Outcomes-based approach to sustainable recovery
The current Covid19 crisis has underlined the need to use public funds efficiently and effectively. There has been much discussion about how public funds should be allocated, and how stimulus measures could build a ‘new normal’. Due to the nature of the crisis, the stimulus measures seem to focus particularly on supporting employment and improving the psychological resilience of families with children. Although human and economic wellbeing is important, we should not ignore the wellbeing of our environment.
The European Green Deal calls for ambitious measures, which remain necessary regardless of the coronavirus crisis. In her speech in April, the President of the European Commission, Ursula von der Leyen, pointed out that Green Deal is an investment in sustainability and circular economy, which will boost our resilience. By putting in place environmental and climate sustainable production chains, countries will become less dependent on global production chains while meeting their climate objectives.
Sustainable recovery measures also make financial sense. Recent research published by the University of Oxford compared the impact of different types of stimulus measures on economy and climate. This research suggests that green projects create more jobs, deliver higher short-term returns on investment and lead to increased long-term cost savings, by comparison with traditional fiscal stimulus. Therefore, it would be sensible to identify measures that will boost the economy and increase human and environmental wellbeing.
The Centre of Expertise for Impact Investing aims to introduce an outcomes-based and proactive approach to public spending. What this means in practice is that strategic planning, budgeting and public procurements are based on wellbeing impacts, which also serve as indicators of successful implementation. Financing is also tied to the wellbeing impacts achieved, not to individual services provided.
In most cases, the only environmental consideration in public procurements is avoiding negative environmental impacts. Admittedly, that is important, but by including outcome targets in public contracts awarding criteria we could actively procure positive environmental impacts and only pay for proven results. In addition, environmental projects could be designed to create new jobs, meet the needs of specific social groups, or generate economic savings to the state and municipalities.
In Finland, we are currently working on three environmental themes that test this approach: manure nutrient cycle and market development for recycled fertiliser to reduce pollution in the Baltic Sea, the rehabilitation of river basins to improve the viability of fishery resources, and energy-efficient housing to reduce climate emissions.
Research data and modelling tools are readily available to support the designing of outcomes targets and measurement and verification in public contracts. For example, indicators to measure the effectiveness of manure nutrient cycle include a reduction in the excessive use of manure phosphorus in the fields. The impact of this reduction on the region’s waters can be modelled. We can also assess the positive impacts on climate and employment, and the effects of the activities on the region’s farmers.
When public contracts are tied to environmental and wellbeing impacts, public spending is more effective and can proactively prevent future negative impacts and costs. To be adopted, this approach calls for a new mindset. What the coronavirus crisis has taught us is that we have the courage and the ability to make quick decisions and to put new ideas into practice. Now is the time for us to discard the old budget-focused thinking and refocus on sustainable investment in wellbeing. That is the way to build the new normal.