New rules for Public Sector Carbon Reporting

With COP 26 only weeks away, major new public sector procurement rules on carbon reporting come into effect at the end of September. 

Procurement note PPN 06/21 will apply to Central Government, Executive Agencies and Non-Departmental Public Bodies in England buying goods or services with annual contract values of £5 million or more.  

Under these new procurement rules, a bidding supplier will need to show early commitment to achieving Net Zero Carbon with a Carbon Reduction Plan (CRP), signed off at high level, and published on the supplier’s UK website. The CRP will also need to:

• confirm that the supplier is on a path towards Net Zero Carbon;
• detail the supplier’s Greenhouse Gas (GHG) emissions (using a set CRP template). 

Under these new procurement rules, a bidding supplier will need to show early commitment to achieving Net Zero Carbon

For most businesses, GHG means the direct or indirect emission of carbon dioxide (carbon), but for some in our sector it may include even more potent GHGs such as electrical insulation gas sulphur hexafluoride. 

The new public sector CRP requirement is based on an already widely adopted Protocol that puts carbon and other GHG emissions into three groups:

• Scope 1 - direct emissions from sources controlled or owned by the supplier. e.g. emissions from offsite or site vehicles, or diesel generators;
• Scope 2 - indirect emissions e.g. linked to buying electricity for office and site power, heating or cooling; and
• Scope 3 – further sources of carbon and other GHGs, notably upstream and downstream. 

Scope 3 emissions present a new challenge

The direction of travel in construction is for much more carbon reporting throughout the supply chain

Scope 3 carbon emissions are associated with the supplier’s activities, but not directly generated by them, or the energy they use. The emissions include sources directly connected to the business, such as suppliers or distributors, so they are often known as “value chain emissions”.  

Under the new public sector rules, suppliers bidding for large contracts must include Scope 1 and Scope 2 UK emissions in their CRP but also a significant and challenging group of Scope 3 emission categories:

• Business travel and employee commuting (in vehicles other than the supplier’s own vehicles)
• Waste generated due to operations; and
• Upstream and downstream transportation and distribution. 

The new public sector bidding requirements won’t be entirely new to larger suppliers in our sector (broadly, over £36 million turnover) who are already legally required to report GHGs under ‘Streamlined Energy and Carbon Reporting’ rules (SECR). 

However, the need to address this group of Scope 3 emissions, not yet a mandatory feature of SECR, is an extra challenge, though there are guides to how to do it.   

The new rules, applicable to contracts issued under the Public Contracts Regulations 2015, confirm that the direction of travel in construction is for much more carbon reporting throughout the supply chain, at least for multi-million-pound contracts.  

It’s also likely that construction’s prequalification Common Assessment Standard will introduce an ‘advisory’ question on GHG reporting in 2022. This will further underline the need for construction businesses to know how to measure and report on their carbon emissions to meet client and other buyer’s requirements.