New green rules for companies bidding for government contracts

New measures which require businesses bidding for major government contracts to commit to achieving net zero emissions have come into force.

All companies bidding for government contracts worth more than £5 million a year must commit to achieving Net Zero emissions by 2050. The requirements will apply to any companies bidding, not just those who are successful. The UK is the first country in the world to put such a measure in place.

"Government spends £290 billion a year on procurement and it’s right that we use this spending power to green the economy," said Chancellor of the Duchy of Lancaster Steve Barclay. "Working arm-in-arm with business, we are taking giant strides to ensure this country is building back greener and tackling climate change."

The new requirements come into effect ahead of international climate conference COP26 which the UK will host later this year, with officials at the event working closely with climate experts and campaigners to encourage other countries to follow the UK’s example.

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 as part of the Streamlined Energy and Carbon Reporting regulations published in 2018.

The new rules will go further, requiring a commitment to achieving Net Zero by 2050 at the latest, and the reporting of some Scope 3 emissions; including business travel, employee commuting, transportation, distribution and waste for the first time. Scope 3 emissions represent a significant proportion of an organisation’s carbon footprint. Understanding, reporting and reducing these emissions will play a substantial role in decarbonising governments supply chain, and the UK economy as a whole.

The new rules will 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.

"The scale and breadth of spend makes public sector procurement an essential tool in driving net zero progress across all sectors and regions of the country. This new policy will provide a sharp focal point for public-private partnerships," commented CBI’s Director of Decarbonisation, Tom Thackray.

The measures will apply to all central government departments as well as their Executive Agencies and Non-Departmental Public Bodies.