On 18 March 2024, the Cabinet Office published its first procurement policy note of this year. PPN 01/24 (the PPN) introduces an optional standard carbon reduction contract schedule that can be included in public sector contracts.
The PPN follows on from the Government's target for at least a 100% reduction in the net UK territorial carbon account by 2050 which was introduced in 2019 and links to PPN 06/21 regarding Carbon Reduction Plans. It introduces a set of standard terms and conditions intended to be included in public contracts alongside broader sustainability obligations which the PPN refers to as the "Carbon Reduction Schedule".
The Carbon Reduction Schedule is optional for use in any public contract where it is relevant to the subject matter of the contract and proportionate to do so and contains sector specific drafting for technology, facilities management and construction contracts.
Before utilising the Carbon Reduction Schedule, contracting authorities should assess:
- their understanding of carbon reduction initiatives and how to apply and monitor these;
- the supplier’s understanding of carbon reduction initiatives and its ability to introduce effective measures;
- the value and estimated carbon greenhouse gas (GHG) emissions linked to the contract; and
- the criticality of the contract.
The PPN is accompanied by a guidance note which explains the context for the PPN and guidance on use of the Carbon Reduction Schedule.
Assessing the contracting authority's and supplier's understanding of carbon reduction initiatives
The maturity of individual organisations' understanding on the complex requirements surrounding carbon reduction initiatives is still very wide-ranging. In particular contracting authorities should be confident they have sufficient understanding and capacity in their organisation to support any requirements they insert into their contracts. Similarly, the ability of the supplier to undertake the requirements should be carefully considered in order to ensure best outcomes.
Proportionality is also a key consideration. As with any public contract, the obligations put on a supplier should be proportionate to the subject-matter, size and complexity of the overall contract. In particular, requirements of small and medium-sized enterprises (SMEs) should be proportionate to their size and this should be considered not only in the contract which the contracting authority is placing, but also in any terms which are passed-down though the supply chain (where SMEs are more likely to be involved).
Assessing value and estimated carbon GHG emissions and the criticality of the contract
High-value contracts are likely to demand additional resources, time and assets in contract delivery which could be associated with higher GHG emissions. However, the subject-matter of the contract will have as big, if not bigger, an impact on the estimated carbon GHG emissions. Both must be considered whether assessing the overall nature of obligations to be included in the contract in order to ensure that they are both proportionate and realistic.
The Carbon Reduction Schedule
The Carbon Reduction Schedule covers a range of topics including net zero targets and commitments, reporting obligations and fuel emissions. It also contains sector-specific clauses for technology contracts, IT hardware asset management contracts, cloud services, construction works and facilities management.
It is important to note that the suggested contract drafting will need to be modified for use in specific contracts and consideration given to interaction with other elements of your contract. For further information or assistance in this regard, please get in touch with your Trowers & Hamlins contact.
