Over last decade public procurement experienced wide spread modernisation across the globe, both including local and international levels.
With the revamp of UN Model law on Public Procurement, introduction of new Public Procurement Directives (Europe) as well as introduction of several policy developments (Sustainable Public Procurement Program, UN Principles on Business and Human Rights) public procurement understanding has changed. It is not anymore understood as a process of solely buying for a cheapest price but something beyond that. Procurement gain recognition as a part of strategic development of organisation - whether that is private or public one - as well as a tool that allows delivering aspects beyond savings.
These include ensuring that governments do business responsibly, take a leadership position in community and consider Corporate Social Responsibility (CSR) issues relevant to its own business operations (including those of its supply network), and are transparent about their actions in these areas.
2. Exemplary difference between public and private procurement
There are though several differences between public and private procurement. For example doing more than the bare minimum that the law requires in private sector is often down to ‘voluntary engagement’. Although there are those pushing for increased CSR regulation, this doesn’t look likely in the immediate future. That is due to the fact that it is debatable to what extent countries’ laws referring to aspects of CSR are bounding for private businesses.
On the other hand, in public procurement context it could be argued that there is more “hard law” to lean on, as there is no doubt that governments are bound by their constitutions and international treaties to uphold certain ethical sourcing standards and actively prevent law violations such as bonded labour, child labour and or corruption. Thus, for example, we have seen the development of social and environmental labelling schemes, seeking to reassure citizens that the governments when purchasing consider social and environmental norms that they set in their policies at the first place.
3. Importance and challenges
Governments’ actions in procurement have potential to streamlining socially responsible trade by not only mandating the minimum standards for business performance but also facilitating through incentivizing companies to engage with the CSR agenda or to drive social improvements. However, there are several challenges when considering social criteria in procurement.
One of the main challenges is the fact that on the basis of international laws, equality is the leading principle of procurement laws, and as practice shows social considerations at times have been used as a smoke screen for preferential treatments of local suppliers. What is more, the question is whether CSR clauses shall be considered in procurement process at all? Until recently, scepticisms in regards to social considerations have been observed, particularly in the EU backyard, where in the revision of Public Procurement Directives out of Parliament’s tabled 253 amendments, mostly from a social protection angle – majority of these were rejected by the Council and Commission. However, we may be witnessing a turning point in the regards to social considerations, as CJEU, which have been cautious with its earlier “social” judgements, in its more recent ruling in RegioPost case upholding minimum wage clause. From these reasons further analysis of Corporate Social Responsibility in the context of public procurement is particularly relevant for potential change of the business ethics both in public as well as private sector.
Author: Dr Marta Andrecka
Date: December 2016