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Procurement Policy Notes: Accelerating decarbonisation through public procurement

25 March 2022

In this article, we discuss the lessons that can be learnt from the approaches that have been taken by various Government bodies in the UK to decarbonise public procurement including the use and implementation of Carbon Reduction Plans, contractual arrangements forming part of the procurement process and social value as a means of achieving decarbonisation.

Procurement Policy Notes ("PPNs") published by the UK Government, Welsh Government, Scottish Government and Northern Ireland Executive provide a means for those bodies to directly influence how decarbonisation is implemented by contracting authorities at a local and national level in the UK. 

Context

With the value of public procurement in the UK totalling close to £300bn each year, contracting authorities have the potential to "leverage public procurement as a tool [to drive] greener and more resilient outcomes across public services". Decarbonisation in public procurement is therefore becoming increasingly relevant and a key means of achieving net zero greenhouse gas emissions across the UK economy by 2050.

Whilst there is a Common Framework in place for public procurement between the UK Government and the governments of the devolved nations, decarbonisation in public procurement does not currently fall within the remit of that framework. There is therefore considerable scope for differences in approach to emerge in different parts of the UK in how decarbonisation in public procurement can be achieved and an opportunity for contracting authorities to learn from different nations' approaches to help decarbonise their own procurements.

Carbon Reduction Plans

In June 2021, the Cabinet Office published Procurement Policy Note 06/21 ("PPN 06/21") which "requires suppliers who are bidding on Central Government contracts [from 30 September 2021] to commit to achieving net zero…and to detail their organisation’s UK greenhouse gas emissions via…a Carbon Reduction Plan". The potential implications for failing to meet this selection criteria are significant with contracting authorities being entitled to exclude bidders for non-compliance. It is therefore anticipated to have a "significant impact upon the behaviour and pace of carbon reduction in the [UK] Government's supply chain".

The Welsh Government has followed a similar approach in relation to Carbon Reduction Plans and formally adopted PPN 06/21 on 30 September 2021 following the publication of Welsh Procurement Policy Note 06/21 ("WPPN 06/21"). The provisions of WPPN 06/21 come into force from 1 April 2022 and largely mirror the requirements of PPN 06/21 whilst being recommended "as good practice to the rest of the Welsh Public Sector" and a method of confirming bidders' "commitment[s] to contributing to a net zero public sector in Wales by 2030 and net zero UK by 2050".

Though the requirements of PPN 06/21 and WPPN 06/21 only apply to major Government contracts valued at £5 million or more, they are intended to provide a means for in-scope contracting authorities to "verify prospective supply chain [partners' commitments] to working with them to achieve net zero carbon status".

Climate and circular economy: Principles and expectations

In contrast, the Scottish Government has placed a greater emphasis on using public procurement "to support climate and circular economy ambitions" instead of decarbonisation specifically and has encouraged contracting authorities to consider their own emissions.

In January 2021, the Scottish Government released Scottish Procurement Policy Note 01/2021 ("SPPN 01/21") which clarified "expectations with respect to climate and [the] circular economy [whilst] aligning [to] climate change reporting duties and current procurement policy and legislation". Key aspects of SPPN 01/21 include:

  • highlighting the use of "Procurement Strategies [by public bodies to] prioritise and take account of climate and [the] circular economy in their procurement activity";
  • emphasising the availability of the "Sustainable Procurement Tools…to support Scottish public sector buyers"; and
  • encouraging "public bodies to focus their energies on effecting change with reduced emissions".

In a similar vein, the Cabinet Office published Procurement Policy Note 05/21 in June 2021 setting out the "strategic priorities for public procurement" and the "principles that [in-scope] contracting authorities [in England] should [follow] organisationally" including "tackling climate change and achieving net zero".

Contractual arrangements and other practical considerations

Most recently, the Welsh Government has published Welsh Procurement Policy Note 12/21 ("WPPN 12/21") which provided specific "advice on the actions that can be taken on Scope 3…emissions with a particular focus on the purchased goods and services element" which can be determined by the contractual arrangements entered into and therefore the procurement process followed. 

Under WPPN 12/21, the contractual arrangements which the Welsh public sector has been encouraged to consider at the procurement stage for purchased goods and services include:

  • "contracting with businesses organised on Circular Economy (CE) principles (e.g. eco-design, design for disassembly)";
  • "requiring Original Equipment Manufacturers (OEM) or suppliers [to] take back…products and/or packaging" as part of the draft contract(s); and
  • "including waste disposal requirements in contracts or establishing separate contracts for waste disposal that require waste segregation to minimise residual ‘non-recyclable’ waste".

Although directed towards the Welsh public sector, WPPN 12/21 provides a number of other practical considerations that could be applied by contracting authorities across the UK to help decarbonise their procurements. Changes that could be implemented at a Local or Central Government level include:

  • conducting "expenditure analysis, identifying current contracts with high CO2e and opportunities to act on CO2e reduction";
  • exploring how procuring organisations' "current contracts can be used to act on CO2e reduction" by "ensuring that any decarbonisation measures built into the contracts have been fully applied";
  • considering "how to incentivise suppliers and contractors to change materials, processes and [achieve] standards/accreditations" by, for example, "extending the maximum period of contracts to [provide more] time to recoup the costs of investment [and negotiating] bonus payment clauses for…key milestones" relating to decarbonisation; and
  • where possible, maximising the "influence over the market by entering into collaborative procurement arrangements with other bodies to aggregate the demand [and thereby incentivise] prospective suppliers to commit to making changes".

Social value through decarbonisation

In September 2020, the Cabinet Office launched "a new model to deliver social value" under Procurement Policy Note 06/20 ("PPN 06/20") requiring Central Government bodies to account for "the additional social benefits that can be achieved in the delivery of [their] contracts" and to explicitly evaluate social value "in all Central Government procurement". The social value model established the UK "Government’s social value priorities for procurement [including] a menu of social value options for commercial staff [within] in-scope organisations to review and select" and this included "fighting climate change" by demonstrating "effective stewardship of the environment". Whilst PPN 06/20 did not reference decarbonisation specifically, it did state that contracting authorities should aim to "deliver additional environmental benefits in the performance of [contracts] including working towards net zero greenhouse gas emissions".

Looking ahead, the Cabinet Office's Transforming Public Procurement Green Paper published in December 2020 and the publication of their response to consultation in December 2021, has emphasised how "public money spent through public procurement…must support Government priorities [including tackling] climate change". Potential proposals to help meet this aim include:

  • allowing contracting authorities "to include criteria that go beyond the subject matter of the contract and encourage suppliers to operate in a way that contributes to economic, social and environmental outcomes on the basis of the ‘most advantageous tender'"; and
  • encouraging contracting authorities to "take a broad view of value for money" and "award criteria for evaluating final bids and scoring their quality, to encourage ways of working and operational delivery that achieve social value objectives".

Given the increased emphasis and role of decarbonisation in achieving net zero targets, we would anticipate seeing a shift in "the role of procurement" to focus on decarbonisation as a way of translating "desired outcomes into the right contracts and [the selection of] suppliers that will deliver these in the way that offers best social value for money" and which would naturally extend to decarbonisation.

Comment

The UK Government and the governments of the devolved nations have taken distinctive approaches to aid decarbonisation in their procurements at both local and national levels. This provides increasing scope for contracting authorities to apply different measures adopted by other nations of the UK, particularly where those contracting authorities do not fall within the scope of existing PPNs.

If you are a public body considering how the latest public procurement measures might affect your organisation, please contact a member of our national public sector team to discuss how we might assist you.

Further Reading