Jenny Broderick explores the practical implications of the Procurement Policy Note 06/21, which requires certain government suppliers to adopt a net-zero carbon reduction plan.
What does PPN 06/21 mean for government suppliers?
Procurement Policy Note Taking account of carbon reduction plans in the procurement of major government contracts (Action Note PPN 06/21) was published by the Cabinet Office on 5 June 2021. It applies to central government departments, their executive agencies and non-departmental public bodies when procuring works, supplies or services with a contract value over £5m per annum where the Public Contracts Regulations 2015 apply to the procurement. From 30 September 2021, where PPN 06/21 applies, candidates (including real estate companies) will only be able to progress past the selection stage of any competition if they commit to reaching net-zero carbon emissions in their UK operations by 2050. In order to demonstrate the credibility of this commitment, suppliers must audit and publish their carbon emissions annually.
This is an unprecedented development in government procurement policy in two respects. First, it introduces an environmental requirement on bidders’ entire UK operations regardless of the relevance of those UK operations to the performance of the applicable contract. Second, it implements an environmental requirement at the selection stage as a pass/fail criterion, rather than being scored (and costed) at the evaluation stage.
How to adopt a compliant carbon reduction plan
1. Identify bidding entity/ies. The CRP must be completed only for the bidding entity and its UK operations. If a corporate group has a wider UK operation, the CRP should focus solely on the bidding entity. That may include a “share” of the bidding entity’s emissions of centralised operations. Candidates must, therefore, identify any entities which are likely to participate in any future tender process and prepare a CRP for each entity separately. If bidding as part of a consortium, the process must be completed for each consortium member.
2. Obtain senior support. Obtaining senior support at an early stage in order to ensure the scope of the CRP is appropriate and sign-off can be effected quickly at the end of the process in accordance with internal commercial, financial or legal procedures.
3. Evaluate the bidding entity’s current UK emissions. The starting point for any CRP is the bidding entity’s current (baseline) UK scope: 1 (direct); 2 (indirect from energy consumption); and 3 (other indirect) emissions. The reporting period must be within 12 months of the commencement of any procurement. If it is not possible to report the entity’s emissions for any of the emission scopes, then an explanation of why must be included in the CRP. Candidates should keep in mind that emissions must be reported annually and contracting authorities may use this information to track progress. Emissions reporting must be completed in compliance with the technical standard for CRPs. Reporting of scope 1 and scope 2 emissions should be in line with the latest government environmental reporting guidelines, and the selected scope 3 emissions in line with the GHG Reporting Protocol corporate standard. Candidates may use any existing emissions data they hold, however these data must be presented in the template form CRP published with PPN 06/21. Candidates will likely need to engage a carbon accounting consultant to evaluate their emissions and it will take some time to generate (weeks or even months), because it involves a detailed review of the business’ wider operations, particularly in relation to scope 3 emissions.
4. Identify any existing carbon reduction projects. Candidates must detail any existing carbon reduction measures adopted. This, in any event, may be useful for tracking historic carbon reduction and scoping future measures. These could include measures adopted prior to any CRP, such as those in connection with energy performance certificates or the Energy Saving Opportunities Scheme.
5. Consider future carbon reduction measures. Suppliers are required to set out in their CRP the environmental management measures to be effected during the performance of the contract. This could include the adoption of environmental management accreditations like ISO14001, or joining schemes such as the Science Based Targets Initiative, but it could also include practical actions like energy efficiency improvement works in buildings and changes to company travel policies.
6. Draft CRP. This must be completed in the prescribed form according to the Technical Standard.
7. Obtain sign-off from the board. Sign-off must be obtained from the board or other equivalent management body. The CRP itself must be signed by a director or other senior leader.
8. Publish on company website. Suppliers must publish the CRP on their website.
9. Repeat the process annually. CRPs must be maintained on the bidding entity’s website and updated annually. The same reporting period should be used for each successive CRP to enable comparison. The annual update should be completed within six months of the entity’s financial year end.
The future
Although PPN 06/21 applies only to major central government contracts, it is likely that supplier carbon emissions reduction targets will be extended to other public procurement. CRPs may also be employed to evidence suppliers’ environmental credentials for the purpose of social value award criteria. There is, therefore, real potential commercial value in implementing an effective, managed CRP as part of a wider corporate social responsibility programme.
Jenny Broderick is a senior associate at Squire Patton Boggs
The procurement policy note is available on the government website
