Governments, civil society and businesses have been presently under increasing pressures to address and prevent mounting threats to national economies, households’ stability, as well as to environmental protection and sustainability goals, etc. New trends have appeared called “responsible business conduct” to assist states in dealing with modern challenges and crises.
Responsible Business Conduct, RBC represents a new trend in better connecting businesses with decision-making processes concerning present challenges. In this way the RBC provides opportunities and adequate expectations that all businesses should contribute to sustainable development and to prevent adverse impacts of corporate activities.
As the largest buyers of goods, services and public works, national governments account for about 13 percent of GDP in the OECD 38 member states; and all three Baltic States are members of the OECD. The governments, therefore, can definitely play a decisive and valuable role in promoting RBC, while safeguarding public interest and ensuring the accountability of public spending. Besides, public procurement – alongside purely economic and financial aspects – is forced to adapt to new challenges and for example include in the context wider environmental, economic and social considerations, making it a strategic tool for achieving changing policy objectives, such as sustainability, circular economy and responsible business.
Contemporary increased pressures on national governance from both the EU institutions and global challenges to manage public resources in a sustainable and efficient manner, the states are obliged to provide an “economic rationale” for integrating RBC-objectives in procurement activities and encourage SMEs to function sustainably. Among concrete measures, state governance, while address different challenges, has to create “an enabling conditions” for an optimal and successful RBC’s inclusion in public procurement.
However, the latest OECD-2020 analysis has shown incomplete and uneven uptake of RBC objectives in public procurement, as central purchasing bodies have not yet systematically incorporated risk-based supply chain due diligence in their frameworks and practices.
Governments should encourage responsible supply chain requirements to suppliers to implement RBC objectives throughout the value supply chains if they want to conduct business with the public sector. This objective is reflected in several recent international commitments: e.g. the OECD Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights, and the 2030 Agenda for Sustainable Development. By complying with these world-wide commitments, many countries have already developed regulatory or strategic frameworks to enhance the uptake of RBC objectives in public procurement operations. However, only a few countries have comprehensive frameworks addressing all RBC objectives throughout the entire supply chain; even where these frameworks exist, their application remains relatively low in practice.
Main reference to: OECD (2020), Integrating Responsible Business Conduct in Public Procurement, OECD Publishing, Paris, https://doi.org/10.1787/02682b01-en .
SMEs in RBC’s objectives
For example, 27 OECD member states acknowledge that they use enhanced public procurement frameworks to promote and cover at least one of the RBC objectives, whether through regulation or strategy. But quite a few companies address them all: while all countries have a framework supporting environmental objectives, only 41% include gender considerations, and only 48% include minority issues.
In OECD countries, on average, SMEs account for approximately 99% of all firms, 60% of jobs and over 50% of value added. Through their collective weight, the SMEs are being crucial to achieving inclusiveness, sustainability and RBC objectives, yet SMEs trail behind large enterprises in both RBC practices and many key areas of engagement.
On another side, the SMEs collectively account for at least 50% of GHG emissions of the business sector in the OECD states; however, most SMEs are still in the early stages of their journey to net zero, with very limited action taken to reduce the carbon footprint of their operations.
SMEs and sustainability challenge
According to one recent survey, only 10% of SMEs currently measure their GHG emissions, and 22% do not fully understand the term “net zero”. Moreover, about one third has yet to seek advice or information to help them develop a net-zero roadmap or improve their environmental performance.
Besides, the SMEs quite often claim the lack of adequate access to finances as one of their most important constraints to green investment. And finance is likely to present an even larger challenge for SMEs going forward, as financial institutions seek to comply with mandatory environmental reporting requirements.
SMEs also face greater challenges than larger firms in screening the regulatory environment and dealing with RBC norms – prompting discussions in environmental and human rights due-diligence legislation about whether SMEs should be subject to the same requirements as larger companies.
More on SMEs and sustainability: https://www.oecd-ilibrary.org/economics/oecd-sme-and-entrepreneurship-papers_f493861e-en