Commitment to Net Zero to be mandatory in bidding for public contracts

Written on 9 Sep 2021

With a month to go before the Cabinet Office's Procurement Policy Note 06/21 takes effect, bidders for public sector contracts need to get ready to prove to contracting authorities that they are committed to Net Zero when bidding for opportunities worth over £5 million

In a decisive move towards the 2050 Net Zero target, the Cabinet Office published Procurement Policy Note (PPN) 06/21 "Taking Account of Carbon Reduction Plans in the procurement of major government contracts" earlier this year. The announcement of the PPN came in the wake of the publication of the UK Industrial Decarbonisation Strategy and the National Procurement Policy Statement, which both hinted at the key role of public sector procurement in the deployment of pivotal new initiatives to effectively "drive the adoption of green practices" that "reflect [UK] values and respond to national priorities".

Which contracts are caught by PPN 06/21?

PPN 06/21 is applicable to contracts advertised by central government departments, their executive agencies and non-departmental public bodies from 30 September 2021 which have an anticipated value of £5 million per annum (excluding VAT) and are subject to the Public Contracts Regulations 2015.
The PPN applies except in limited cases where it "would not be related and proportionate to the contract". It is expected that carbon reduction will be a factor in the award of "most, if not all" contracts, specifically those contracts which have a direct impact on the environment or require the use of natural resources, buildings and/or transportation of goods or people.

The PPN will not be applicable if the market for a contract is "distorted/narrowed/struggling/ to such a significant extent that delivery of public services is likely put at risk, or value for money is likely to be severely compromised" or "where there is a civil emergency".

The PPN also applies to framework agreements and dynamic purchasing systems where the value of any contract awarded is greater than £5 million.

What will my organisation have to do to show a commitment to achieving Net Zero?

As part of the assessment of a bidder's technical and professional ability, the PPN imposes a mandatory requirement (a selection criterion on a pass/fail basis) for suppliers to provide a Carbon Reduction Plan.

The PPN attaches a template Carbon Reduction Plan that bidders will be required to submit, which includes:

  • a commitment to achieving Net Zero by 2050 for a bidder supplier's UK operations;
  • details of both baseline and current Scope 1, Scope 2 and at least 5 of the 15 categories of Scope 3 emissions (as detailed in the following table);

Scope 1

Owned or controlled sources

Scope 2

Indirect emissions from the generation of purchased energy

Scope 3

Indirect emissions

Company facilities

Company vehicles

Purchased electricity, heat and steam

Purchased goods and services

Business travel

Employee commuting

Waste disposal

Use of sold products

Transportation and distribution (up- and downstream)

Investments

Leased assets and franchises

  • emission reduction targets, formulated as "We project that carbon emissions will decrease over the next five years to XX tCO2e by 20XX. This is a reduction of XX%"; and
  • details of completed and future Carbon Reduction Projects, including certification schemes

The Carbon Reduction Plan must be updated regularly (at least within six months of an organisation’s financial year-end) and published on the supplier's UK website. Consortium bidders will need to pro-vide a Carbon Reduction Plan for each consortium member.

Will my organisation be excluded if it fails to show a commitment to Net Zero?

A bidder can be excluded from the procurement if they fail to make an organisational commitment to reduce emissions so as to achieve Net Zero by 2050. They can also be excluded if the Carbon Re-duction Plan fails to meet the standard required. However, the Carbon Reduction Plan will not be scored or compared against other Carbon Reduction Plans submitted by competitor bidders. Unlike the Social Value Model, the Carbon Reduction Plan is applied at the selection stage, not the later evaluation stage.

Even new entrants to the market (trading for less than 12 months) are required to commit to achieving Net Zero by 2050 although they should not be put at a disadvantage and, if necessary, are allowed to submit a Carbon Reduction Plan as soon as possible after the procurement.

What can my organisation do to prepare?

In order to comply with the new requirements from 30 September 2021, suppliers need to put in place systems which can accurately calculate baseline and current Scope 1 to 3 emissions. Once a supplier has a true picture of its current emissions, it can begin to seek out and put in place effective carbon reduction projects and set achievable carbon reduction targets.

Putting these systems in place is time consuming, not least because organisational commitments to reduce carbon emissions by a particular percentage in the short term and to Net Zero in the long term must be firmly based on fact. Contracting authorities can also request evidence if required. From a reputational perspective, carbon reduction plans published on a supplier's website need to be careful-ly drafted so that they are neither inadequately nor overly ambitious and cannot be met.

Failing to put in place these systems now could mean that a supplier is unable to complete a Carbon Reduction Plan in time, and so will not be able to successfully bid for a contract once PPN 6/21 is in full effect.