s looking for, instead of simply purchasing an existing product. However, innovation procurement is still rare in Swedish municipalities due to a lack of resources, requests and needs.

“Public Procurement of Innovative solutions (PPI) happens when the public sector uses its purchasing power to act as early adopter of innovative solutions which are not yet available on large scale commercial basis.”

— European Commission, 2020

3. Collaboration

To develop guidelines and best practices for circular procurement, authorities need to work with government agencies. In Sweden, for instance, the National Agency for Public Procurement helps to produce guidelines and requirements, and support actors in sustainable procurement. The public sector can also be more innovative in its approach to procurement, by identifying and adopting new solutions which can contribute to both circular procurement and the circular economy overall. There is also room for further collaboration and co-operation between municipalities to support each other, share lessons-learned and jointly conduct procurement processes.

We thank, among others, Vinnova, Energimyndigheten, Formas and the Swedish Environmental Protection Agency (Environmental research fund) for the funding.

Read more about the UCAF project here.

Produced by Venni Arra, SEI.