Last edited 09 Jun 2021

Net zero commitment will be required for major government contracts

[edit] Introduction

Measures announced by the Government on 7 June 2021 will require businesses to commit to net zero by 2050 before they can bid for major public contracts.

The measure has been designed not to overly burden and potentially exclude small and medium sized enterprises (SMEs) from bidding for government work. It is also intended to serve as a tangible reinforcement of the Government’s plan to build back greener.

Under the arrangement, prospective suppliers that bid for contracts above £5 million a year will need to have committed to the Government’s target of net zero by 2050 and have published a carbon reduction plan. Firms which fail to do so will be excluded from bidding for the contract.

The initiative, which is scheduled to become effective in September 2021, will also require firms to publish clear and credible carbon reduction plans. A carbon reduction plan sets out where an organisation’s emissions come from and presents the environmental management measures that they have in place. Some large companies already self-report parts of their carbon emissions, known as Scope 1 (direct) and Scope 2 (indirect owned) emissions.

Under the September 2021 plan, the rules will go further, requiring the reporting of some Scope 3 emissions. These include business travel, employee commuting, transportation, distribution and waste. Scope 3 emissions represent a significant proportion of an organisation’s carbon footprint.

The approach is similar to the prompt payment measures introduced in 2019, which allowed a supplier’s performance in paying their subcontractors promptly to be taken into account when bidding for government work.

All companies bidding for major government contracts will need to comply with the measure - not just those who are successful in winning contracts. This further widens the impact of the measure, as more and more suppliers commit to achieving net zero.

The measures will apply to all central government departments and arms length bodies as well.

Tom Thackray, Director of Infrastructure and Energy, at the Confederation of British Industry (CBI) said, “The CBI has long supported using procurement policy to ensure government spending supports the UK’s environmental objectives, and these changes will encourage more firms across the country to demonstrate their own commitment to net zero when bidding for government contracts.”

A representative from the Business Services Association (BSA) added, “Harnessing the power of public procurement is one important tool at the government’s disposal. That’s why the BSA welcomes this move. We and our members contributed to the process of drawing it up. It is another important step on the road to net zero.”