Three steps to decarbonising public contracts

15 December 2021

Purchased goods and services can account for around 60% of an organisation's total CO2 footprint, the Welsh Government has said in a Procurement Policy Note (PPN). 

The PPN, which gives guidance on meeting sustainability targets through procurement strategies, said emissions from an organisations’ supply chain presented a “particular challenge”.

This is because such emissions arise from the organisation's demand for goods and services but “they occur in supply chain activities that organisations do not directly own or control”.

The PPN said supply chain activities can be influenced by the purchasing organisation's procurement processes by “ensuring the anticipated outcomes are delivered through contract management relationships” and “incentivising innovation and continuous improvement over the period of the contract”.

The public sector in Wales has a procurement spend of around £7bn. The Welsh Government aims to achieve a carbon neutral public sector by 2030.

The PPN outlined three strategies to meet decarbonisation targets: 

1) Spend and transparency 

The PPN stressed transparency within supply chains and understanding suppliers is integral for decarbonisation.

Organisations must establish exactly how their money is being spent and identify what specific goods and services are being bought. Spend analysis data will only reveal what an organisation has spent its money on, but they must be clear over what day-to-day activities are being undertaken to deliver the contract. 

Through this spend analysis and understanding the services they are contracting, organisations can start breaking down where they are best placed to cut emissions. 

2) Use your spend analysis

The PPN said using spend analysis work back from spend categories to identify specific contracts and opportunities to act on CO2 reduction.

It said communication with contractors and suppliers was key. It recommended organisations approach their top contractors, suppliers, or service providers and identify their contract manager and understand the daily activities that will be carried out for the contract.

Having identified the specific contracts or framework agreements currently in use, establish what, if any, decarbonisation measures have been built into the contract, and whether these have been fully applied. 

It recommended identifying any management information data that might be available that would be a “useful benchmark or starting point” from which to start to take action.

3) Explore how your current contracts can be used to act on CO2 reduction

The PPN said while contract specifications may not have specific reference to decarbonisation, they may include contract clauses that could be used to initiate action to address CO2.

It said a contract may refer to innovation, continuous improvement, or contract variation, which could be used to implement sustainability targets. 

This approach is likely to be most effective if the contract is still in its early stages, when the contracting authority is a major client and/or has a good working relationship with the supplier, service provider or contractor.

The PPN stressed this provided economic benefits. 

It said: “Cooperating with you is likely to be beneficial to the development of your suppliers, service providers, or contractors, as understanding your decarbonisation objectives will be a source of competitive advantage as other public sector clients begin to specify decarbonisation requirements in their contracts.”

If there are no opportunities to take action within the scope of current contracts, the PPN recommended terminating the contract, “especially if the subject of the contract is a medium to high CO2 risk and better delivery options are available”.

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