What is being introduced and why?
The UK government has committed to a ‘Net Zero’ target of a minimum 100% reduction in the net UK carbon account (greenhouse gas emissions) compared to 1990 levels, by 2050. To support this commitment, the UK Cabinet Office has released a Procurement Policy Note setting out how central government departments should take account of suppliers’ Net Zero carbon reduction plans when assessing an individual supplier’s technical and professional ability as part of a procurement process. The policy will apply to the procurement of goods, services, and/or works valued in excess of £5 million per annum where the process is started on or after 30 September 2021, and is mandatory for central government departments, their executive agencies and non-departmental public bodies.
As part of the assessment, bidders will need to provide a Carbon Reduction Plan, confirming their commitment to achieving Net Zero in their UK operations by 2050. Carbon Reduction Plans must meet the Cabinet Office’s technical standard, found here. Bidders will also be required to set out the environmental management measures they have in place/ will be in effect and utilised during the performance of the contract. This can include certification schemes or any specific carbon reduction measures.
Bidders will have to disclose certain of their current emissions, provide emissions reporting in CO2e (Carbon Dioxide Equivalent) for the six greenhouse gases covered by the Kyoto Protocol and ensure their Carbon Reduction Plan is published on their website.
A template Carbon Reduction Plan has been set out within the PPN.
Will it apply to the procurement of all contracts valued over £5 million per annum?
Yes, as long as the procurement is covered by the Public Contracts Regulations 2015. The policy will equally apply to the procurement of framework agreements and dynamic purchasing systems where the individual value of any contract to be awarded under the framework or DPS is anticipated to be greater than £5 million per annum. Before entering into any contract under a framework or DPS an authority may verify that a supplier remains committed to achieving Net Zero.
The assessment does not have to be made where environmental considerations are not related to the subject matter of the contract or where the assessment is considered disproportionate to the requirement. However, the PPN advises that Net Zero factors are likely to be a feature of the majority of contracts that fall within the valuation scope.
Do bidders have to disclose data from the bidding entity or the wider UK business?
Only the bidding entity is relevant. Where the bidding entity is different from the UK or global parent, Carbon Reduction Plans should reflect the commitments and data of the bidding entity only. Where an organisation’s commitments or reporting does not align with the bidding entity, the technical standards should be considered and an appropriate methodology adopted such as approximation based upon equity share.
What about non-UK suppliers?
The measures apply equally to non-UK suppliers, but only in respect of their UK operations. Where a non-UK supplier does not currently carry out UK operations it must not be disadvantaged by this and can still comply with the policy without UK emissions data.
How will this be scored?
Cabinet Office has advised that assessment of Carbon Reduction Plans should be a pass/ fail assessment against the requirements of the policy. CSR statements, commitments under the Science Based Targets Initiative or Race to Zero can be used as examples of environmental management measures a bidder has in place but cannot be accepted by authorities as a substitute for a Carbon Reduction Plan.
What action should prospective bidders take now?
The Net Zero assessment will introduce additional criteria at the selection stage of a procurement. Organisations bidding into central government procurements valued in excess of £5 million per annum are most likely to see this as a new, pass/fail section with the Selection Questionnaire.
Prospective bidders should immediately start to think about how they will address the new requirements in preparation for 30 September 2021 and start to prepare a Carbon Reduction Plan using the PPN template. Plans should be put in place to ensure this is updated at least annually. Bid teams can familiarise themselves with the likely question format here.
Carbon Reduction Plans need to be approved at director level (or equivalent) to demonstrate a clear commitment to emissions reduction at the highest level of the organisation. Organisations will need to be able to show the approval was within 12 months of the date of the procurement.
For more information or advice, please contact David Hansom (firstname.lastname@example.org) or Hannah Chapelhow (email@example.com) in Clyde & Co's procurement law team.
New measures will require businesses to commit to net zero by 2050 and publish clear and credible carbon reduction plans before they can bid for major government contracts.