Forthcoming (2013) in Technology Analysis & Strategic Management
Arole for public procurement in system innovation: The transformation of the Greater Manchester (UK) waste system
Sally Gee and Elvira Uyarra
The transformation of socio-technical systems to more sustainable states is morepolicy induced than market driven. Reflecting this, the potential for governments to direct system transformation has been widely debated. However, this debate concentrates on supply side policies and under analyses the potential for public buyers to steer system innovation. This paper draws from ideas on system innovation, transition management and public procurement to explore how a major public buyer was able to do just this.
Thepaper describes the transformation of the Greater Manchester (UK) waste system from a relatively simple landfill model to a highly complex, multi-technology solution of intensive recycling, composting and energy production. The paper draws three main conclusions: 1) it is possible to orchestrate system innovation through public procurement in certain circumstances; 2) this involves developing the required interdependencies between technologies, institutions and practices; 3) system transformation can be orchestrated from within the incumbent regime.
Key words (6): innovation, systems, transitions, public procurement, sustainability.
Dr Sally Gee is a Researcher at the Manchester Institute of Innovation Research (MIoIR) and The Sustainable Consumption Institute (SCI) at the University of Manchester, UK. Sally uses cases studies to follow innovation processes over time and analyse system emergence and evolution. Recent work explores the potential of large public and private purchasers to stimulate system innovation.
Dr Elvira Uyarra is a Researcher at the Manchester Institute of Innovation Research (MIoIR) and The Sustainable Consumption Institute (SCI) at the University of Manchester, UK. Elvira’s research centres mainly on regional science and innovation policy; spatial dimensions of knowledge and innovation; evolutionary approaches to public policyand the innovation impact of public procurement.
Solving resource scarcity and multifaceted environmental problems requires system-wide transformations rather than discrete solutions. The transformation of socio-technical systemsto more sustainable states has become a central concern of innovation scholars in the last two decades (e.g. Kemp, 1994; Geels, 2002). It is widely agreed that market mechanisms alone are insufficient to motivate eco-innovation or promote sustainable socio-economic practices and outcomes. Explanations for market and system failure includeexternality problems (e.g. Rennings, 2000; Jaffe et al, 2002) and socio-technical lock-in (e.g. Unruh, 2000). These issues are compounded by the unprecedented scale and speed of changerequired to abate environmental degradation and have leadmany commentators to conclude that the emergence of more ecologically sustainable systems is more policy-induced than market driven (van den Bergh et al, 2011).
Reflecting this, aliterature around themanagement of transitions has focused on the role of policy (e.g. Kemp et al, 2007a; Loorbach, 2007; Kern and Smith, 2008), particularly regulation and supply side policy, to steer national transitions. The transitions management approach is mainly concerned with learning and variety generation. Public procurement is recognised as ademand side policy tool for creating socio-technical niches that may‘breakthrough’ when landscape pressures destabilise the dominant industrial trajectory. However, the potential for major public buyers to directly steer system transformationhas been relatively neglected.
On the other hand, the literature on public procurement for innovation tends to focus on the ability of the State to stimulate discrete non-ecotechnological innovations through procurement is well documented in a variety of sectors, including defence (e.g. Ruttan, 2006) and health (e.g. Phillips et al, 2007), with some discussion of discrete eco-innovations more generally. Less attention has been paid to public organisations effectively orchestrating the emergence of new systemsthrough their procurement activities. Indeed, there are few studies that explicitly consider the necessary conditions for public buyers to influence the transformation of socio-technical systems. This paper combines insights from the literatureon system transformation, transitions management and public procurement to address this gap and explores the potential for major public buyers within the dominant regime to orchestrate sustainably-oriented system innovation.
Our analysis is based upon the transformation of the Greater Manchester (GM, UK) local authority collected waste (LACW)system from a relatively simple landfill disposal system to a highly complex, multi-technology waste management system based on recycling, composting and sustainable energy production. The transformation marked a departure from the dominant national industrial trajectory of centralised waste solutions based on landfill and incineration. Indeed, the configuration of technologies in GM is unique in the UK. Implementing a new technological system required major changes in the socio-technical system, including the re-configuration of organisations, changes in household practices and the emergence of new markets. The main focus of this paper is how the authorities in GM broke from the dominant national waste management regimeand orchestrated the emergence of a very different system. The paper addressesthreerelatedresearch questions: What was the role of the public procurer in thistransformation? To what degree was system innovation planned, managed and/or emergent? What does this tell us about the potential for governments to steer system innovation?
The paper is structured as follows. Section 2 introduces the relevant literature, exploring whether it is possible for governments to direct sustainable transitions and the role of public procurement in system innovations. We also present the methodological approach. In Section 3 the system innovation is described. In Section 4 empirical evidence is used to explore the role of the procuring authority in the transformation of the GM waste system. In Section 5 we concludethat this case demonstrates an additional pathway for the transformation of local systems to more environmentally sustainable states.
2. Literature review
Transforming dominant socio-technical regimes into more sustainable configurations has become a major policy challenge (Berkhout, 2002). System innovations are defined as large-scale transformations in the way societal functions are fulfilled, involving not only technological artefacts, but also “new markets, user practices, regulations and cultural meanings” (Geels et al, 2004; p.1). How to effectively stimulateand manage socio-technical transformation has become a central concern of academics and policy makers alike. A key debate concerns the degree to which system innovation can be planned and managed or whether it is inherently an emergent process.
Several authors question whether system innovations can be managed and whether deliberative intervention is possible or effective (Elzen et al, 2004; Shove and Walker, 2007). Shove and Walker (2010) argue thata planned transitionis not viable as emergent patterns develop in conjunction with multiple groups, depending on self-organising and self-regulating forms of governance (household recycling practices as a case in point), where new configurations result in further adaptations, and the process continues in a constantly evolving state. From this perspective it is useful to understand governance actors as endogenous to the system (Rip, 2006; Flanagan et al, 2011), unable to take a top down, or ‘external’ approach’ (Smith and Stirling, 2007), but subject to, and participating in, co-evolutionary processes.
The governance of system transformations is also a central theme for Smith et al (2005) who suggest that some system innovations are emergent outcomes of co-evolutionary processes, whereas others are guided and actively coordinated. Smith et al (2005) propose a framework where the location of resources affects outcomes, and a lack of internal (regime) resources is associated with major system transformation, whereas the availability of internal (regime) resources is associated with incremental system evolution. Deliberately intended major system transformations are referred to as ‘purposive transitions’ and, in contrast to the argument that governance actors are endogenous to the system, involve actors outside the regime exerting pressure and providing resources for change. Purposive transitions are associated with the transition management framework and share a similar focus on co-ordinating long term societal transformations.
Transition management (e.g. Kemp et al 2007a; Loorbach, 2007; Kern and Smith, 2008) is concerned with steering system innovation. This perspective recognises the limitations of planned policy intervention (see e.g. work by Geels and Kemp (2007) and Loorbach (2010) on the waste transition in the Netherlands) emphasising the co-evolution of socio-technical systems with societal values and beliefs. Primarily offering a framework for policy integration, the transition management approach has a focus on learning and variety generation. The role of the State is to shape processes of co-evolution through the generation of visions, the support of experiments, cycles of learning and adaptation (Kemp et al, 2007b). System innovation involves co-ordinated yet iterative processes of learning, joint problem solving and the co-generation of acceptable solutions by multiple stakeholders (e.g. Rotmans et al, 2001; Loorbach, 2010). Direct intervention is primarily through supply side policies, with market mechanisms ultimately selecting outcomes. Demand side policies, i.e. policies intended to affect market demand, feature less prominently, and although procurement is recognisedin the literature as a policy tool, it is understood as a tool to develop lead markets, which in combination with other policies may contribute to system innovation over time (Kemp et al, 2007a). The general message of this literature is that planned intervention is likely to be ineffective; however it is possible to guide or actively encourage a transition, from the current to a new system,through an integrated policy process (Kemp and van Lente, 2011).
While these literatures focus on the potential for policy to steer system innovation, the role of large public purchasers is relatively neglected. Similarly, although a number of authors emphasise the role of public procurement for technology development and innovation (e.g. Dalpe et al, 1992; Cowan and Kline, 1996; Edquist et al, 2000; Edler and Georghiou, 2007; Rolfstam, 2009) this literature tends to focus on the introduction or diffusion of specific products, technologies or market areas rather than system-wide change. The potential to intervene and influence system transformation depends on the agency and power of procuring organisations; a relatively neglected dimension in transitions management. Some useful insights on the ability of powerful actors to orchestrate system innovationcan be found in the innovation systems literature (e.g. Smith et al, 2005) and captured by concepts such as a ‘systems builder’ (Hughes, 1983) and ‘prime movers’. The prime mover is defined as an actor which is technically, financially, and/or politically so powerful that it can strongly influence the development and diffusion process (Jacobsson and Bergek, 2004). These powerful actors are attributed a key role in the formation of new technology innovation systems (Carlsson and Jacobsson, 1997) acting on the ‘seamless web’ of technical, economic and political factors (Hughes, 1983) inherent in system innovation. From a Hughesianperspective system building is an entrepreneurial characteristic rather than an activity undertaken by major purchasers. Similarly, the prime mover in the technology innovation systems literature tends to be associated with the entrepreneurial firm, and analysis is focused on financing rather than purchasing.
Although a few authors (e.g. Huber, 2008) suggest a role for major private purchasers in supply chain innovation, there is, to our knowledge, no analysis of the role of major (public or private) buyersdirectly orchestrating system transformation through their purchasing power. This paper explicitly considers how a major public buyerinfluenced system innovation and discusses the degree to which this process was managed or emergent. Drawing on concepts such as systems builders and prime movers, we argue that when system innovation is the desired outcome(and instigated from the demand-side), buying power needs tobe supplemented by other features such as political power and entrepreneurial drive.
The empirical case presented next describes the transformation of a city-region waste management system over a ten year period. Most case studies of transitions illustratethe emergence of new, national, sectoralsocio-technical (e.g. Geels, 2002) or large technical (e.g. Hughes, 1987) systems over many decades. However, transformations can also take place over shorter time scales and have a local dimension (e.g. Hodson and Marvin, 2010). This paper provides an example of how system innovation can occur at the local level, over a comparatively short time scale through therelatively underexplored dimension of procurement.
To generate the case study, we undertook 19 semi-structured interviews during 2010 and early 2011 with key actors at the local and national policy level (local authorities, waste authorities, central government ministries), as well as in the private (waste management, construction, chemicals, corporate law) and voluntary sectors (NGOs). Interviewees were asked to recount their experiences and opinions of the transformation of the waste management system in GM, whilst focusing on their particular areas of expertise. There are certain methodological limitations associated with an interview methodology, including historical bias, selective memory and a tendency to focus on success. To overcome these limitations, the interviews were informed and supplemented with extensive secondary data, drawn from the academic literature, official documents, industry conferences, annual reports and news items. This data was compiled (Yin, 2003) into a detailed chronological case study that supports the summary and analysis in the following sections.
- Summary of the system innovation
The UK has historically favoured landfill for the disposal of local authority collected waste (LACW). In 2000, reflecting the national average, over 90% of GM’s LACWwas sent to landfill and only 3%was recycled; an extremely low figure even by UK standards (Melvine and Munck, 2005). Therelatively simple landfill-based waste disposal system in GMwas characterised by unsorted household and kerbside waste, single purpose collection vehicles and centralised waste processing and disposal.
INPUT TABLE 1
By 2013 a radically different, highly complex, multi-technology system had been instituted in GM; based on recycling, composting and energy generation, involving Mechanical Biological Treatment (MBT), Anaerobic Digestion (AD), In-Vessel Composting (IVC) and the generation of energy through the burning of Solid Recovered Fuel (SRF) in a Combined Heat and Power (CHP) plant. The configuration of technologies and outputs in GM are unique in the UK (D&W, 2009).
The £631million investment in physical infrastructure was accompanied by a fundamental shift in practices throughout the socio-technical system. Table 1 captures some of the key differences between the landfill and recycling-based waste systems, demonstrating significant changes in; user practices (e.g. sorting of waste by households); markets (including the creation of markets for SRF and recyclates); regulations (governing the way waste services are paid for and renewable energy incentivised); and culture (from mass disposal to materials recovery). New organisations entered the system (for example, technology providers, community groupsand an industrial energy user) and interconnections between different elements of the system were altered. As one of the waste operators remarked: “[It is] not [the] first time that [we have] experienced these technologies, but not to this…complexity… It the first time that anybody has done it to this scale….. not just the facilities, it is the interactions...”.
The transformation of the GM waste system was triggered by legislation, particularly the 1999 European Landfill Directive, which stipulated that Member States must significantly reduce the amount of biodegradable municipal waste (BMW) sent to landfill. European initiatives served as significant landscape pressures for national governments and the local public bodies responsible for waste disposal; for example, national level penalties for failing to meet the Directive’s landfill diversion targets had the potential to reach £0.5m per day (Defra, 2003). The British government took a number of steps to discourage landfill, including the introduction of the Landfill Allowances Trading Scheme (LATS) and the Landfill Tax escalator. Cumulatively, these national policy responses to the European Directive had a direct impact on the local public bodies with statutory responsibility for disposing of the UK’s waste.
In England and Wales, the statutory unitary-purpose bodies responsible for municipal waste managementare the Waste Disposal Authorities (WDAs), whereas collections are the responsibility of waste collection authorities (WCAs). The Greater Manchester Waste Disposal Authority (GMWDA) is the largest WDA in England, serving over 958,000 homes in 9 Local Authorities; Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside and Trafford. In all, the GWMDA handles 5% of the UK’s total volume of LACW. The high volume of waste handled by the GMWDA necessitated an urgent response to the imminent rapid rise in costs associated with disposing of waste by landfill. Operating at this scale also served to position the GMWDA as an important WDA nationally, and contributed to the status of the GMWDA as a powerful buyer in the waste sector at that time.
European waste diversion targets were set against a policy agenda of encouraging recycling and waste reduction, embodied in the 1995 and 1999 White Papers, and the 2000 National Waste Strategy (DETR, 2000). A key element of the National Waste Strategy was the Waste Hierarchy which proposed, in order of priority; reduction, re-use, recycling and composting, energy recovery and finally disposal of waste (Cabinet Office, 2002). This strategy served as an important cognitive institution (Scott, 1995; Parto et al, 2007; Geels and Kemp, 2007) for framing national and local initiatives. Yet despite the immediatepolicy drivers and clear common framing, implementing a waste strategy based on reduction, recycling and alternative treatment modes (Strategy Unit, 2002) proved difficult to pursue nationally (Melville and Munck, 2005).
Indeed, the overwhelming response in the UK was to build or modernise traditional ‘chemico-energy’ facilities, i.e. incinerators (Murray, 1999; Melville and Munck, 2005). Incineration and landfill can be viewed as the same socio-technical regime (see Table 1) and incineration has historically been a popular way of disposing of LACW in the UK. The similarities between the landfill and incineration systems motivated many WDAsto minimise disruption to existing practices and pursue an incineration strategy, i.e. to maintain the regime. As described by Smith et al (2005) the availability of internal (incumbent) resources supportedincremental system evolution.
In 1999, in response to the landfill diversion targets and in line with many other WDAs, the GMWDA proposed to build several new generation energy-from-waste (EfW) incinerators. However, the GMWDA’s proposal was resoundingly rejected by the councils, environment groups and the local public on environmental and planning grounds. These stakeholders campaigned for the waste disposal problem to be more broadly defined and the GMWDA wasrequired to seek alternative solutions; dissent opened new search directions (Smith et al, 2005). In this case, the GMWDA wasforced to redirect their search because neither landfill nor incineration remained an option for disposing of waste in the GM area.