The Green Buy-In

When the U.S. government used its $5 trillion annual purchasing power to encourage environmental responsibility, companies responded.

New research led by Associate Professor Omri Even-Tov is among the first to empirically demonstrate how government purchasing rules have nudged companies to take environmental action without requiring further regulations.

 “Our research shows that when the government sets expectations as part of procurement, it’s not just greenwashing,” says Even-Tov. The analysis of 10 years of data on 2,700 companies showed that green procurement led firms to:

• Reduce greenhouse gas emissions by up to 10,000 pounds annually per county.

• Increase by 5% the likelihood of developing patents to produce green products. 

• Increase by 24% how much they talked about environmental disclosures on earnings calls. 

Overall, companies that increased climate disclosures earned more government contracts, reduced toxic emissions, and encouraged development of green products. 

“Our research highlights the importance of the government’s role in fighting climate change,” Even-Tov says. “When the government does take action, it can lead to good outcomes.”