New measures require businesses to commit to net zero by 2050 to win major government contracts

Photo by Romain Dancre on Unsplash

By September, prospective suppliers bidding for government contracts above £5m a year must have committed to the 2050 net zero target and published a carbon reduction plan, while firms that fail to do so will be excluded from bidding.

Announced on World Environment Day, the new measures make the UK government the first in the world to put this requirement in place.

The new rules are set to support the government’s plan to build back greener by ensuring that potential government suppliers publish ‘clear and credible’ plans to reduce carbon emissions across their operations to bid for major government contracts.

Minister for Efficiency and Transformation, Lord Agnew, commented on the announcement: “The government spends more than £290 billion on procurement every year, so it’s important we use this purchasing power to help transform our economy to net-zero.

“Requiring companies to report and commit to reducing their carbon emissions before bidding for public work is a key part of our world leading approach.

“These measures will help green our economy, while not overly burdening businesses, particularly SMEs.”

A carbon reduction plan sets out where an organisation’s emissions come from and 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.

The new rules will go further, requiring the reporting of some Scope 3 emissions, including business travel, employee commuting, transportation, distribution and waste.

Scope 3 emissions represent a significant proportion of an organisation’s carbon footprint.

The new rules seek to drive forward the government’s green agenda, while also striking a balance to not overly burden and potentially exclude small and medium-sized enterprises from 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.

The measures will apply to all central government departments and arm’s length bodies.

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

As a result of this measure, the government reports improvements in payment performance across the UK economy.