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Is Swedish Public Procurement Ready for Sustainable Product Development?

An Investigation on Barriers in Public Procurement that Prevents the Diffusion of Sustainable Innovations

ELIN SOHLSTRÖM

Master of Science Thesis Stockholm, Sweden 2016

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Is Swedish Public Procurement Ready for Sustainable Product Development?

An Investigation on Barriers in Public Procurement that Prevents the Diffusion of Sustainable Innovations

Elin Sohlström

Master of Science Thesis INDEK 2016:152 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

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Master of Science Thesis INDEK 2016:152

Is Swedish Public Procurement Ready for Sustainable Product Development?

An Investigation on Barriers in Public Procurement that Prevents the Diffusion of Sustainable Innovations

Elin Sohlström

Approved

2016-11-09

Examiner

Niklas Arvidsson

Supervisor

Cali Nuur

Commissioner

AxFlow

Contact person

-

Abstract

The current focus on sustainability entails an extension of companies focus beyond economic objectives to an approach that also take into account economic, ecological as well as societal performance (Hollos, Blome and Foerstl, 2012). In this context, purchasing and supply has been transformed to have a strategic role in sustainability (Meehan and Bryde, 2011). The European Union point to a rising interest for policies that aim at a reorientation of public procurement to achieve solutions that promotes consideration of social policies and that supports sustainable innovation (European Commission, 2016).

Public procurement processes have according to Oruezabala and Rico (2012) only been studied in a few empirical studies. Furthermore, Rolfstam et al. (2011) emphasizes that diffusion is an area that have been neglected in the public procurement of innovation. The need for sustainable innovations makes it relevant to address a gap in the literature, which beyond exposing hinders for sustainable public procurement accounts for their effect on the diffusion of sustainable innovations. Wastewater treatment is important for public procurement due to its significant environmental impact and therefore the wastewater treatment industry is the focus of this thesis. The importance of the study is supported by actors such as AxFlow that supplies the wastewater treatment industry with technical solutions. This company experiences that hinders in public procurement prevents diffusion of sustainable innovations.

The purpose with this research is to investigate what barriers for sustainable procurement that prevents the diffusion of sustainable innovations. To fulfill this purpose a case study was conducted where data was collected through interviews with individuals with varying roles and experiences

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within public procurement to waste water treatment plants. In order to achieve the purpose it was necessary to determine that public procurement play a role in achieving a sustainable development. It was also crucial to find evidence on the existence of barriers for sustainable procurement and what these are.

The results indicate that public procurement could play a significant role in promoting sustainable development. However, it is possible to conclude that the actual contribution is significantly small or nonexistent due to the fact that there are several barriers in place that prevents public procurement from having a significant impact. Findings suggests that barriers to sustainable procurement exists and that these relate to all three pillars of sustainable development, which are the economic, social and environmental pillar. By analyzing barriers to sustainable procurement found in the empirical study it was possible to identify which specific barriers that prevents the diffusion of sustainable innovations.

It is concluded that the diffusion of sustainable innovations is prevented by the following barriers:

1. Public procurement failing to create economic incentives for sustainable product development.

2. An insufficient base of stake holders involved in the policy formulation process.

3. Policies not being formed on consensus and dialogue.

4. A lack of policy integration over different environmental media.

5. A lack of a strategic plan in public procurement.

6. Procurers given insufficient support and mutual measures necessary for evaluation.

Key-words: Diffusion, Public Procurement, Sustainable Procurement, Sustainable innovations, Sustainable Development

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Summering

Ett aktuellt fokus på hållbarhet resulterar i att företag i högre utsträckning vidgar sina målsättningar från att endast inkludera ekonomiska faktorer till att mäta prestation med utgångspunkt i

ekonomiska, ekologiska såväl som sociala mål (Hollos, Blome och Foerstl, 2012). I denna kontext har inköp och distribution transformerats till att ha en strategisk roll i hållbarhet (Meehan and Bryde, 2011). Europeiska Unionen pekar på ett ökat intresse för policyer med målsättning att förändra publik upphandling för att i högre utsträckning beakta sociala faktorer och stödja hållbara innovationer (European Commission, 2016).

Publika upphandlingsprocesser har enligt Oruezabala och Rico (2012) endast studerats i ett fåtal studier. Vidare hävdar Rolfstam et al. (2011) att spridning är ett område som förbisetts i den aktuella forskning som rör publik upphandling av innovationer. Behovet av hållbara innovationer gör det relevant att adressera detta gap i litteraturen, vilket inkluderar att fastställa hinder för hållbar publik upphandling och undersöka hur dessa påverkar spridningen av hållbara innovationer. Avloppsrening är på grund av dess stora påverkan på miljön ett område där publik upphandling kan bidra till

hållbarhet. Av denna anledning har avloppsreningsindustrin valts som fokus för detta examensarbete.

Vikten av studien stöds av aktörer såsom AxFlow vilka tillhandahåller tekniska lösningar till

avloppsreningsverk. Detta företag upplever att hinder i publik upphandling förhindrar spridning av hållbara innovationer.

Syftet med studien är att undersöka vilka hinder för hållbar upphandling som förhindrar spridning av hållbara innovationer. För att uppnå detta syfte genomfördes intervjuer med individer med

varierande roller och erfarenhet av publik upphandling till avloppsreningsverk. Det var även

nödvändigt att undersöka huruvida publik upphandling har en bidragande roll i att uppnå en hållbar utveckling. Vidare krävdes bevis för att det existerar hinder för hållbar upphandling och vilka dessa är.

Resultaten indikerar att publik upphandling skulle kunna ha en signifikant roll vad gäller att bidra till en hållbar utveckling. Det är dock möjligt att dra slutsatsen att bidraget är litet eller icke-existerande eftersom det existerar en rad hinder i den publika upphandlingsprocessen. Resultaten påvisar att det existerar hinder för hållbar upphandling relaterade till alla tre dimensioner av hållbar utveckling, vilka är den ekonomiska, sociala och miljömässiga dimensionen. De specifika hinder som förhindrar spridning av hållbara innovationer kunde identifieras genom en analys av de hinder för hållbar upphandling som hittades i den empiriska studien.

Det går att dra slutsatsen att spridningen av hållbara innovationer förhindras av följande hinder:

1. Publik upphandling misslyckas med att skapa ekonomiska incitament för hållbar produkt utveckling.

2. En otillräcklig bas av intressenter involveras i utarbetandet av policyer.

3. Policyer utformas i otillräcklig grad utifrån konsensus och dialog.

4. Avsaknad av integration av policy över olika miljömässiga medier.

5. Brist på strategisk plan i publik upphandling.

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6. Upphandlare ges otillräckligt stöd och avsaknad av gemensamma mätetal som är nödvändiga för utvärdering.

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List of Contents

1. Introduction ... 1

1.1 Background ... 1

1.2 Problematisation ... 2

1.3 Purpose ... 3

1.4 Research Questions ... 4

1.5 Expected Contribution ... 4

1.6 Delimitations and Limitations... 5

2. Literature and Claims of Governmental Authorities ... 6

2.1 Introduction ... 6

2.2 Sustainability and Public Procurement ... 6

2.2.1 Sustainability ... 6

2.2.2 The Role of Public Procurement in the Achievement of a Sustainable Development ... 7

2.2.3 Definitions of Green- and Sustainable Public Procurement ... 8

2.2.4 Hinders for Sustainable Procurement on a National Level... 9

2.2.5 Hinders for Sustainable Procurement on an International Level ... 11

2.2.6 Over-view of Hinders for Sustainable Procurement ... 13

2.2.7 Model for Translation of Sustainable Public Procurement into Practice ... 15

2.3 Diffusion of Sustainable Technologies ... 16

2.3.1 Diffusion of Innovation ... 16

2.3.2 Diffusion of Environmental Technology ... 16

2.3.4 Model for Assessing if Frameworks of Environmental Regulation Promote or Hinders Environmental Innovation ... 17

3. Overview of Public Procurement ... 19

3.1 The Procurement Process and Limits of Direct Procurement ... 19

3.2 Five Fundamental Principles for Public Procurement ... 20

3.3 Opportunities for Environmental Consideration in the Procurement Process ... 21

3.4 Opportunities for Social Consideration in the Procurement Process... 22

3.5 Example of a company which experiences that hinders in public procurement prevents the diffusion of sustainable innovations ... 23

4. Method ... 25

4.1 Research Approach and Design ... 25

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4.1.1 Pre-study ... 27

4.1.2 Literature and Claims of Governmental Authorities ... 28

4.1.3 Data Collection ... 28

4.2 Data Analysis ... 29

4.3 Validity, Reliability and Generalizability ... 30

5. Findings ... 31

5.1 Barriers for Sustainable Procurement Related to Environmental Sustainability ... 31

5.1.1 Insufficient Knowledge on Usage of Environmental Award Criteria ... 31

5.1.2 Evaluation ... 32

5.1.3 Risk-adversity ... 33

5.1.5 Complexity and Guidelines ... 33

5.2 Economic Sustainability ... 35

5.2.1 Insufficient Resources ... 35

5.3 Social Sustainability ... 36

5.3.1 Limited Opportunities for Follow-up ... 36

5.4 General Barriers for Sustainable Procurement ... 38

5.5 The Role of Public Procurement in the Achievement of a Sustainable Development ... 38

5.6 Summary of Results ... 39

6. Analysis and Discussion ... 41

6.1 The Role of Public Procurement in Achieving a Sustainable Development ... 41

6.2 Hinders for Sustainable Procurement ... 42

6.2.1 Evidence on the Existence of Hinders for Sustainable Procurement ... 42

6.2.2 What are the Hinders for Sustainable Procurement ... 43

6.2.3 Diffusion of Sustainable Innovations ... 45

7. Conclusions, Implications and Suggestions for Future Studies ... 48

7.1 Main Conclusions ... 48

7.1.1 The Role of Public Procurement in Achieving a Sustainable Development ... 48

7.1.2 Hinders for Sustainable Procurement ... 49

7.1.3 Diffusion of Sustainable Innovations ... 50

7.2 Implications ... 51

7.2.1 Managerial Implications ... 51

7.2.2 Research Implications ... 52

7.3 Suggestions for Future Studies ... 52

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8. References ... 53 Appendix ... 58 Interview Questions ... 58

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List of Figures

Figure 1. Model for examining translation of public procurement into practice (Brammer and Walker, 2011).

Figure 2. The procurement process (Konkurrensverket, 2014).

List of Tables

Table 1. Overview of barriers for sustainable procurement.

Table 2. Summary of results from interviews related to barriers for sustainable procurement.

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1. Introduction

In this chapter the background to the thesis is briefly described, the purpose is stated and the research questions used to address this purpose are introduced. The contribution of the thesis is argued for and the delimitations and limitations that were made are discussed.

1.1 Background

Legislation and an increase in environmental awareness mandates organisations and suppliers to take into account green issues to become competitive in the global market (Büyüközkan and Cifci, 2011).

The current focus on sustainability entails an extension of companies focus towards other factors than economic objectives that traditionally have been emphasized to an approach that concurrently take into account economic, ecological as well as societal performance (Hollos, Blome, and Foerstl, 2012). In this context, purchasing and supply has been transformed to have a strategic role in sustainability, which comes as a result of an increased amount of research has been conducted in the field of responsible purchasing and supply chain performance that considers environmental and social factors (Meehan and Bryde, 2011).

Public procurement can be defined as an economic activity that controls that society operates correctly regarding the purchasing of public services and products. It ensures that governmental actions are supported through the acquirement of the right item, at the time it is needed and to the right price (Wedin, 2009). In Sweden, public procurement is primarily regulated through LOU, the Swedish public procurement act, LUF which is the Law on procurement in water, energy, transport and postal services sector and LUFS which is the Law on procurement of defense and security (Upphandlingsutredningen, 2013). There are different parties that operate under the regulations and that needs to use the public procurement procedures. The parties include bodies controlled by public law such as municipals and state-owned enterprises, as well as decision making bodies at county councils and government authorities situated locally (The National Agency for Public Procurement, 2016). Public procurement has been an area of focus in both research and politics because it is a source of significant public expenditures both internationally, in Europe, and in Sweden. As a share of the gross domestic product (GDP) on services and goods, the expenditures on a national level is 15 to 18 percent of GDP. Because investments that are made through public procurement are paid by the taxpayers it is an area of relevance for the general public (Wedin, 2009).

The European Union point to a rising interest for policies that aim at a reorientation of public procurement to achieve solutions that to a higher extent promotes consideration of social policies and that supports innovation and environmental sustainability (European Commission, 2016). In Sweden, it is stated in the objectives for public procurement that the procuring authority or unit should take responsibility for an environmental and socially sustainable development, if motivated by the nature of the procurement. The responsibility is, and has for some years been, clearly supported in the procurement laws. In quality assessments, normally environmental- and social aspects should also be considered (Upphandlingsutredningen, 2013). Appropriately performed procurements act as a support in regards of gaining the right balance between social, environmental and economic sustainability, in the procurement of goods and services (The National Agency for Public

Procurement, 2016). The Swedish Competition Authority (2015) estimates that the total value of

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2 public procurement in Sweden was SEK 625 billion in 2012. It can be concluded that the public sector accounts for an extensive demand in the market and can thereby through offensive and constructive requirements abet to the development of more sustainable product and services (Upphandlingsutredningen, 2013).

Innovation friendly procurement is the realisation of traditional procurements by procuring authorities or units in a way that new innovative solutions are not excluded or treated unfairly.

Combining innovations and environment, by procurement through transformative solutions, can contribute to a sustainable society and the development of new markets (Upphandlingsutredningen, 2013). Environmental innovations differ from other innovations in terms of that environmental quality is improved (Li, 2013). In relation to other innovations environmental innovation often needs support from politics and global market potential (Jänicke, 2008). Diffusion is “the process by which an innovation is communicated through certain channels over time among the members of a social system” (Rogers, 1983). Diffusion is a process that is social and interactive and that institutions decide upon (Rolfstam et al., 2011).

The thesis focuses on AxFlow, a distributor founded in 1989 that are a leader in delivering pumps and pump expertise for the process industry in Europe. AxFlow operates in 20 European countries and represents world leading manufacturers of industrial pumps and add customer value through industrial know-how, by deliveries that are fast and reliable and by offering a broad range of technical services. They aim at being able to meet the needs of local industry while providing customer service as well as strategic distribution across Europe. The company supplies fluid handling solutions and services to the following industries: chemical and petrochemical; food and beverage; pharmaceutical as well as water and wastewater (Axflow, 2016).

The products that they supply waste water treatment facilities with nationally are sold through public procurement. Sustainability is a key focus for AxFlow globally and this is illustrated in their

sustainability strategy. The strategy emphasizes that “AxFlow should contribute to sustainable and energy efficient operations in the process industry as well as minimize its negative impacts on the environment and the society”. One key area they aim at driving initiatives within is sustainable customer offerings. In line with this aim, a pump for transporting dewatered sludge that are using innovative non-conventional techniques, have been added to their product offering. The solution is by AxFlow stated to be superior other solutions in terms of social and environmental consideration.

In terms of economic perspective, it requires a higher initial investment than solutions using conventional techniques, but have a relatively low pay-back time (Axflow, 2016).

1.2 Problematisation

The need of sustainable technologies makes diffusion of sustainable innovations through public procurement important, especially in public procurement to industries with high environmental impact. An insufficient amount of research has though been conducted that investigate how diffusion of sustainable innovations are supported in the procurement process. With the significant positive impact that public procurement can have with regards to adoption of sustainable solutions the need for further research is obvious. The need for further research is further supported by companies as AxFlow which experiences that hinders in public procurement prevents the diffusion of sustainable innovations.

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3 As stated in the introduction, environmental and social consideration in public procurement are emphasised both in Sweden and all over the European Union and public procurement could have a significant positive impact on the development and adoption of sustainable solutions. Still, public procurement practices have, only been studied through a few empirical studies, even though a great amount of publications debate reasons for why and how firms are developing procurement processes that are more environmentally friendly (Oruezabala and Rico, 2012). Previous research has focused on the encouragement of sustainability when procuring products in different industries, sustainable procurement in different countries, sustainable procurement policies and how tools that can assist the policy implementation can be developed. It is further emphasized by Rolfstam et al. (2011) that diffusion is an area that have been neglected in the public procurement of innovation. There is not sufficient research that investigates how the procurement process act as a stimulus for environmental innovation and how the diffusion of these innovations is supported. The need for sustainable

technologies makes it relevant to address this gap in the literature. Beyond exposing hinders for sustainable public procurement the analysis needs to be extended to a wider perspective that

accounts for their effect on the diffusion of sustainable innovations and the suppliers’ abilities to give competitive tenders with a sustainable product.

Waste water treatment is an important area for public procurement due to its significant

environmental impact, since waste water treatment both consumes significant amounts of energy, but also handles potentially environmentally hazardous materials. Therefore, the diffusion of sustainable innovation through public procurement could also be of significant importance to the waste water treatment industry.

The relevance of addressing this gap in the literature is supported by companies like AxFlow which experiences that there are hinders in public procurement that prevent the diffusion of sustainable innovations in the waste water treatment sector. AxFlow offers a solution to waste water treatment plants that they state is superior comparable solutions that are using conventional techniques

regarding both economic, social and environmental factors. Further the product is assessed to have a potentially important role in waste water treatment plants’ work towards reducing their

environmental impact. Nevertheless, only two installations have today (2016) been made in Sweden.

Based on the previously mentioned aspects a perception is made by the supervisor at AxFlow that the sales of sustainable innovations are hindered due to insufficient consideration of sustainability aspects in public procurement to waste water treatment plants. As a result, it is difficult for distributors such as AxFlow to adapt their sales work and understand what is needed in order to enable for increasing sales as well as succeed with meeting customer needs. This study will investigate if hinders in line with those experienced by AxFlow actually exists in the waste water treatment industry.

1.3 Purpose

The aim with the thesis is to investigate what barriers for sustainable procurement that prevents the diffusion of sustainable innovations and thereby the limits of public procurement regulation. An attempt is made to create an understanding of the tensions between, legislation, and the rules that govern public procurement and the need for sustainable technologies.

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4 1.4 Research Questions

The research questions that will be answered in order to achieve the stated purpose is:

What barriers for sustainable procurement prevents the diffusion of sustainable innovations?

A subset of two questions will be answered in order to answer the main research question. In order to answer the main research question it is firstly crucial to determine that public procurement actually play a role in achieving a sustainable development and thereby that a relationship between public procurement and sustainability exists. The first sub-question is formulated as:

RQ1) Do public procurement play a role in achieving a sustainable development and if it does how?

To answer the main research question it is also crucial to determine the existence of barriers for sustainable procurement and what these are. By analyzing all barriers to sustainable procurement, it is possible to identify which specific barriers that prevents the diffusion of sustainable innovations and thereby answer the main research question. The second sub-question is:

RQ2) Are there barriers for sustainable procurement and in case there are, what are these?

1.5 Expected Contribution

Contributions to the literature will be given in terms of an understanding of how procurement authorities assess that public procurement play a role in sustainability. This will complement previous studies, that primarily focus on the important role of public procurement in sustainability, by

illustrating how the message have been conveyed to the individuals that can influence how

procurements are carried out in practise. It is illustrated by how the procuring units within the waste water treatment industry responds to the encouragement of procuring sustainably and hinders are described. Previous studies that investigates consideration of sustainability when conducting procurements in the waste water treatment industry has not been found, even though it is of significant importance for the environment. The goal with this study, is to contribute by providing assistance to procuring units towards areas of improvements concerning sustainable procurement.

New rules were accepted within the European Union in 2014 where environmental consideration and the social dimension were further emphasised. The new rules may provide procuring units with new guidelines, rendering some hinders for sustainable procurement described in previous research irrelevant. The research findings may therefore also contribute towards assessing whether the new rules have had an impact in terms of enabling for sustainable procurement and remove barriers.

A contribution to the literature will also be given in terms of an understanding of the barriers in public procurement that prevents the diffusion of sustainable innovation. Academic research that investigate barriers in public procurement that prevents diffusion of these innovations have not been found which makes this contribution important.

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5 The research will benefit companies that are looking at opportunities of developing sustainable products that will be sold through public procurement, in terms of the offering of a support for decision for stakeholders such as investors, when making decisions.

1.6 Delimitations and Limitations

The study provide knowledge in how regulation regarding sustainability in public procurement is implemented in practice. However, public procurement and sustainable innovations are large and complex research fields and due to time constraints, the scope of this study has been limited. The target is to provide an in-depth study with a narrow scope rather than providing a broader view.

The study will be limited in terms of market scope to the waste water treatment industry. It is

reasonable to assume that implementation of environmental regulations varies across different public markets and as such limiting the study to one market will allow for an in-depth study of how the regulation of environmental procurement is implemented in this specific market.

Furthermore, even though environmental directives for public procurement are set on a European Union level, the implementation varies significantly between countries as implementing the rules is not mandatory by member states and as such the study has been limited to Sweden.

The perception made by AxFlow was in the starting point of the thesis that sales of sustainable innovations are hindered due to insufficient consideration of sustainability aspects in public procurement to waste water treatment plants. This perception was based on the problems they experienced selling one specific pump using innovative techniques. On the basis of this the main focus of the study has been to investigate the research questions with this particular product as a key benchmark. However, the findings are still valid for all products sourced since most interview questions relate to all procured products.

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2. Literature and Claims of Governmental Authorities

In this chapter theories and concept related to public procurement and sustainability are presented on the basis of academic literature and data from governmental authorities. The existing research that investigates hinder for

sustainable procurement are described based on academic literature and secondary sources. Lastly concepts and theories for diffusion of sustainable innovations are introduced.

2.1 Introduction

Section 2.2 Sustainability and Public Procurement presents definitions of sustainability as well as research and evidence on sustainable procurement in Sweden. The factors that have been found nationally and internationally to hinder sustainable procurement are thereafter presented. The international context is relevant to be able to draw conclusions regarding to which extent the barriers are general, i.e. independent on context, and which barriers that prevent the diffusion of sustainable innovations.

Because of the nature of the topic a need for capturing secondary data exists. Data from different interest groups are also relevant to capture due to that a limited amount of academic literature have been published in this research field. Academic literature is therefore complemented with secondary data from governmental authorities in this section.

In section 2.3 Diffusion of sustainable technologies firstly diffusion is defined on the basis of academic literature with the aim to give a foundation for discussing the concept of diffusion related to the empirical findings in the analysis part. Secondly on the basis of academic literature it is discussed how sustainable innovations differs from regular innovations and the factors that are especially important in order for sustainable innovations to diffuse. With the aim of the thesis which is to investigate how diffusion of sustainable innovations are affected by the limits of public procurement, it is crucial to understand which factors that are important for the diffusion of these innovations and how theory on diffusion of innovations that do not focus on sustainable innovations can be applied. Thirdly, sustainable procurement can be viewed as public sector using institutional coordination in order to reach sustainability aims. On the basis of this it is relevant to understand how institutions have the opportunity to influence the diffusion of sustainable innovations and what is needed in terms of institutional coordination in order to enable for diffusion of them.

2.2 Sustainability and Public Procurement

Theories and concept related to public procurement and sustainability are presented below on the basis of academic literature and data from governmental authorities. The existing research, nationally and internationally, that investigates hinder for sustainable procurement are described based on academic literature and secondary sources.

2.2.1 Sustainability

A definition of sustainable development that are universal and that is not dependent on its context cannot be found (Koning, 2002) (Connelly, 2007). An analysis of the definitions and interpretations of this concept show that the focus often is on particular elements and that most of them do not

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7 succeed to capture the entire spectrum of elements (Mebratu, 1998). A frequently quoted definition by The Brundtland Commission (1987) states that sustainable development is: “Development that meets the needs of present without compromising the ability of future generations to meet their own needs“ (United Nations, 1987). According to Hopwood et al. (2005) sustainable development is usually illustrated in a model that consists of three rings which are the social, economic and environmental ring. These rings are separated from each other but connected. This illustration is aligned with the one presented by Elkington (1998) called The triple bottom line that incorporates these rings as performance dimensions for measuring sustainability. He describes that the economic dimension concerns long term-

sustainability in regards of profitability and capital. The environmental dimension is argued to concern natural capital and the environmental impact of the business that is carried out. The social dimension he explains concerns social capital and emphasizes “must embrace wider measures of a society’s health and wealth creation potential”.

Hopwood et al. (2005) argues that all sustainable development intercessors agrees on that changes in the society is needed. According to them they do however not agree on the nature of the concept, which changes that are needed and which actors and tools that are important. They further

emphasizes that sustainable development has different meanings for different individuals. As a result of diverse views regarding routes, goals and methods of how a sustainable development can be achieved the concept is viewed as confusing. In regard of the social dimension of sustainability Weingaertner and Moberg (2014) argues that there is an extensive amount of literature, however the meanings of the concept and its interpretations have not fully been understood.

2.2.2 The Role of Public Procurement in the Achievement of a Sustainable Development The role that public bodies have in sustainable supply have only been investigated in a small amount of studies (Preuss, 2007) (Thomson and Jackson, 2007). According to the United Nations

Environment Programme (2013) it is reasonable to assume that there is a link between Sustainable procurement and benefits for society, such as economic, environmental and social. They do however argue that proving the positive outcome is difficult.

The responsibility that public sector has as a provider of services that directly affect sustainability, such as waste disposal and economic development makes the ability that public bodies in terms of contributing to a sustainable development evident (Wilson and Game, 2006). According to a review made on the book Buying into the Environment by Reibstein (2004), which presents results found by Erdmenger and individuals from different institutes on the European Commission’s so called RELIEF project, the great potential power that governments have in terms of motivating producers to make more environmentally-friendly products are argued for. Great environmental gains could be achieved if public sector purchasing emphasized an ecological focus according to the review.

Erdmenger argues that if green electricity, energy efficient lightning, vehicles and insulation for building was procured and a switch to organic food that is grown locally was made by public sector 33 per cent of the of the EU’s Kyoto commitments regarding the reduction of greenhouse gas emissions could be achieved. Reibstein (2004) further states that it is stressed by Erdmenger that as the government changes their purchasing function it will be reflected on the purchasing of the private sector. As a result, higher reductions of greenhouse gas emissions would be gained.

The European Commission (2016) states that public procurement play an important role in the efforts of the European Union towards an economy that is more resource-efficient. They further

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8 argue that public procurement can act as a great stimulus for eco-innovations because it can generate a critical demand quantity for goods and services that are sustainable that otherwise would be hard to get out on the market.

According to the National Agency for Public Procurement (2016) public procurement have a role in a sustainable development as it can contribute to the solving of diverse environmental issues. These issues are for example water usage. A contribution to the solvency of this issue they argue can be made through setting requirements on water saving equipment. Further through procurement of products on the basis of eco-design a contribution to the solving of environmental issues related to consumption of resources and energy efficiency can be made. They also argue that by supervising the usage of chemicals and setting limits for usage of substances that are toxic a contribution can be made to solve issues related to pollution of water, air and soil. The establishment of norms for private sector and the society enables public procurement to affect the market and thereby contribute to a sustainable development. Through sustainable public procurement awareness for environmental issues can also be raised.

Public procurement does according to the National Agency for Public Procurement (2016) have a role in the work towards a sustainable development considering the social dimension through procurement of goods that have been ethically produced. It does also have a role as requirements related to social integration and working condition can be set and as a result an improved labor market can be gained.

The role of public procurement in achieving a sustainable development if considering the economical dimension according to the National Agency for Public Procurement (2016) concerns resources, monetary and non-monetary, that can be saved through the usage of mind sets that incorporates life- cycle costing. Through incorporation of sustainability in the procurement process they also argue that public sector has the opportunity to create incentives for development of green technologies in the industry. Further as sustainable criteria are used the market may be affected in terms of an increased amount of actors that offers green products and technologies. In a long-term perspective, the competition may also increase and purchasing prices become lower. Public sector is also argued to have a role as it can contribute to the development of circular economy.

2.2.3 Definitions of Green- and Sustainable Public Procurement

Green public procurement (GPP) is by the European Commission (2016) defined as "a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured.”

Sustainable procurement is defined as that “public authorities seek to achieve the appropriate balance between the three pillars of sustainable development - economic, social and environmental - when procuring goods, services or works at all stages of the project” (European Commission, 2016). The definitions are aligned with those stated by Uttam (2014) which imply that Sustainable procurement incorporates consideration of both environment and social factors in the procurement and can be

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9 viewed as an extension of Green procurement that is the process where contracting authorities aims at procuring products that meet environmental requirements. Numerous public authorities have been implementing Green public procurement as part of a wider approach that aims at sustainable

purchasing and that also account for economic as well as social aspects (European Commission, 2016).

2.2.4 Hinders for Sustainable Procurement on a National Level

The European Commission (2012) argues that countries have implemented Green public

procurement activities and adopted policies at different times and as national criteria is becoming more widespread the challenge is to make sure that criteria are compatible between member states.

On the basis that it differs how far member states have come in their development of sustainable public procurement practices, clear comparisons between countries are difficult. As a result, evidence on sustainable procurement and factors that hinder sustainable procurement according to studies conducted in Sweden are described in this section and are separated from hinders found in international studies.

Scholar have investigated sustainable procurement in Sweden in different sectors and from general governmental perspectives. A survey that was answered by public actors implicate that six out of ten always, or often set environmental requirements within procurements (Naturvårdsverket, 2009).

Environmental consideration in the public procurement process have been studied in different industries. A study by Faith-Ell et al. (2004) shows that serious efforts have been made in the integration of environmental aspect into road maintenance contracts, though the application of requirements is hindered due to lacking transfer of information to key actors. In addition, environmental issues are taken into consideration in procurements in the Swedish construction industry, both in the public sector (Carlsson and Waara, 2013) and private sector (Varnäs, 2007).

A lack of a comprehensive view and that short-term perspectives are often used in the procurement of products and services within the public sector which have been found hinder sustainable

procurement. As a result, outcomes are often gained where products that can be bought at a low price are chosen even though the total costs are higher in a long-term perspective and the product are worse from an environmental perspective (Upphandlingsutredningen, 2013). The Public Procurement Act is important when the government and the municipality conducts investment in tangible assets and low up-front costs are often what make an entrepreneur win the procurement, while aftersales makes up a source of profits for the entrepreneur which from a system perspective is resource inefficient according to (IVA, 2015). It is shown that a reason for environmental

requirement not being used or are given low priority by procuring authorities are increased costs as a result of the requirements and hampering of competition (Naturvårdsverket, 2010). The argument is supported by Carlsson and Waara (2013) which argue that increased costs act as a hinder and explains that procuring units do in some cases not have budgets that allow for paying price

premiums for goods that are friendlier to the environment. Naturvårdsverket (2010) argues that the perception that sustainability will result in increased costs makes Sustainable procurement activities regularly fall foul of budgets that are tight.

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10 Investigation by the Swedish government show that legislation and its application is perceived as complicated and inflexible and it is unclear to which extent far-reaching environmental- and social requirements can be provided. Uncertainties regarding if and how social deference and

environmental requirements are allowed to be considered also act as a barrier. Furthermore, it is unclear to which extent that individual needs and choices can be taken into consideration (Upphandlingsutredningen, 2013). A study of the development of criteria for Green Public Procurement by a Swedish governmental expert body shows weaknesses in terms of limited impact and deficiencies in clearly defining objectives for sustainability. It is concluded that changes in the current process are needed to stimulate innovative solutions that supports sustainable development and that do not only result in progress related to environmental problems that are currently known (Bratt et al., 2013).A weak leadership nationally, insufficient guidance within procuring authorities, a diverse and insufficiently wide support in procurements, inefficient providence of requirements and insufficient follow-up on requirements are factors found important for not making use of the full potential of public procurement as an efficient instrument of control in Sweden (Upphandlingsutredningen, 2013).

Generally, follow up of requirements are stated to be a weak link in the procurement process (Faith- Ell et al., 2004) (Upphandlingsutredningen, 2013) and follow up often have small or no connection to environmental aspects. Follow up of environmental requirement is stated to be important in order to understand if they have resulted in a more environmentally friendly procurement and have had positive effects on the environment, for feedback, effects on the economy of the organization and for support in future procurements (Naturvårdsverket, 2010). Statistics is well below par and as a result there are difficulties calculating the effects of the environmental and social requirements that are provided (Upphandlingsutredningen, 2013).

In order to be able to state relevant environmental requirements it is crucial that environmental concern is present from the beginning in the procurement process; e.g. in the investigation of the needs and in the market analysis. It is uncommon that the procuring authorities makes a need- and market analysis related to environment consideration (Naturvårdsverket, 2009) (Naturvårdsverket, 2010). Improved quality control within procuring units would result in that follow-up and

environmental requirements would be accounted for in the beginning of the procurement process (Naturvårdsverket, 2010).

The study by Naturvårdsverket (2010) shows that uncertainties exist regarding if procurers, operators or politic management have the responsibility for setting environmental requirements in the

procurement process. Procurers needs to know that they can set environmental requirements and have the knowledge necessary do so(Naturvårdsverket, 2010). A study by Naturvårdsverket (2009) implicate that the lack of knowledge and experience with regards to how to set requirements represent the most significant obstacle for environmentally sustainable procurement. Insufficient resources and abilities provided by the government hinders the opportunities to set requirements that makes sense to use from a business perspective. This can be related to a lack of a strategic thinking and ability to take greater and wider perspectives into account (Upphandlingsutredningen, 2013).

Risk avoidance is stated to act as a hinder for sustainable procurement by both authorities and scholars. The fear of protests has resulted in structural effects on public procurement with the aim of

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11 reducing risk by avoiding quality assessments, consideration of alternative tenders and the testing of procurement forms that benefit the development of innovative goods and services. It is possible to file a protest in administrative court if one suspects that the regulation has been violated by the procuring unit and consequently the procurement will be temporarily stopped which for the authorities means risks in terms of not getting the goods or services that they need in time

(Upphandlingsutredningen, 2013). Having environmental criteria that easily can be evaluated easily is preferred by procurement officers (Carlsson and Waara, 2013).

2.2.5 Hinders for Sustainable Procurement on an International Level

Evidence on sustainable procurement and factors that hinder sustainable procurement according to studies conducted internationally are described in this section.

2.2.5.1 Barriers found by international politic organs

The main barriers to Green Public Procurement are, according to a study initiated by the European Commission, that it would be more expensive to procure green products, insufficient environmental knowledge, lack of support from management and politics, deficiency of information and tools as well as training (Bouwer et al. 2006).

Barriers in the United Nations’ system for the implementation of effective sustainable procurement practices were investigated by Hasselbalch, Costa and Blecken (2015) through interviews with procurement practitioners and policymakers. Sustainable procurement offers the United Nations the opportunities to make an impact on organizations that it is associated with, as well as in in projects in terms of introducing practices that are not harmful for the environment, favor social progress and that gain the economic development and at the same time optimize costs.

According to the study, the most frequent cited barrier is the lack of a sustainable procurement policy on an organizational level. It is argued that due to the lack of strategies or high-level policies on how to handle sustainable procurement it becomes difficult to take initiatives for implementation.

Lack of political mandate is also a factor that is frequently cited in the study. It is explained to be a barrier of importance because it is considered unrealistic that a significant amount of time and effort would be put into efforts regarding sustainability without knowing what is up-and-coming in politics.

Other frequently cited barriers is that procurement procedures need to be updated and an increased dealing with short-term costs. The up-front costs are often higher for sustainable solutions even though the cost may be lower in a long-term perspective.

2.2.5.2 Barriers Found in Research Made in the United Kingdome

Studies on Green Public Procurement performance consistently shows that seven countries; Austria, Denmark, Finland, Germany, Netherland, Sweden and UK have more tenders where environmental criteria have been used than the remaining 18 countries that were studied. In these countries,

respondents to the questionnaire that was sent out also gave their Green Public Procurement activities a higher rating (Bouwer, 2006). Based on Sweden’s performance in Green Public Procurement, and with the aim of this study to investigate the relevant hinders for sustainable procurement the reviewed literature in the section focus on the UK, a country that as Sweden have

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12 made efforts in their work with sustainable procurement which is assessed important for relevant comparison

The UK has formulated a national sustainable development strategy that includes a goal that they by 2009 wanted to be a leader in SPP within the EU (DEFRA, 2006). Of all the EU member states, only one third had in 2007 formulated action plans for SP, of which the leading countries were the UK, the Netherlands and Denmark, all having well developed plans compared with other countries (Steurer et al., 2007). The existence of differences between countries concerning how social and environmental dimensions are obvious. Due to the position that UK have, in the forefront of sustainable procurement, extensive investigation into barriers have been made which enables making relevant conclusions regarding the importance of different factors. For relevant benchmarking with the empirical findings of this study it was necessary to compare with a country with well-developed policies.

The UK Government task force have in detail summarized the most important hinders for sustainable procurement nationally from a governmental perspective and formulated

recommendations based on those. A key barrier for sustainable procurement that is stressed in the report is that even though long term savings can be achieved with sustainable procurement the costs in a short-term perspective are larger (UK Government task force, 2006).

It is recommended that sustainable procurement is made to be a leadership priority based on the fact that sustainable procurement is hindered by the lack of leadership in organisations within the public sector. Furthermore, a lack of commitment, a lack of incentive systems and that there is a need for an organization that drives the development of sustainable procurement are stated to be barriers for sustainable procurement. Further suppliers are not given unified messages regarding the value of offering sustainable products (UK Government task force, 2007).

It is recommended that clear priorities are set in order to address barriers that relate to that many guidance documents create confusion for procurers. A great amount of guidance documents results in them not being applied as well as causes difficulties prioritizing different sustainability factors. An example is the choice between products that are disposable or reusable. A barrier is also the lack of tools for decision making in terms of frameworks that supports policies. Insufficient integration of sustainability in the day to day work at departments, with regards to that sustainability is not considered in all stages of the procurement process is also seen as a barrier (UK Government task force, 2006).

It is stressed that there is a need for meeting standards and setting future goals. Procurement of product and services that meet certain minimum standards for sustainability are pointed out to be important. Based on records, this is not the case today. It can be explained by that as a result of insufficient product information it becomes hard to prioritize and set standards. Consequently, products are procured based on how they comply with legalization rather than based on their environmental or social performance (UK Government task force, 2006).

The UK government stresses that capabilities must be developed. They point towards a lack of information and training, ignorance for sustainability, not being able to convince procurers of merits, insufficient guidance and difficulties related to calculation of intangible benefits as important. Other barriers found are not succeeding to apply life cycle costing rules in practice, a short-term focus,

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13 inefficient practices for budgeting and uncertainties regarding how to account for non-monetary benefits (UK Government task force, 2006).

Furthermore, it is argued to be important to engage with the market in order to act as a stimulus for innovation. Both in order to address barriers related to under developed supply chain management in the public sector in relation to practices in the private sector but also to deal with that it is difficult to penetrate the public sector market with solutions that are innovative. The last-mentioned factor can also be related to other barriers that have been found such as risk adversity and missing incentives for innovation in the procurement or for procuring innovative solutions. Further the public sector lack capabilities of sending out signals regarding requirements that will be important in the future and giving suppliers incentives for investments in R&D and up-scaling their business to be able to meet the needs of the public sector. As a result of lacking engagement with the market, the tax payers’ value for money is negatively affected (UK Government task force, 2006).

A frequently cited research article by Walker and Brammer (2009) investigates barriers for sustainable procurement in the United Kingdom public sector through a survey with open-ended questions. The factor that was found significantly most important in the study was perceptions regarding financial viability. Respondents pointed out that high costs prohibited sustainable procurement which was the most commonly highlighted barrier. Awareness was found to be the second most commonly

perceived hinder by respondents and thirdly, a lack of resources was perceived to act as a hinder for sustainable procurement.

Another study conducted in the UK stresses financial constraints as an important barrier for sustainable procurement. Environmental initiatives in many cases implicate that local authorities must carry costs related to it and that a majority of them not are willing to pay price premiums for buying green products. As a result of these financial constraints initiatives for sustainability are limited in procurements by the local authorities in the UK (Preuss, 2007).

The main barriers for green procurement is described in a study made in England based on

interviews with five local authorities. A majority of the interviewees described that they thought the main barrier to green procurement was the lack of priority at senior level. A majority of the

interviewees mentioned cost as the factor that was secondly most important. Other significant barriers that was mentioned was legal concerns, lack of data regarding costs and benefits as well as guidance (Thomson and Jackson, 2007).

2.2.6 Over-view of Hinders for Sustainable Procurement

The factors that have been found nationally and internationally to hinder sustainable procurement discussed in the previous sections are summarized in Table 1.

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14

Table 1 Overview of barriers for sustainable procurement

Hinder Reference

Lacking transfer of information and tools to key actors Faith et al. (2014) Bouwer et al. (2006)

UK Government task force (2007) Thomson & Jackson (2007)

Lack of comprehensive view Regeringen (2013)

Upphandlingsutredningen (2013) UK Government task force (2007)

Financial constratints Regeringen (2013)

Naturvårdsverket (2010) Carlsson & Vaara (2013) Bouwer et al. (2006)

Hasselbalch, Costa & Blecken (2015) UK Government task force (2007) Walker & Brammer (2009) Preuss (2007)

Thomson & Jackson (2007) Legislation and application percieved as complicated Upphandlingsutredningen (2013)

Thomson & Jackson (2007) Defiencies in clearly defining objectives for sustainability Bratt et al (2013)

UK Government task force (2007) Lack of leadership in organisations within the public sector Upphandlingsutredningen (2013)

UK Government task force (2007)

Lack of follow up on requirement Faith et al. (2014)

Upphandlingsutredningen (2013) Naturvårdsverket (2013) Naturvårdsverket (2010)

Risk adversity Upphandlingsutredningen (2013)

UK Government task force (2007)

Insufficent knowledge with regards to sustainable procurement Naturvårdsverket (2009) Bouwer et al. (2006) Walker & Brammer (2009) UK Government task force (2007)

Lack of support from management and politics Upphandlingsutredningen (2013) Bouwer et al. (2006)

Hasselbalch, Costa & Blecken (2015) Lack of sustainable procurement policy on an organizatonal

level

Hasselbalch, Costa & Blecken (2015)

Lack of incentive systems UK Government task force (2007)

Lack of commitment UK Government task force (2007)

Lack of clear priorities with regards to sustainability factors UK Government task force (2007) Thomson & Jackson (2007)

Sustainability is not considered in all stages of the procurement process

Naturvårdsverket (2009) Naturvårdsverket (2010) UK Government task force (2007) Public sector lacks engagement with the market UK Government task force (2007)

Lack of resources Upphandlingsutredningen (2013)

Carlsson & Vaara (2013) Walker & Brammer (2009)

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15 2.2.7 Model for Translation of Sustainable Public Procurement into Practice

Gelderman et al (2006) proposes a conceptual model for examining the translation of public procurement into practice that points out potential reasons for non-compliance with the tendering directives presented by EU for public procurement. Compliance is by Gelderman referred to as

“acting in accordance with an influence attempt from the source” as defined by Payan and

McFarland in 2005. The model is extended by Brammer and Walker (2011) to a conceptual model that accounts for the influences on sustainable procurement and that additionally to Geldermans model takes into account national policy context and regional variances. The model proposed by Walker and Brammer (2011) is illustrated below.

Figure 1- Model for examining translation of public procurement into practice proposed by Brammer and Walker (2011)

The model suggests that pressure on the organization to undertake sustainable procurement is the primary reason for spreading the use of it. Further, four influences on sustainable procurement practices are described in the model; the role of how costs and benefits are perceived, if the procuring organisations are familiar with sustainable procurement, the availability of goods and services that have been sustainably produced and incentives and pressure for sustainable procurement on an organisational level.

Familiarity influence, in terms of that for effective implementation, an understanding of the sustainable procurement concept and connected governmental policies is crucial. To enable sustainable procurement, the organization also needs essential tools, skills and competences

(Brammer and Walker, 2011). On an organizational level training, has been found to be an important factor for successful green purchasing practices (Bouwer et al., 2006). Availability connects to that a large amount of the procured goods and services are greatly specialists and as a results it can in some cases be challenging to find sustainable supplies (Brammer and Walker, 2011).

National policy context Sustainable public

procurement Supplier availability/

resistance Familiarity with policies Perceived costs/ benefits of

policy

Organisational incentives/

pressures

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16 2.3 Diffusion of Sustainable Technologies

In this section diffusion is defined, the characteristics of sustainable innovations and the factors that are important in order for them to diffuse are described. The need of institutional coordination in order to enable for diffusion of sustainable innovations is also discussed. Lastly a model for making an assessment regarding if a frameworks of environmental regulation promotes or hinders

environmental innovation is introduced.

2.3.1 Diffusion of Innovation

Rogers describes diffusion as “the process by which an innovation is communicated through certain channels over time among the members of a social system”. Diffusion is not an ordinary type of communication, but is characterized by that the message concerns an idea that is perceived as new (Rogers, 1983).

In the definition of diffusion of innovations there are four main elements which can be summarized as the innovation, communication channels, time as well as the social system. The first element, innovation is described as an object, idea or object that the individual or other unit that may adopt it perceive as new. It is an innovation if the idea by the individual appears as new, though newness does not only need to consist of new knowledge but can be expressed also by persuasion or individuals deciding on adoption (Rogers, 1983).

The second element, communication channels are defined as “the means by which messages get from one individual to another”. Which effect the transfer have and under which conditions the innovation will or will not be transmitted to the receiving part depend on the nature of the relationship for exchanging information. To get individuals that potentially would adopt the innovation aware of the existence of the innovation mass media channels, meaning messages

transmitted with involvement of a mass-medium, have been found to be the mean that often is most efficient and rapid. However, to persuade an individual to usage of a new idea, interpersonal

channels, which involves that individuals make exchanges face-to-face, have greater effectiveness (Rogers, 1983).

The third element, time relates to the innovation decision process. In the process the individual, or other unit for making decisions, goes from primary knowledge of the innovation through the stages of persuasion, to decision making regarding whether to adopt or reject the new idea, to the

implementing of the innovation and lastly to confirmation through the search or reinforcement for the innovation decision that was made (Rogers, 1983).

The fourth element, social system, is by definition a “set of interrelated units that are engaged in joint problem solving to accomplish a common goal”. In a system the diffusion of innovations can be facilitated or hindered by the social system structure. Diffusion of innovation can be affected by the structure of the system through norms, opinion leadership and consequences (Rogers, 1983).

2.3.2 Diffusion of Environmental Technology

Ecological modernization can be seen as “the innovation and diffusion of environmental

technology”. If considering it from a political perspective environmental innovation in relation to

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17 other innovation are characterized by that they usually need to be supported politically, have market potential globally and a demand it created for environmental innovations by industrial growth globally at the same time as natural resources are limited (Jänicke, 2008).

For the creation and diffusion of environmental innovations Jänicke (2000) describes that three factors are crucial; most importantly the effort of the company to reduce their costs, secondly that environmental policy is formulated combined with or interacting with the degree of environmental awareness of the general public.

Several approaches that can make a contribution when considering policy frameworks in terms of promoting that environmental innovations are generated and diffused was found through a comparison of regulatory frameworks internationally in the paper industry. These were strategic planning, the creation of economic incentives, management of the product chain, integration of policy over different environmental media and mutual measures that are voluntary (Jänicke, 2008).

2.3.3 Institutions and institutional coordination- the effect on adoption and diffusion Rolfstam et al. (2011) emphasizes that diffusion is an area that have been neglected in the public procurement of innovation. Diffusion and innovation can be seen as a process that is social and interactive, that are decided upon by institutions, and that therefore sometimes enables diffusion and sometimes don’t. It can be concluded that in order to achieve diffusion institutional coordination is sometimes necessary. In an empirical study made the aforementioned researcher investigates how adoption and diffusion of innovation is affected by institutions and institutional coordination. It could in the study be concluded that it existed barriers that had an inhibiting effect on the diffusion of innovative products that was procured. It is implicated that attention have to be given the

diffusion of the innovation. Additional resources are also needed for coordination and negotiation of the institutional set-up that the procured innovation is diffused into because practices for the

procurement of innovation differs from the procurement of regular goods that already are well- known by the procurer.

2.3.4 Model for Assessing if Frameworks of Environmental Regulation Promote or Hinders Environmental Innovation

A model is suggested by Jänicke (2000) that consists of three central elements that can be used to assess if frameworks of environmental regulation promotes or act as a barrier for environmental innovation.

The first element to consider in order to assess if a policy framework is innovation friendly is instrumentation. The different phases of innovation which are invention, innovation and diffusion requires that the instruments that are chosen and combined supports the process and are relevant to the special features in the specific phases. The instruments are stated to be innovation-friendly if;

providing economic incentives; they act in combination; are founded on strategic planning and goal creation as well as are supportive of the innovation process and consider the diverse phases of innovation (Jänicke, 2000).

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18 The second element is policy style. In order for a policy style to be innovation-friendly it have to be founded on consensus and dialogue. It also must consider continuity, reliability and calculability in order to decrease uncertainties regarding firm’s profit opportunities, to not make wrong investments and enable supporting the transition towards environmental protection. Furthermore, a decisive policy style will give a signaling effect which contributes towards confidence and predictability for market participants. This means that the regulator need to be decisive both when formulating and implementing environmental policy goals. Still, it is important for regulators to remain flexible and co-operative to individual needs while acting decisive and cooperating with other market participants (Jänicke, 2000).

The configuration of actors is the third element in the model. In order to facilitate environmentally friendly innovation cooperation from a multitude of different regulatory authorities is required to allow for both horizontal and vertical policy integration. Networking between different regulator actors also aids in the environmental innovation process, especially if the networking between the actors is tight. Furthermore, involving a broad base of stake holders in the policy formulation

process both provides a broad acceptance base and expands the spectrum of opinions, which in turn aids in implementation of the policy (Jänicke, 2000).

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19

3. Overview of Public Procurement

This chapter describes how public procurement process should be carried out in accordance with legislation and how it offers opportunities for environmental and social consideration. The overview illustrates how public procurement processes should be carried out according to directives from Swedish authorities and the five fundamental principles that apply to all public procurement, given by the European Union. Further opportunities for environmental and social consideration in public procurement nationally is described. An example of a company which experiences that hinders in public procurement prevents the diffusion of sustainable innovations is also introduced.

3.1 The Procurement Process and Limits of Direct Procurement

The overview has been made mainly based on reviewed literature from The Swedish Competition Authority which is a management authority for competition issues and public procurement. The authority works towards an effective market in terms of competition, both in the private and public sectors. The data provided is therefore highly reliable.

According to The Swedish Competition Authority the procurement process can be divided into three steps; preparation, procurement and management of the agreement. It starts with that

municipal council, county council or advisory council decide upon that a procurement to a business is needed. The process that is described in detail below is illustrated by The Swedish Competition Authority in Figure 2. However, in the case of direct procurement an exception is made from the legislative demands of advertisement and open competition. For procurement in the water, energy, transport and postal services sectors that direct procurement can be used if the value of the contract does not exceed SEK 993 368 (Konkurrensverket, 2014).

Figure 2- The procurement process according to the Swedish Competition Authority

The preparation phase should be initiated with making a specification of requirement based on the needs of the agent. This is done with the aim of identifying what is needed and during which period of time it is needed. In the analysis of what the needs are calculations of the value of the products or services that will be procured should be included. Secondly, a market analysis is conducted to gain knowledge regarding market offers and potential distributors. The market analysis aims at, for

Decision Contract

document Advertisement Tenders Decision Agreement/

contract

Follow-up and evaluation

References

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