Upscaling the use of VSS through Sustainable Public Procurement and Trade Policy

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Our previous blog raised the question of how to upscale the use and adoption of voluntary sustainability standards (VSS). In this blog, we explore answers to this question through the lens of public policy. The integration of VSS in public policy can provide incentives for their adoption. But how can VSS be integrated in public policy? We discuss this in reference to two specific policy instruments, namely public procurement and trade.

Sustainable Public Procurement

Who are the biggest buyers in any market? Governments. Several sources estimate that government procurement accounts for up to 15% of an economy’s GDP in high-income countries, and even higher in middle-income and low-income countries. Hence, the purchasing power of governments can provide real incentives to nudge markets towards higher standards of sustainability and upscale the adoption of VSS. This can be pursued through so-called sustainable public procurement (SPP).

In recent years, SPP has developed and been widely adopted by public authorities throughout the world. Through SPP, governments can ensure that public contracts contribute to broader environmental and social policy goals.

It envisages public authorities demanding, for example, that their purchases of wood products are manufactured from legally harvested or sustainable timber, that public buildings meet ecological standards, that clothing for State employees is made in a healthy labour environment devoid of child labour, or that coffee served by public bodies is produced under fair conditions. Hence, via SPP, governments can deliver key policy objectives related to sustainable development.

In the rise and growing importance of SPP, VSS can play a specific and increasingly significant role since they are often integrated into the operationalization of SPP practices. In public procurement, VSS operate on the basis of an elaborate set of rules and procedures to ensure that producers and all actors in the supply chain conform with social and environmental standards.

However, the development of SPP policies does not imply a straightforward recognition of VSS by governments, as they need to assure equal treatment, non-discrimination and fair competition among public procurement tenders.

Yet, VSS may be referred to indirectly in SPP through the inclusion of sustainability criteria in public tenders that are similar to standards set by VSS, or by making reference to VSS as a form of proof of compliance with the criteria stipulated in tenders. As a result, in daily procurement practice, VSS serve as indicators of social and environmental performance, and may be used as a convenient means of assessing a bidder’s credentials.

While, overall, VSS are gaining recognition in SPP, the question remains whether such recognition can lead to greater VSS adoption. Several examples highlighted in the Flagship publication suggest that SPP could indeed increase VSS uptake. Yet, further considerations on upscaling VSS adoption through SPP include the need to set up of recognition systems in order to distinguish credible from non-credible systems.

Trade policy

With the rapid increase in global trade in the past few decades through global value chains, trade governance has gained importance. Multiple instruments are used to govern global trade flows, many of which can influence the uptake of VSS. The Flagship report identifies four types of trade-related instruments in which VSS already play a role or whose role is under consideration by States. These are free trade agreements (FTAs), preferential trade agreements (PTAs or GSP schemes) market access regulations, and export promotion measures.

FTAs have evolved over time, both in number and in content. Over the last decades, we have observed a strong increase in the number of FTAs, with 301 currently in force. Moreover, FTAs have evolved in terms of content, as they increasingly incorporate non-trade objectives such as sustainable development provisions, or social and environmental protection provisions. This also includes references to the use and promotion of VSS. In the Flagship report, we identify 19 FTAs which refer to the use of VSS. However, currently, such provisions remain promotional rather than conditional as they do not require clear commitments and involve little permanent evaluation. There is therefore considerable scope for further integration of VSS in FTAs.

A second trade instrument into which VSS can be integrated are (PTAs, or more specifically, generalized schemes (or systems) of preferences (GSP). A GSP scheme is a preferential trade arrangement by which a country grants unilateral and non-reciprocal preferential market access to goods originating in developing countries. Currently, 13 countries and regional organizations, constituting large consumer markets, operate a GSP scheme consisting of a general scheme for middle-income countries and a specific scheme for LDCs. Among their objectives, both VSS and GSP schemes aim to foster sustainable development and good governance and, hence, some authors propose to further integrate VSS in GSP. The Flagship report discusses the possibilities and limitations, pro’s and con’s of such further integration.

A third trade measure that could have a significant impact on VSS uptake is market access regulation. There is no general overview available on how many regulations exist which include VSS in market access requirements, but some recent examples show how this is currently done. The Flagship report discusses several examples including the European Union Timber Regulation, which was developed in the context of the EU’s 2003 Action Plan on Forest Law Enforcement, Governance and Trade (FLEGT), the Korean Act on the Sustainable Use of Timbers amended in 2017, as well as the European Union’s Renewable Energy Directive (RED) which was adopted in 2009 and which, inter alia, governs how goods which are entering the Union’s market are “marked” in terms of sustainability.

A fourth trade-based instrument into which VSS are and can be further integrated are export promotion measures. VSS can contribute to increasing access to markets, and hence promoting exports. Governments can engage with VSS in different ways to increase exports. The Flagship discusses several examples including the cases of cotton in Mozambique, timber in Gabon and shrimps in Suriname. While these examples provide little evidence on the outcomes of the inclusion of VSS in export promotion measures, they nonetheless serve to identify different types of government engagement with VSS in those measures. First, governments can make certification a necessary requirement for obtaining an export license. Second, they can provide financial incentives for certification in order to promote certain export-oriented sectors and products. Third, they can engage with VSS to provide training and capacity-building to producers in order to help them increase their exports.

In the previous blog, we showed and argued that there is ample scope to upscale the use of VSS. In this blog, we lay out some of the strategies how this can be done through public policy, with a focus on sustainable public procurement and trade policy. In the next and final blog, we will reflect on some of the issues we might need to consider when upscaling VSS.

Dr. Axel Marx
Leuven Centre for Global Governance Studies
Santiago Fernandez de Cordoba
United Nations Conference on Trade and Development and Coordinator, UNFSS

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