Europe Must Stop Wasting the Power of Its Resources
Public procurement represents about 14% of the European Union’s gross domestic product, making it one of the strongest tools at the bloc’s disposal to shape markets and promote policy goals. However, a recent evaluation by the European Commission confirms the doubts of many governments and businesses: the current framework has failed to make public spending simpler, more strategic, and environmentally friendly. With over 75% of public contracts lacking environmental criteria, it is no wonder that compliance with the EU’s declared industrial and climate goals is so lacking.
European Commission President Ursula von der Leyen has made the reform of procurement a central part of the new strategic agenda for the EU, linking it to the proposed Industrial Acceleration Act and the goal of creating “Made in Europe” markets for clean technologies. In her recent State of the Union address, she emphasized the need to enhance local production and decarbonization together, rather than at the expense of one another. Likewise, Stefan Sijourne, the European Commission’s Executive Vice President, was keen to highlight the potential of public procurement as a means to ensure competitiveness, resilience, and economic security.
However, to promote competitiveness and serious climate leadership, sustainability must become a requirement in public tenders, rather than a mere optional add-on. Otherwise, companies building clean steel plants or producing low-carbon cement will continue to lose out to cheaper competitors with higher emissions.
These heavy industries are essential for boosting competitiveness and creating jobs in Europe, doing precisely what Europe’s strategies need: decarbonizing supply chains, investing in innovation, and creating skilled local jobs. But these industries need a stable incentive that rewards decarbonization and supports trustworthy clean product markets. As warned by the German Steel Federation, Europe risks losing its competitiveness unless public procurement creates a reliable demand for low-carbon materials.
While many public sector buyers try to integrate green criteria, the existing legal framework remains fragmented and complex, rendering it incapable of facilitating the broad adoption of climate-compatible strategic procurement. This leaves cleaner companies confronting inconsistent demand and unclear expectations. Public procurement should be a strategic tool that rewards performance, not just compliance. Yet outdated habits and bureaucratic caution prevent innovation, allowing higher-emission competitors to thrive.
Compounding the issue, competition in EU procurement has generally diminished, particularly in smaller tenders. The European Court of Auditors found that single-tender contracts increased from 24% in 2011 to 42% in 2021, while the Commission’s recent assessment shows that large contracts still attract strong participation. Simplification is essential—not to lower standards, but to make green procurement easier and more consistent.
In fact, other economies have moved more decisively. Under President Joe Biden, the U.S. Inflation Reduction Act leveraged public spending to promote clean manufacturing and domestic resilience. In the UK, the new Procurement Act incorporates “social value” and climate considerations into public tenders, creating clearer incentives for innovation and sustainability. Both laws demonstrate how procurement can create “leading markets” for clean materials, a fundamental goal of the Industrial Acceleration Act.
While this law aims to boost domestic demand for low-carbon technologies, procurement guidelines should ensure consistency with sectoral legislation, translating these ambitions into coherent and enforceable rules. If done correctly, this could promote a shift toward procurement that rewards quality and innovation. Europe risks falling behind not due to a lack of technology but because of a misalignment of its industrial, climate, and procurement policies.
If well executed, procurement reforms could unleash more competitive, consistent, and flexible public spending without increasing budgets. This means awarding contracts based on true value-for-money principles and making green public procurement the default, thereby sending a clear market signal that quality, life-cycle costs, and societal benefits generally matter more than the lowest initial bid. It also entails agreeing on shared environmental standards and robust specifications across various sectors of the single market, so that buyers and suppliers abide by the same rules, facilitating easier implementation and fairer competition. Moreover, it means aligning requirements in key sectors, reducing the complexities faced by public buyers and providing companies with the certainty they need for planning and investment.
Some countries are already showcasing what is possible. Lithuania has successfully scaled up green procurement from 5% to over 90% of contract value within just three years, combining clear standards, training, and oversight. Portugal has introduced mandatory environmental criteria in priority sectors. Ireland is utilizing embodied carbon targets to procure cleaner, higher-performing public buildings. The first Irish tender using a “CO2 Performance Ladder”—a tool for identifying best practices in green public procurement—achieved a 21% reduction in emissions compared to traditional approaches, demonstrating that the right standards can lead to measurable outcomes.
The EU already possesses the tools necessary to achieve better outcomes. Utilizing these tools can unleash benefits that go beyond merely driving clean industrial innovation. Consider that air pollution costs Europe an estimated 600 billion euros ($696 billion) annually. According to the consultancy Carbone 4, aligning procurement with sustainability could reduce carbon emissions by 34 million metric tons each year, mobilizing 86 billion euros for green industries and creating 384,000 high-quality jobs. The same dynamics play out locally: when the French city of Dinan added green and social criteria to its cleaning services contract, it reduced costs by 20%, cut water usage, and created job opportunities for the unemployed.
In a time when demands for constrained public budgets are rising, strategic procurement can simultaneously drive business, reduce emissions, protect public health, and foster economic growth. So why not reform the rules to make this the norm?
