Net Zero hit the headlines once again on the weekend as the major news channels reported on the UK government’s latest announcement about carbon and major contracts. Most of the media dipped their toes into the vast pool that is the carbon question but mostly it was just fluff with very little of the substance. We’re all about data at Carbon Visibility so we like to spend time on the detail. Here’s what it actually means for any company tendering for government contracts worth on average £5m a year or more.
From September 30, this applies to all contracts of this value with all Central Government Departments, their Executive Agencies and Non Departmental Public Bodies. So that’s all the main ministerial departments and some 400-plus other agencies and public bodies, from the better-known DVLA and Bank of England to the less prominent but intriguing Committee on Mutagenicity of Chemicals in Food, Consumer Products and the Environment. Between them all, annual spend is in the region of £800bn. Subtract staff and other costs, and that still leaves a hefty pot to pay for goods, services and works.
Ok, so what do businesses actually have to do to satisfy these new rules? Essentially, they need to demonstrate a commitment to carbon zero by 2050 and evidence this with a carbon reduction plan (CRP).
Simple, eh? Well, yes and no. The CRP has to meet a required standard which includes:
- Confirming the bidding supplier’s commitment to achieving Net Zero by 2050 for their UK operations
- Providing their current emissions for the sources included in Scope One and Two of the GHG Protocol, and a defined subset of Scope Three emissions
- Providing emissions reporting in CO2e (Carbon Dioxide Equivalent) for the six greenhouse gases covered by the Kyoto Protocol
- Setting out the environmental management measures in effect, including certification schemes or specific carbon reduction measures they have adopted
- The CRP also has to be published on the supplier’s website
One thing that leapt out at us there was “a defined subset of Scope Three emissions”. Scope One (emissions from the business’ own boilers, vehicles and so on) and Scope Two (emissions from purchased energy) are generally held to be relatively straightforward to figure out.
However, the inclusion of some of Scope Three will be something of a curve ball to many, especially as this includes upstream and downstream transportation and distribution. This is essentially making the company somewhat responsible for the emissions of their own suppliers and customers, and requires them to calculate these CO2e emissions.
As well as including some Scope Three, the policy is pretty tight in terms of exemptions, stating that environmental considerations and carbon reduction will be a factor in “most, if not all, contracts”. This may include, but is not limited to:
- Contracts which have a direct impact on the environment in the delivery of the contract
- Contracts which require the use of buildings by staff engaged in the delivery of the contract
- Contracts which require the transportation of goods or people used in the delivery of the contract
- Contracts which require the use of natural resources in the delivery of the contract.
So, contracts that require buildings used by people, transport of goods or people and the use of natural resources? Not easy to think of contracts which won’t, is it? So the policy is comprehensive in its scope and clearly serious in its intentions.
Cue lots of businesses making promises with their fingers crossed behind their backs. Well, not quite. Every year they have to compare their performance against their baseline data and explain what they’re doing to keep reducing their emissions.
The policy note doesn’t cover penalty clauses for those businesses that are successful in tendering but don’t keep to the targets laid out in their CRP. No doubt explanations will be expected but it’s not a great stretch to believe that financial penalties will be written into the contracts for those who underperform against their CRP.
All this is just to get over the first hurdle of being included in the tender process at all. The UK government has also said that social value – which includes environmental concerns – should be a factor in choosing suppliers for major contracts. In fact, the guidance in Procurement Policy Note 06/20 specifically said that social value should be applied in the procurement process to the extent that it “carries a heavy enough score to be a differentiating factor in bid evaluation”; a higher weighting can be applied if justified.
And, let’s face it, we’re just getting started. As the proactive world leaders address the climate emergency and those who have buried their heads in the sand are forced to face up to what’s going on, it’s clear that fortune will favour the environmentally and socially responsible business more and more as time goes by.
Learn how Carbon Visibility captures Scope Three emissions through our assessment platform, Carbon Click.