Public procurement accounts for about 14% of the European Union’s GDP, making it one of the bloc’s most powerful tools for shaping markets and advancing its policy goals. But a recent evaluation by the European Commission confirms what many governments and businesses already suspected: the current framework has fallen short of making public spending simpler, more strategic, and greener. With over 75% of public contracts still lacking environmental criteria, it is no wonder that spending is so poorly aligned with the EU’s stated industrial and climate objectives.
European Commission President Ursula von der Leyen has made procurement reform a central part of the EU’s new strategic agenda, linking it to the proposed Industrial Accelerator Act and the goal of creating “Made in Europe” markets for clean technologies. In her latest state of the union address, she emphasised the need to boost domestic production and decarbonisation together, not at the expense of one another. Similarly, Stephane Sejourne, a European Commission executive vice-president, has highlighted public procurement’s potential as a lever for ensuring competitiveness, resilience, and economic security.
But to promote competitiveness and meaningful climate leadership, sustainability must become a requirement in public tenders, not an optional add-on. Otherwise, companies building clean steel plants or producing low-carbon cement will still lose out to cheaper, higher-emissions competitors.
These heavy industries are central to Europe’s competitiveness and job creation, and they are doing exactly what Europe’s strategies demand: decarbonising supply chains, investing in innovation, and creating skilled local jobs. But they need a stable incentive that rewards decarbonisation and fosters reliable markets for clean products. As the German Steel Association warns, Europe risks losing competitiveness unless public procurement creates reliable demand for low-carbon materials.
While many public buyers are trying to incorporate green criteria, the current legal framework remains too fragmented and complex to facilitate the mainstreaming of strategic, climate-aligned procurement. This leaves cleaner firms facing inconsistent demand and unclear expectations. Public procurement should be a strategic instrument that rewards performance, not just compliance. But outdated habits and administrative caution still hinder innovation, benefiting higher-emissions competitors.
Making matters worse, competition in EU procurement has declined overall, especially for smaller tenders. The European Court of Auditors found that single-bid contracts rose from 24% in 2011 to 42% in 2021, while the recent Commission evaluation shows that large contracts still attract strong participation. Simplification is needed, not to lower standards, but to make green procurement easier and more consistent.
Other economies have moved more decisively. Under the President Joe Biden’s administration, the US Inflation Reduction Act used public spending to promote clean manufacturing and domestic resilience. And in the United Kingdom, a new procurement act embeds “social value” and climate considerations into public tenders, creating clearer incentives for innovation and sustainability. Both show how procurement can create “leading markets” for clean materials, a goal that is central to the Industrial Accelerator Act.
While that act aims to boost domestic demand for low-carbon technologies, the procurement directive should ensure coherence with sectoral legislation and translate these ambitions into consistent, implementable rules. Done right, this can promote a shift to procurement that rewards quality and innovation. Europe risks falling behind not for lack of technology, but for lack of alignment between its industrial, climate, and procurement policies.
If implemented well, procurement reforms could unlock more competitive, consistent, and resilient public spending without raising budgets. That means awarding contracts based on real value for money and making green public procurement the default, thus sending a clear market signal that quality, life-cycle costs, and wider societal benefits matter more than the lowest initial bid. It also means agreeing on common environmental criteria and robust standards across the single market, so that buyers and suppliers adhere to the same rules, making implementation easier and competition fairer. And it means harmonising requirements in key sectors, reducing complexity for public buyers, and giving companies the certainty they need to plan and invest.
Some countries are already showing what’s possible. Lithuania scaled green procurement from 5% to over 90% of contract value in just three years, combining clear criteria with training and oversight. Portugal has introduced binding environmental standards in high-priority sectors. And Ireland uses embodied carbon targets to procure cleaner, higher-performance public buildings. The first Irish tender using the CO2 Performance Ladder – a best-practice tool for green public procurement – cut emissions by 21% compared to a conventional approach, offering proof that the right criteria can drive measurable results.
The EU already has the tools to do better. Using them can unlock benefits that extend beyond driving clean industrial innovation. Consider, for example, that air pollution costs Europe an estimated €600bn ($696bn) per year. According to the consultancy Carbone 4, aligning procurement with sustainability could cut carbon dioxide emissions by 34mn metric tonnes annually, mobilise €86bn for green industries, and create 384,000 high-quality jobs. And the same dynamic occurs locally: when the French city of Dinan added green and social criteria to its cleaning services contract, it cut costs by 20%, reduced water use, and created jobs for unemployed residents.
At a time when demands on constrained public budgets are rising, strategic procurement can strengthen businesses, reduce emissions, protect public health, and promote economic growth at the same time. Why not reform the rules to make it the norm?
[This commentary is signed by Paolo Campanella and Gijs Termeer] – Project Syndicate
- Liesbeth Casier is Lead for Public Procurement and Sustainable Infrastructure at the International Institute for Sustainable Development.
- Joren Verschaeve is Co-ordinator at the Alliance for Low-Carbon Cement and Concrete.
- Christophe Deboffe is a partner at Neo-Eco, a circular economy consultancy.