Net-zero requirements unveiled for government contracts

New measures will require UK businesses to commit to net-zero emissions by 2050 and publish credible carbon reduction plans before they can bid for major government contracts.

Prospective suppliers bidding for contracts above £5m a year will need to have committed to the new requirements by September this year. Firms which fail to do so will be excluded from bidding for the contract.

The UK government is now the first in the world to have put these rules in place, and said that they will support its plan to “build back greener” from COVID-19 by ensuring its suppliers are on a path towards net zero.

Minister for efficiency and transformation, Lord Agnew, said: “The government spends more than £290bn 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.”

The new rules will require carbon reduction plans to cover scope 1, scope 2, and scope 3 emissions, including for business travel, employee commuting, transportation, distribution and waste.

They will apply to all central government departments and arms-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 to be taken into account quickly when bidding for government work.

All companies bidding for major government contracts will need to comply with the measures, not just those who are successful in winning contracts, further widening their impact.

Tom Thackray, director of infrastructure and energy at the Confederation of British Industry (CBI), said: “As the world looks towards the UK and COP26 for leadership on decarbonisation, business is already playing a vital role in driving progress towards a greener future.

“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.”

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