UK NHS suppliers required to commit to net zero by 2050 or lose out on future contract opportunities
Published on 20th Feb 2023
From April, bidders for NHS contracts over £5 million must produce a carbon reduction plan
With over 80,000 suppliers across markets for medical equipment, medical technology, medicines, foods, office goods and healthcare related services, an estimated 60% of the NHS's carbon footprint emanates from its supply chain. In recognition of this fact and in an attempt to curb emissions, the NHS drew up its Net Zero Supplier Roadmap, dictating a change in its public procurement strategy and setting ambitious net zero targets for its suppliers. In doing so, the NHS sent a clear signal to the market: calculate your carbon footprint and commit to net zero or risk losing out on major NHS contracts.
Next milestone approaches
From April 2023, in every procurement for a contract above £5 million per year, the NHS will seek an express commitment from bidders to reach net zero by 2050. This commitment needs to be demonstrated by a bidder in a Carbon Reduction Plan.
As a warning of more strict milestones down the line, in the NHS's specific guidance it has said that "To best prepare for future NHS roadmap milestones, suppliers are encouraged to set a net zero target of 2045, although a target of 2050 will still meet the minimum requirements of CRPs."
Carbon reduction plan requirements
The NHS is aligning itself with the Cabinet Office's PPN 06/21, which appends a template Carbon Reduction Plan (CRP) for bidders to complete and sets out the required standard for CRPs. (See our Insight for more.)
Every procurement will be different and it is important to read the invitation to tender carefully to understand what standard the CRP needs to meet.
In brief, the CRP needs to include:
- A bidding entity's commitment to achieve net zero by 2050 for UK operations.
- Baseline and current greenhouse gas protocol emissions for Scope 1 (direct) and 2 (indirect) emissions and a defined subset of Scope 3 (other indirect) emissions for the bidding entity's UK operations. Scope 3 emissions include upstream transportation and distribution, downstream transportation and distribution, waste generated in operations, business travel and employee commuting. Emissions reporting must be in CO2e (Carbon Dioxide Equivalent) for the six greenhouse gases covered by the Kyoto Protocol: Carbon dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), and Sulphur Hexafluoride (SF6). The reporting period for current emissions must not be more than 12 months prior to the date of commencement of the procurement.
- Carbon reduction targets. This could be in the following format (as quoted from the Carbon Reduction Plan Template appended to PPN 02/21): "We project that carbon emissions will decrease over the next five years to XX tCO2e by 20XX. This is a reduction of XX%"
- The environmental management measures or carbon reduction projects that the bidding entity has implemented or intends to implement.
- A declaration and sign-off of the CRP from the board of directors (or equivalent).
It may be necessary to publish the CRP on the homepage of a bidder's UK website, clearly signposted as the Carbon Reduction Plan.
When is a carbon reduction plan needed?
A bidder will be required to provide a contracting authority with a CRP in a contract opportunity with an anticipated value above £5 million per year. This figure will be averaged over the life of the contract.
CRPs will form part of the selection criteria, with a pass/fail outcome.
What's next on the NHS supplier roadmap?
This is only one of the milestones in the NHS supplier roadmap; there are more ambitious and stringent milestones to come, as early as April 2024.
In April 2024, the Carbon Reduction Plan requirements will apply to most (if not all) NHS public procurements.
In April 2027, suppliers will need to align to the NHS net zero goal of 2045 (five years earlier than the UK government's 2050 goal).
This is something bidding organisations should have in mind when considering and developing their commitments, targets and plans to implement now. While for current purposes the NHS will accept businesses' commitment to the 2050 net zero goal in order to progress in a procurement, in only four years' time that goal will need to be brought forward by five years.
In April 2028, the NHS wants to put in place requirements to oversee the carbon footprint for individual products supplied to the NHS. It is not yet known what this will look like and the NHS will work with suppliers and regulators to develop a scope and methodology.
Osborne Clarke comment
Publishing a Carbon Reduction Plan on their website homepage means businesses need to be prepared to be held accountable for their commitments to net zero. Crucially, any commitments an organisation makes need to be evidence-based and there must be a willingness to implement carbon reduction projects and reach targets.
It is also important for businesses to have the next NHS milestone in mind when considering their position as a supplier. The April 2023 milestone represents a big move by the NHS towards reaching its net zero goals – but requirements will get more strict from then on. The most onerous change will be when the individual carbon footprint of a single product will need to be measured, monitored and (potentially) reduced, by 2028.
If you have any questions about the NHS's adoption of PPN 06/21, the public procurement team at Osborne Clarke is happy to assist with any queries, please contact one of our experts below.