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Biden-Harris Administration

Federal Purchasing Power, the Green Economy and Sustainability Management

by |December 13, 2021

As President Biden waits for our dysfunctional Congress to act on his Build Back Better program, last week, he took major executive action to move the power of federal procurement behind the green economy. According to the White House Fact Sheet:

“The President’s executive order directs the federal government to use its scale and procurement power to achieve five ambitious goals:

  • 100 percent carbon pollution-free electricity by 2030, at least half of which will be locally supplied clean energy to meet 24/7 demand;
  • 100 percent zero-emission vehicle acquisitions by 2035, including 100 percent zero-emission light-duty vehicle acquisitions by 2027;
  • Net-zero emissions from federal procurement no later than 2050, including a Buy Clean policy to promote use of construction materials with lower embodied emissions;
  • A net-zero emissions building portfolio by 2045, including a 50 percent emissions reduction by 2032; and
  • Net-zero emissions from overall federal operations by 2050, including a 65 percent emissions reduction by 2030.”

The federal government’s purchasing power is enormous, and an executive order like this one will have a substantial impact on businesses seeking to make and sell green products. As the fact sheet notes: “By transforming how the federal government builds, buys, and manages its assets and operations, the federal government will support the growth of America’s clean energy and clean technology industries…”

The federal government owns 300,000 buildings and 600,000 vehicles. Its non-personnel budget is about $650 billion a year. The buildings all require energy to operate, and the vehicles are routinely replaced. While it will take decades to decarbonize the federal government, its enormous force in the marketplace will accelerate the profitability of companies in the renewable energy, energy efficiency and electric vehicle business.

While the executive order exempts operations directly related to national security and intelligence gathering, the Department of Defense has been working on climate adaptation since 2014, and for the past decade, environmental sustainability has been gradually integrated into military operations and planning. In the summer and fall of 2020, I advised a group of graduate students engaged in a management simulation of a proposal to decarbonize the non-combat elements of the Department of Defense.

My students demonstrated the feasibility of this initiative. In fact, the military pioneered the use of solar energy during the war in Iraq as a way of reducing the use of oil tank trucks, which were highly vulnerable to roadside improvised explosive devices.

In addition to carbon reduction, the executive order requires agencies to increase water efficiency, reduce and recycle waste, prevent pollution, and focus on the environmental sustainability of its supply chains. It also requires each agency to submit annual plans reporting environmental progress and perhaps most significantly mandates the creation of organizational capacity in the federal government to manage the implementation of President Biden’s Green Executive Order. Under Section 501 of the Executive Order:

“The Office of the Federal Chief Sustainability Officer is reestablished within CEQ.  The EPA shall provide funding and administrative support for the Office.
(a)  The Office shall be headed by a Federal Chief Sustainability Officer, who shall be appointed by the President.  The Federal Chief Sustainability Officer shall lead the development of policies, programs, and partnerships to achieve the policies set forth in this order, advance sustainability and climate resilient Federal operations, and ensure the Federal Government leads by example in combating the climate crisis.
(b)  The heads of all agencies shall cooperate with the Federal Chief Sustainability Officer and provide such information, support, and assistance as the Federal Chief Sustainability Officer may request, as appropriate and consistent with applicable law.”

Section 502 of the executive order requires each federal agency to appoint an agency chief sustainability officer, and there are other requirements for the Office of Management and Budget and other parts of the federal government to ensure the executive order is implemented.

In my view, this executive order mandates sustainability management in the federal government. Just as agencies must submit and manage their financial resources through a highly institutionalized budget planning and management process, they will now be expected to manage their physical resources according to principles of environmental sustainability. We will know if this is real if the agency chief sustainability officers are seen as senior managers within their agencies. The executive order and its implementation design are excellent first steps, but they will only be meaningful if the president and his inner circle of advisors take them seriously and hold agencies accountable for their performance.

There is a tendency in some organizations to see environmental sustainability as less than serious. In these organizations, sustainability is viewed as public relations rather than an element of operations management. Despite these sustainability imposters, many organizations have come to recognize that inefficient or expensive energy, unmanaged waste and environmental liability can be a major drag on organizational performance and corporate profitability. In some organizations, chief sustainability officers are not seen as important. In others, they are central players in organizational strategy formulation and decision making.

For all of its slow-moving, process-focused behavior, the federal government tends to take rules and executive orders seriously. There will be visible efforts to comply with Biden’s order. But we will need to look at output and outcome performance measures to see if anything is really going on. It should be easy to count the number of electric vehicles purchased. Energy audits can be performed on government buildings, and it will be possible to track changes in procurement practices. Waste and recycling data are also relatively easy to record and analyze.

It will be more difficult to evaluate the impact of President Biden’s order on the rest of the economy. If Build Back Better is enacted and is added to the trillion-dollar infrastructure bill, over $500 billion will be added to the federal environmental management budget over the next decade. When combined with federal green procurement, there will be a huge infusion of cash into the green economy. We won’t know how much this sector would have grown without federal spending, and it will be difficult to disentangle the different sources of federal funding. But I suspect there will be synergistic effects as the combined force of federal spending is interpreted by private sector managers and investors as they make decisions on corporate expenditures. The rapid commitment of major capital investment by America’s automakers in electric vehicles is an example of the potential impact of Biden’s green agenda.

I also expect to see Biden’s executive order imitated by state and local governments. We are already seeing corporations and large institutions announcing carbon reduction goals. The growth of corporate sustainability reporting and finance suggests that Biden’s order might well survive a conservative Republican administration. As I wrote last month:

“…capital markets have finally figured out that corporations are not immune to environmental risk. Climate-induced drought and extreme weather can disrupt operations. Toxics and invasive species can harm ecosystems, and when contagious viruses are involved, can bring economies screeching to a halt as they disrupt supply chains which turn out to be less durable than we had thought. Some wealthy people and public pension funds are insisting upon “green” investments. We are also learning that just as companies need to pay attention to financial and reputational risk, they must also understand and manage their environmental risks.”

While there has been no shortage of right-wing criticism of President Biden’s actions, many business leaders have expressed support of the president’s environmental agenda. Sustainability management is rapidly becoming the norm, and this jolt of federal resources will accelerate the growth of the green economy.


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