ESG (Environmental, Social, and Governance) principles, traditionally associated with the financial sector, are increasingly gaining importance in government operations and procurement processes. This article explores the expanding role of ESG in government and its potential impact on public services. By promoting sustainability, social responsibility, and ethical practices, ESG is reshaping the way governments operate, contribute to community recovery, and address pressing global challenges. Through two key areas of focus – COVID-19 recovery and sustainability – we will delve into the transformative potential of ESG in government and the implications for a more sustainable and responsible future.
ESG in COVID-19 Recovery
The COVID-19 pandemic exacerbated existing economic and social challenges while creating new ones. In this context, ESG principles play a crucial role in propelling communities out of economic hardship and promoting inclusive recovery. The social value component of ESG emphasizes the benefits that can be harnessed to support local communities and economies, such as employment opportunities, re-training initiatives, and resource allocation.
Recognizing the significance of ESG, governments actively incorporated ESG practices in procurement during the pandemic. In September 2020, the UK government published the Procurement Policy Note (PPN) 06/20, which mandates the inclusion of ESG themes in the procurement selection process. This policy encourages the evaluation of social value explicitly, ensuring that a minimum of 10% of procurement objectives align with ESG principles. Bidders for government contracts must demonstrate or verify their commitment to ESG practices, thereby creating a level playing field for responsible and sustainable companies.
The social value model utilized by the UK government encompasses five categories: aiding local communities in COVID-19 recovery, tackling economic inequality, combating climate change, providing equal opportunities, and enhancing well-being. By prioritizing these objectives, governments can drive collaborative efforts that foster sustainable and inclusive community development.
ESG and Sustainability
The COP26 conference held in November 2021 brought global attention to the urgency of climate action. Governments have recognized the need to prioritize sustainability and set ambitious net-zero targets. In the United Kingdom, the government has gone a step further by making net-zero commitments a prerequisite for bidding on major government contracts worth more than £5 million. This pioneering initiative ensures that companies align their operations with sustainable practices and contribute to the collective effort of reducing carbon emissions.
Achieving net-zero targets is essential for curbing the rise in global temperatures and mitigating the impacts of climate change. While the transition to a sustainable future requires concerted efforts, it is also cost-effective and feasible. The Committee on Climate Change highlights the UK’s journey, starting with a target of reducing CO2 emissions by 60% from 1990 levels and subsequently setting an 80% reduction target for all greenhouse gases. It is estimated that meeting such a target would cost 1-2% of GDP.
Public procurement, which accounts for a significant portion of government spending, has the power to drive sustainable initiatives and contribute to reducing carbon emissions. The UK government’s annual expenditure of approximately £290 billion on public service contracts presents an enormous opportunity to create environmental value and encourage ESG practices. As governments increasingly integrate ESG principles into their policies and operations, sustainability becomes an inherent part of public services, governance, and everyday life.
Conclusion
ESG principles are transforming the role of government by placing sustainability, social responsibility, and ethical practices at the forefront of decision making. The incorporation of ESG in government operations and procurement processes is instrumental in fostering community recovery and addressing global challenges. Governments worldwide are recognizing the potential of ESG to create impactful policies to fight climate change and address larger inequalities that are threatening the wellbeing of their citizens. By prioritizing sustainability, social responsibility, and ethical practices, governments can shape a future that safeguards our planet and uplifts our communities. Those who complain that initiatives around reducing carbon emissions are too expensive should bear in mind that first that doing little or nothing is not an option in the long run, and secondly, that spending 1-2% of GDP on these government policies is no more than most governments spend on defence. And the reason they invest in defence is because national security is the highest priority, as is ensuring the planet is habitable in the near future.
