ESG transition of tender procedures in Bosnia and Herzegovina

Based on data from the Organization for Economic Co-operation and Development (OECD), public contracting in member states of the Organization (including Bosnia and Herzegovina) represents an average of 12% of their GDP. Actions world governments are taking now could set the world on a path to a more sustainable future that balances environmental, economic, and social outcomes, and help companies improve their environmental, social, and governance (ESG) practices.

It is interesting to observe the data that Germany allocated 2.5 billion Euros for investment in the infrastructure of electric vehicles and 9,000 Euros in production subsidies per vehicle to encourage adoption. In Shenzhen, China, three major bus operators are being encouraged to switch to electric vehicles through an annual subsidy of $75,500 per vehicle. The Pakistani government, for example, has committed between US$800 million and US$1 billion to a reforestation program aimed at reducing carbon emissions while creating jobs for thousands of low-skilled workers, including workers from socially marginalized groups.

The logical question that follows is where is Bosnia and Herzegovina on this path, especially in the context of tender procedures. Taking into account the volume of consumption of the public sector in Bosnia and Herzegovina, which accounts for about 40 percent of the gross domestic product of Bosnia and Herzegovina, responsible consumption and awareness of the use of resources in procurement can significantly affect environmental protection in the private sector as well.

Are changes to the existing Law on Public Procurement necessary?

While in Bosnia and Herzegovina the public still has the attitude that ESG and green public procurement are concepts of the distant future, it seems that the reality is different. Through the pilot project that was implemented in the previous period by the Service for Joint Affairs in the Institutions of Bosnia and Herzegovina with the support of UNDP, it was proven that the application of “green public procurement” is not impossible in accordance with the current regulations, and the way is open for other contracting authorities to follow established practices.

Although the Law on Public Procurement in Bosnia and Herzegovina (hereinafter: the Law) does not contain all the precisely defined rules that regulate the European Union Directives number 2014/24 and EU7 2014/25 EU, it still contains enough possibilities for the inclusion of ESG criteria in the concrete procedure public procurement in all its most important parts: 1. candidate/bidder qualification requirements, 2. technical specifications of the procurement subject, 3. criteria for awarding the contract, and 4. when contracting.

Based on the current Law, contracting authorities have the possibility to demand certain certificates issued by independent bodies, which confirm that the candidate/bidder meets certain quality assurance standards. In the case of requesting the mentioned certificates, the contracting authority is obliged to refer to the quality assurance systems based on the corresponding European series of standards that have been confirmed by the competent authorities. However, in order to facilitate competition, the contracting authority is obliged to accept other evidence of equivalent quality assurance measures from candidates/bidders who do not have access to such certificates.

Thus, a contracting authority that wants to award a contract to a candidate/tender who takes care of the environment can, as a qualification condition, request one of the certificates from the ISO 14000 family of standards, but is obliged to accept other evidence of equivalent quality assurance measures from a candidate/bidder who they do not have access to such certificates (eg “EMAS” certificate) if it contains equivalent measures of the required quality assurance.

It is important to point out that in the system of Bosnia and Herzegovina, the Institute for Standardization of BiH introduced the standards BAS EN ISO 14001:2016 (EN ISO 14001:2015; ISO 14001:2015), which the organization can use to improve its performance when it comes to environment protection, but also as relevant evidence in tenders.

In addition to the above, the contracting authority may require that the candidate has a hired graduate ecologist, graduate engineer in environmental protection, master’s degree in ecology, certified advisor for safety in the transportation of hazardous materials (ADR, RID, ADN), a driver who has attended training/has a certificate from “eco-driving” etc. It is important to point out that ESG in the tender process is much more than green public procurement. The social criterion is the other side of the coin, which will have to be the subject of tender procedures in the future. Thus, the contracting authority can ask for special conditions of protection, such as the employment of less capable persons and groups at risk of social exclusion; encouragement of small and medium-sized enterprises – reduction of bureaucratic obstacles – prohibition of awarding contracts to companies operating in tax-exempt areas; respecting human rights both internally and in the supply chain; gender equality programs, etc.

The contracting authority, in accordance with the applicable regulations, may require a statement from the bidder that it accepts the undertaking of environmental protection management measures and energy efficiency measures and the employment of socially marginalized and vulnerable categories that the economic entity will apply when providing services/performing works, although this modality is very broad and imprecise. Namely, the candidate fills in and certifies the statement himself, so there is no measurable evidence of actually implemented measures.

For all of the above, legal changes are not necessary and it is a question of the day when the above requirements will be recognized more often in local tenders. It is also certain that the process of further legal changes in the public procurement procedure will follow the trend of harmonization with EU directives and EU legislation, and ESG public procurement will be an obligation of all contracting authorities in BiH.

How to be ready for ESG

Considering all of the above, it is clear that ESG is gradually entering not only the tender procedure in BiH but also all other areas of economic activity. It is already becoming more than certain that ESG criteria will represent a mandatory requirement for export, business, obtaining loans, cooperation with international companies… It is undeniable that the global energy crisis and the COVID 19 pandemic slowed down this process, but by no means stopped it. Because of the above, the leaders of global companies, as well as local businessmen, are starting in a timely manner with the establishment of ecological, social, and management practice criteria and the acquisition of adequate certificates and licenses, in order to meet the changes ready and competitive.

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