Questions/Answers

With rapid economic growth in the 1970s and 80s, Korea experienced a sharp increase in production and consumption, followed by a series of environmental problems. As Korea lacked natural resources and territory, it became ever more important to reduce waste and to build a circular economy in order to address such problems. Thus, environmentally-friendly production and consumption, throughout the lifecycle of products were necessary. A move towards sustainable consumption and production was first initiated by the production sector when manufacturers started developing eco-friendly products. Since demand was low, such green products lagged behind conventional products, in terms of price competitiveness and quality. As a result, manufacturers experienced poor sales performances and scaled down on production. A sufficient amount of production volume had to be secured in order to improve competitiveness of green products and realize an economy of scale. Against this backdrop, the Act on Promotion of Purchase of Green Products (GPP Act) was enforced in 2005, under which the entire public sector, including the central government, local governments, and public institutions, became obliged to purchase green products certified by "Korea Eco-label" and/or "Good Recycled Mark". Since public procurement takes up 10% of GDP, this Act was conducive to creating and expanding the green product market in Korea. As of 2018, the total purchase of green products by the public sector amounted to USD 3.3 billion, a fourfold increase from 2005. The number of green products and manufacturers also saw five- and nine-fold increases reaching 14,698 and 3,825 respectively. Furthermore, CO2 equivalent emissions were reduced by 7.1 million tons on a cumulative basis while reducing the cost of environmental pollution worth of USD 2.7 billion.

The initiative is designed to execute SDGs through the integrated mechanism that brings each public authority to cooperate. The introduction of the Act on Promotion of Purchase of Green Products set the legal framework that facilitates such cooperation. The policy is developed in harmony with procurement framework and well-established eco-labelling programmes. The entire public sector including central and local governments and public institutions are mandated by the Act to purchase green products and report the results. An electronic procurement system serves as a tool to allow the purchase and monitoring of a variety of green products by the public sector.

The initiative contributes to the implementation of SDG 12 – “ensuring Sustainable Consumption and Poduction (SCP) patterns”. Governments have led eco-friendly consumption practices by example and demonstrated concrete outcomes including the growth of green products market. Voluntary agreement on business green procurement was initiated 2006 and followed by the governments’ practices. Therefore, the importance of green public procurement is highlighted as a driver to accelerate the shift towards SCP in the Korean Sustainable Development Goals. It also contributes to achieving target 8.2 – “achieving higher levels of economic productivity through technological innovation”, target 8.3 – “encouraging growth of SMEs”, and target 8.4 – “improving resource efficiency in consumption and production”. Manufactures can secure stable sales when their products are awarded “Korea Eco-label” and “Good Recycled Mark”. Therefore, they are motivated to improve the environmental performance of products, thereby inducing technology innovation. In Korea, more than 90% of the green products market share is taken by Small and Medium-sized Enterprises (SMEs), while their sales grew USD 170 million on average in the past 5 years. In this sense, the initiative contributed to the advancement of environmental competitiveness and the growth of SMEs.

The initiative contributes to reducing the use of natural resources and environmental impacts throughout lifecycle of products. By doing so, the resource efficiency of production and consumption patterns can be improved. On the other hand, it contributes to nurturing more environmentally sound economic growth in the long run. With the purpose of protecting SMEs, financial and technical assistances are provided. SMEs can benefit from up to 90 percent reduction of the license fee using the Korea Eco-label. In addition, technical consultation is offered for those lacking capacity to improve the environmental performance of the products.

Although many countries attempts to develop Green Public Procurement (GPP) policies, only a few of them have implemented those policies due to no standardized definition of green products and lack of an efficient monitoring system. In Korea, green public procurement is implemented in connection with eco-labelling programmes. Thus, there are a number of product categories and certified products available on the market so that green products can be readily identified and supplied. The use of electronic procurement system is critical in managing the performance of public institutions on a regular basis. The unit and quantity of green products procured via the system can be monitored electronically, which increases the accuracy of the results and minimizes administrative burdens. In addition, the amount and percentage of green products procured by the respective organizations is publicly disclosed so as to keep the accountability of the public sector. Local governments and public institutions are evaluated against green public procurement results in order to strengthen the enforcement. As a result, more than 99% of organizations submitted their green procurement results in 2018. About USD 3.3 billion was spent by public authorities to purchase green products from more than 100 product categories.

The initiative helps women-owned businesses to create a stable public market for green products. As of 2018, there were 255 women-owned business producing green products. In addition, Korea Environmental Industry and Technology Institute (KEITI) provided the initial cost outlays to women-owned businesses, supporting them to set up an online green product marketplace that targets public authorities. The revenue collected by this online platform grew twelve-fold, from USD 0.5 million in 2009 to USD 6 million in 2018 Consumers including women have a variety of reasonably priced choices of green products thanks to economies of scales induced by the initiative.

The initiative’s direct target groups are public authorities. However, there are also indirect target groups, whom we define as private sector and the general public. First of all, the GPP Act obligates public authorities to establish green procurement plans and submit procurement results accordingly. As a result, the number of participating organizations increased about 2.5 times from 360 in 2004 to 919 in 2018. The percentage of organizations submitting the results increased from 80% to 99% while the amount of green procurement grew more than 13 times, from USD 250 million in 2004 to USD 3.3 billion last year. The private sector has gained stable access to the green product market. As of 2018, the number of green product manufacturers was approximately 3,600 and the average growth of sales made by those enterprises for the past 5 years was around USD 170 million. Moreover, the usage rate of green products by consumers increased significantly from 21.3% in 2005 to 86.6% in 2018. This initiative’s ultimate goal is to contribute to the circular economy. Each part such as public authorities, private sector, consumers and ordinary citizens all takes respective roles to advance sustainable lifestyle, together enhancing everyone’s quality of life.

Green public procurement was first introduced in 1994. Public authorities were recommended to preferentially purchase green products. However, it remained inactive due to the lack of clear legal mandates and institutional framework. It took a more concrete form when the Act on Promotion of Purchase of Green Products was introduced in 2005. In accordance with the Act, KEITI was designated to operate overall GPP system including the development of an action plan, monitoring and evaluation of records, and operation of GPP help desk. In addition, Public Procurement Service (PPS) was mandated to strengthen the enabling environment to supply green products through an electronic procurement system. An efficient and effective monitoring system has been instrumental in assessing progress. It became compulsory by the Act for all public authorities to report GPP performance records to Ministry of Environment. In 2007, KEITI established an online platform called Green Procurement Information System (GPIS) to make the monitoring and reporting process easier and more convenient. Linked with the PPS’s electronic procurement system, records of green purchases procured through the PPS are automatically transferred to the GPIS. KEITI evaluates progress made with regard to implementation of green public procurement by using several indicators, including the number of public authorities submitting GPP records, the number of training programs provided, the amount and percentage of green products purchased by organizations and product groups, environmental impacts, etc. Since 2005, the monitoring results have been publicly disclosed to increase the accountability of each authority. In the 2010s, interlinkages with other environmental and development policies were strengthened to create synergies. In an effort to promote green building, the Green Building Certification led by Ministry of Land, Infrastructure and Transport became mandatory for public authorities in 2012, which in turn increases the procurement volume of green building materials significantly.

Though the clear institutional framework was in place, public authorities were hesitant to purchasing green products due to the limited number of suppliers and relatively high price of green products. In order to tackle this, the prices of commonly procured green products are negotiated and those products are supplied via an electronic procurement system at reasonable prices in cooperation with PPS. In addition, performance evaluation scheme for governments is utilized to encourage green procurement by including the percentage of green products purchased as one of the evaluation indicators. Fiscal incentives are provided to those achieving higher performances.

There are more than 30,000 public authorities, including subsidiary organizations, making their own procurement decisions in Korea. Thus an efficient monitoring system was needed to assess the level of implementation but it was time-consuming to monitor manually reported results. KEITI established an integrated electronic monitoring system called GPIS in 2007, which directly collects centrally procured data in cooperation with the Public Procurement Service. It greatly reduced the administrative burdens of both procurers and KEITI, and increased the accuracy of data monitored. Therefore, it became possible to conduct precise spending analyses by products and organizations, thereby allowing an informed decision making.

Korea is the first country to set up an integrated electronic monitoring system for green public procurement. It is also the first to measure the environmental benefits generated from the procurement of more than 100 product groups based on actual purchase data of more than 30,000 public institutions.

The legal framework and monitoring and evaluation schemes of Korea’s green public procurement is recognized as one of the best practices in a number of publications released by Organization for Economic Cooperation and Development and United Nations. Also there have been growing requests from developing countries to share the experience and knowledge on the implementation of our initiative. In 2017, KEITI officially launched a project to provide technical assistance and policy consultation for developing countries. Thailand and Viet Nam were selected among ten other candidates. At first, feasibility studies were conducted to identify major policy stakeholders and priority areas for capacity building. In addition, several capacity building workshops were held in these countries, while study visits to Korea were provided. For Viet Nam, it was recommended to include the provisions of clear mandates on green public procurement in existing laws on procurement, state budget and the environment. For Thailand, KEITI recommended that green procurement results be reflected in the performance evaluation of state authorities to increase the level of enforcement. It was regarded by the Ministry of Natural Resources and the Environment of Thailand to fit their local context and approved by the National Environmental Committee in December 2018.

As every country has a public procurement policy, it is viable to incorporate environmental consideration into the country’s procurement law, or even legalize a stand-alone policy for green public procurement. If such a change is implemented in a way that utilizes existing procurement policies and systems, the administrative costs for implementing green public procurement will be minimized. Moreover, it is recommended that countries adopt GPP in a systemic, standardized, and gradual manner, by first applying it to certain groups of products and then expanding it to a broader set of categories over a period of time.

The initial costs around USD 0.4 million were required to establish related systems including servers, software, etc. More specifically, the database for green products in line with global standards, a search engine, and monitoring system for procurement officers to track procurement records in real time needed to be developed. Five staff members of KEITI are dedicated to the operation of the policy including one system operator, two staff members, and two GPP help desk personnel. Other than financial and human resources, technical assistances are required for convening trainings and workshops, the development of guidelines, etc.

In terms of finance, unlike the case with subsidy provision, GPP does not require continuous budget spending. GPP has a strong legal basis, namely, the Act on Promotion of Purchase of Green Products by which roles and responsibilities of Ministry of Environment, KEITI, Ministry of Economy and Finance and Public Procurement Service, as well as their cooperation mechanisms are laid out. In addition, it became mandatory by the Act for public authorities to report their GPP plans and results, while financial incentive and awards are provided to those with high performance. Therefore, it can be sustained over time.

Yes

Internal assessments are conducted annually to evaluate the level of enforcement at all government levels and the outcome of green products procured. Data compiled on the electronic monitoring system is utilized to ensure the accountability. An external assessment was conducted in 2014 by a research institute specialized in life-cycle assessment to measure environmental impacts of green procurement. Our initiative was also evaluated as a best practice across the countries in several publications. Stakeholders’ assessments are annually made by public authorities via an electronic monitoring system and manufacturers via a survey to understand the level of satisfaction and areas for improvement.

A group of input-process-output-outcome indicators is used to evaluate the performances throughout the entire policy cycle. a) Input indicators include the number of companies and products certified for green products b) Process indicators comprise the share of green products registered with the Public Procurement Service and the number of public authorities that submitted green public procurement plans and results c) Output indicators are expenditure of green products purchased and the percentage of those green purchases. d) Outcome indicator is expressed in terms of resource savings and pollution reduction resulted from the purchase of green products including GHG emission reduction.

The initiative has been successful in terms of engaging the entire public sector and creating a new market on green products. In 2018, 99% of public authorities submitted green public plan and results. The percentage of green public procurement over the total expenditure on those product categories is 50.3%, and the volume of green procurement is USD 3.3 billion. There are 14,698 green products and 3,825 manufacturers, a five- and nine-fold increase from 2005 respectively. The total reduction of CO2 equivalent emissions resulted from the purchase of green products is 7.1 million tons while cost savings from the reduced environmental pollution is worth of USD 2.7 billion. The findings of the evaluation are annually disclosed to the public online. In addition, ways to overcome the identified challenges are reflected in policy making. Though the volume of green procurement significantly increased, the percentage of green procurement over total expenditure on those product categories remains stagnant due to relatively low level of purchase on construction materials. It is due to a majority of green product suppliers are concentrated in metropolitan areas. In line with this, the efforts are being put in place to stimulate the supply of green construction materials nationwide.

The implementation of green public procurement in Korea requires an integrated approach of procurement policies and eco-labelling programmes. In order to secure institutional framework for the integrated approach, the roles of Ministry of Environment and Public Procurement Service are stipulated in the Act on Promotion of Purchase of Green Products. The long-term policy targets, the percentage of green public procurement to meet 70% by 2030, are clearly set in the Korea Sustainable Development Goals. The concrete tasks are defined in the Basic Plan on the Promotion of Purchase of Green Products every five years in consultation with line ministries. The adoption of well-established eco-labelling programmes to define green products is critical in ensuring the procurement of green products in an integrated manner at all government levels. This also serves as a clear signal for enterprises to follow in terms of the level of environmental performances. In addition, the existing government evaluation scheme is utilized to strengthen the enforcement of green procurement. The inclusion of green procurement records in Key Performance Indicators of the selected government institutions is made possible through the cooperation with ministries in charge of the performance evaluation of governments.

During policy design, the Ministry of Environment sets goals and priorities of green public procurement. The strategic direction of the policy is consulted with line ministries and included in the Basic Plan on Promotion of Purchase of Green Products every five years. Korea Environmental Industry and Technology Institute (KEITI) and Public Procurement Service (PPS) are the key players for the operation of the policy. KEITI plays a central role in the overall implementation, including the management of an electronic green products database and monitoring system, the provision of capacity building, and raising awareness for procurers. PPS operates electronic procurement system to facilitate actual purchases of green products and transfer green procurement records to KEITI. Public authorities develop an annual implementation plan on GPP and report green purchase records annually. In order to facilitate the implementation of green procurement, they are encouraged to designate a green procurement official. Ministry of Economy and Finance and Ministry of the Interior and Safety are engaged in the evaluation of the results by reflecting green procurement records as one of the indicators within the government evaluation system. The public and media can assess the evaluation results online and encourage public institutions to procure green products.

Successful implementation of the initiative was possible through a strong institutional framework between Ministry of Environment, KEITI and Public Procurement. The use of electronic procurement systems and eco-labelling at the early stage of the policy implementation greatly helped shape the procurement patterns preferring green products. Another success factor was the provision of a clear mandate to all types of governments and public authorities for reporting plans and results of green procurement. As a result, it contributed to delivering multiple sustainable development goals and targets underpinning economic growth and environmental protection. It appears that public authorities evaluated against green procurement results turn out to have a higher green procurement rate compared to those evaluated otherwise. Therefore, the scope of evaluation would be expanded to cover the entire public authorities so as to push up the implementation rate of green procurement. A survey on public authorities indicates that the lack of diverse green product offerings is cited as the biggest hurdle related to green procurement. At present, a majority of green product suppliers are concentrated in metropolitan areas. Therefore, efforts would be made to increase the number of green product suppliers based in other regions through cooperation with local governments.