Firms must commit to net zero and report on emissions to win big government contracts

Firms must commit to net zero and report on emissions to win government contracts

Firms must commit to net zero and report on emissions to win big government contracts

New measures will soon require businesses to commit to net zero by 2050 and publish a ‘clear and credible’ carbon reduction plan before they can bid for major government contracts.

The green procurement rules announced by the Cabinet Office will come into force in September 2021 and apply to suppliers bidding for contracts above £5million a year. Firms which fail to do so will be excluded from bidding for the contract.

Reporting on Scope 1, 2 and 3 emissions

A carbon reduction plan sets out where an organisation’s emissions come from and the environmental management measures that they have in place. Large companies are already required to self-report parts of their carbon emissions under Streamlined Energy and Carbon Reporting, which mainly covers Scope 1 (direct) and Scope 2 (indirect owned) emissions.

The new rules will go further, requiring the reporting of some Scope 3 emissions, including business travel, employee commuting, transportation, distribution and waste. Scope 3 emissions represent a significant proportion of an organisation’s carbon footprint; and are often between 80% and 97% of total emissions for a large business. The policy also affects SMEs: all bidding companies will be required to report, regardless of size.

The government says it is the first in the world to put this requirement in place. Minister for Efficiency and Transformation, Lord Agnew, said: “The government spends more than £290 billion on procurement every year, so it’s important we use this purchasing power to help transform our economy to net zero. Requiring companies to report and commit to reducing their carbon emissions before bidding for public work is a key part of our world leading approach.”

Tom Thackray, Director of Infrastructure and Energy, at the CBI said: “The CBI has long supported using procurement policy to ensure government spending supports the UK’s environmental objectives and these changes will encourage more firms across the country to demonstrate their own commitment to net zero when bidding for government contracts.”

Broader guidance for public sector procurement

The government also announced separate new guidance which covers the whole English public sector, including local government and the NHS.

The guidance tells procurement teams that “social value” elements should be a key priority in procurement decision making, including environmental impact. It says that while securing the best value for money is crucial, contracts must not simply be awarded to the lowest bidder – especially when wider economic benefits can be proved.

Contracting authorities are asked to consider bidders’ approach to climate change and waste reduction, their contribution to net zero and the circular economy, and opportunities to deliver additional environmental benefits such as enhanced biodiversity throughout the contract.

 

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