Taking Account of Carbon Reduction Plans in the procurement of major government contracts

A shoot of a plant coming out of the ground

As she departed office in 2019, one of Theresa May’s last acts as prime minister was to legislate an amendment to the Climate Change Act 2008 which committed to reducing the UK’s greenhouse gas emissions to ‘net zero’ (a 100% reduction against 1990 levels) by 2050. Widely praised, the move meant the UK became the first major economy to set such a target, and reflected the ascendancy of climate action in public discourse, with the views of spokespeople as diverse as then-governor of the Bank of England, Mark Carney, and activist groups such as Extinction Rebellion at least partially converging.

The recently released PPN (procurement policy note) 06/21, entitled ‘Taking Account of Carbon Reduction Plans in the procurement of major government contracts’, demonstrates the government’s commitment to bringing central government procurement in line with the new 2050 target by expanding the level of emissions information bidders must include in their submissions.

What is required of bidders?

Applicable to contracts above £5m in value per annum (excluding VAT), including those awarded within framework agreements or dynamic purchasing systems, PPN 06/21 will come into force for all procurement exercises conducted on or after 30 September 2021.

The main feature of the change is the requirement for bidders to submit a Carbon Reduction Plan (CRP) at selection stage, which must:

Confirm the organisation’s commitment to achieving net zero in their own operations by 2050
Report current emissions using both:
- The three categories (Scopes) of the Greenhouse Gas (GHG) Protocol, an international standard for measuring emissions:
  - Scope 1: Emissions directly from sources controlled or owned by the organisation, e.g. vehicles.
  - Scope 2: Indirect emissions resulting from the purchase and use of electricity, heat, steam or cooling.
  - Scope 3: All emissions not included in Scopes 1 or 2. For the CRP, organisations are only required to cover five of the 15 categories in Scope 3:
    - Business travel
    - Employee commuting
    - Waste generated in operations
    - Upstream transportation and distribution
    - Downstream transportation and distribution.
  - CO2e (Carbon Dioxide Equivalent) for the six greenhouse gases covered by the Kyoto Protocol, the first international emissions target agreement.
- Detail environmental management measures that will apply during the contract, such as relevant certifications (e.g. ISO 14001:2015) or specific carbon reduction initiatives (reducing vehicle mileage, energy use, etc.)
- Be published on your website
- Have been signed off ‘at an appropriate level’, i.e. director-level, within 12 months of the date of the procurement.

The Cabinet Office have also provided a ‘Technical Standard for completion of Carbon Reduction Plans’ which expands in detail on the reporting requirements listed above. Additionally, and whilst there is a natural overlap in their aims, it is also important to note that the CRP requirement is distinct from the Social Value Model published in PPN 06/20.

As the PPN’s associated FAQ document clarifies, it is not mandatory for devolved administrations (Scotland, Wales, Northern Ireland), and is therefore of most relevance for bidders in England.

How does this affect the tendering process?

The PPN is clear that, whilst government buyers (referred to as ‘In-Scope Organisations’ in the PPN) have discretion over whether to apply the CRP requirement to their procurement, carbon reduction will be relevant to ‘most, if not all, contracts’. In other words, expect to see widespread adoption of the measure in all but the most exceptional cases.

The main implication of the PPN is that bidding organisations will need to proactively maintain their CRPs even when not currently tendering, similarly to how existing policies, procedures or management systems are typically reviewed/audited and updated yearly.

Assessing carbon emissions to the required level of detail is not a task it is advisable to complete hurriedly ahead of a submission deadline, and it therefore needs to be pursued as an integrated part of the company’s environmental management strategy, ensuring a valid and up-to-date CRP is available on an ongoing basis for any tenders which arise. The services of specialist consultancies may be required to calculate carbon footprint, with a non-exhaustive list of suggestions detailed on p. 7 of the FAQs.

However, it is important to note that many SMEs will remain unaffected by this requirement, at least for the time being – its applicability solely to central government contracts and the £5m p.a. value threshold will leave local authorities (such as London boroughs, district and city councils) and other public sector organisations (universities, schools and housing associations, for example) largely untouched.

Environmental and sustainability tender questions

The topic of carbon emissions, and more broadly, the environment and sustainability, are areas that our bid writers cover in most tender submissions, meaning they are highly experienced in the nuances and what a buyer is looking for here. Contact us today to discuss how we can support your organisation to win more tenders.