Businesses must commit to net zero to win future government contracts

10 June 2021

Companies will soon be required to have a “clear and credible” plan to reach net zero by 2050, if they want to win government contracts.

A new Procurement Policy Note (PPN) issued by the Cabinet Office on 5 June requires all central government departments, their executive agencies and non-departmental public bodies to, “verify that the supplier remains committed to achieving net zero prior to entering into any contract awarded under a framework agreement”.

The provision applies to all contracts with an anticipated contract value above £5 million per year, excluding VAT, except, “where it would not be related and proportionate to the contract”.

The PPN follows a Green Paper published by the Cabinet Office in December covering government spending leverage in the recovery of the economy, innovation of public service delivery and achieving the government's target of net zero carbon by 2050. The consultation period ended 10 March this year.

Under the new public procurement agreement, a company’s Carbon Reduction Plans (CRP) must meet the required standard as set out by the supporting guidance to this PPN, including, but not limited to:

  • confirming the bidding supplier’s commitment to achieving net zero by 2050 for their UK operations

  • providing the supplier’s current emissions for the sources included in Scope 1 and 2 of the GHG Protocol, and a defined subset of Scope 3 emissions

  • providing emissions reporting in CO2e (Carbon Dioxide Equivalent) for the six greenhouse gases covered by the Kyoto Protocol

  • setting out the environmental management measures in effect, including certification schemes or specific carbon reduction measures you have adopted, and that you will be able to apply when performing the contract and that support achieving net zero by 2050

  • publication of the CRP on the supplier’s website.

The Cabinet Office note advises that environmental considerations and carbon reduction will be a factor in most, if not all, contracts and that in the majority of cases, the application of this PPN will be relevant. 

In-Scope Organisations must apply the provisions of this PPN to relevant procurements advertised on or after 30 September 2021.

Further details of the PPN are available here