Jul 22, 2021

Construction firms must now report Scope 3 emissions

Builder in action on site

The recently released Procurement Policy Note (PPN)[1] presents how the UK Government will take account of suppliers Net Zero Carbon Reduction Plans in the procurement of major contracts. The PPN applies to all Central Government Departments, agencies and public bodies (referred to as ‘In Scope Organisations’). The PPN applies to procurements advertised on or after 30th September 2021 “when procuring goods and/or services and/or works with an anticipated contract value above £5 million per annum”.

Under this new criteria, In-Scope Organisations should include a requirement for suppliers’ bids to provide a Carbon Reduction Plan outlining their commitment to net-zero carbon by 2050 and setting out the environmental management measures they have in place during the delivery of the contract. This means environmental factors will be a consideration in the majority of contracts. Details on what is to be included in each category is discussed below:

Carbon Reduction Plans

  • Must include confirmation that the supplier is committed to achieving net-zero carbon by 2050 for their UK operations.
  • Current emissions included in Scope 1 and 2 of the GHG Protocol, as well as a breakdown of Scope 3 emissions under the Corporate Value Chain (Scope 3) Accounting and Reporting Standard[2]. There are 15 categories of Scope 3 emissions covered by the GHG Protocol and suppliers are required to detail their emissions for 5 of these categories, including:
    • Upstream transportation and distribution
    • Disposal and treatment of waste generated in operations
    • Business travel in vehicles not owned or operated by the company
    • Employee commuting (in vehicles not owned by the company)
    • Downstream transportation and distribution
  • Emissions must cover the 6 greenhouse gases covered by the Kyoto Protocol in terms of carbon dioxide equivalents. Quoted companies, large unquoted companies and Limited Liability Partnerships (LLPs) already have to declare their Scope 1 and 2 emissions under SECR.
  • Should set out the environmental management measures in place (e.g. certification schemes or measures that have been adopted).
  • The Carbon Reduction Plan should be publicised on the suppliers’ website.

Setting out the environmental management measures in place during the delivery of the contract. This may include, but is not limited to contracts that:

  • have a direct impact on the environment
  • require the use of buildings by staff engaged
  • require the transportation of goods or people
  • require the use of natural resources

The key issue to be addressed is whether a bidder has taken steps to understand their environmental impact and carbon footprint relevant to the delivery of the contract. Suppliers will be excluded if they fail to produce on any of the requirements.

Corporate Value Chain (Scope 3) Reporting

Under the Corporate Value Chain (Scope 3) Reporting a Scope 1 and 2 emissions report is required in line with the GHG Protocol Corporate Standard. Under this reporting any Scope 3 emissions not included should be justified. There are 15 categories of Scope 3 emissions and under these guidelines companies should identify their scope 3 emissions from purchased goods, transportation, processing and use of sold products, waste generation and treatment and assets.

Is it possible that this process will gradually extend down the chain until it becomes a standard process for most contractors? Reporting on Scope 3 emissions is a detailed exercise which includes surveying contractors and digging for information from the supply chain. It has been an area that we find building owners struggle with engaging and collecting data for, so to see the Government keen to increase transparency and data from their contractors is an encouraging step forward.

Through SHIFT assessments main contractors are surveyed annually, engaging them on their carbon emissions, procurement and disposal of waste. For more information on SHIFT or if you’d like some advice as a supplier get in touch here.

 

[1] Procurement Policy Note 06/21: Taking account of Carbon Reduction Plans in the procurement of major government contracts – GOV.UK (www.gov.uk)

[2] Corporate Value Chain (Scope 3) Standard | Greenhouse Gas Protocol (ghgprotocol.org)