PPN 06/21 - A practical guide to Carbon Reduction Plans for SMEs
Carbon Reduction Plans

PPN 06/21 - A practical guide to Carbon Reduction Plans for SMEs

The UK government is asking public sector suppliers to play their part in its Net Zero strategy. We take a look at a key decarbonisation initiative - PPN 06/21 - and what it means for SMEs.

Context - the UK's net zero commitment

In 2019, the UK government committed to achieve Net Zero emissions by 2050, strengthening its original target by amending the Climate Change Act 2008 following recommendations from the Climate Change Committee, an independent advisory body.  As defined by the legislation, this means the 'net UK carbon account' must be zero by the 2050 deadline. Put simply, the UK's total greenhouse gas (GHG) emissions must be equal to or less than the GHG emissions it removes from the atmosphere, a target that can be achieved through two key levers: investment in carbon removal such as tree-planting and carbon capture technology; and (crucially) reductions in absolute GHG emissions.

With public sector spending at ~45% of GDP, there's a big opportunity for government to incentivise decarbonisation by shifting spend toward businesses that are taking action on climate change. Procurement Policy Note 06/21 (PPN 06/21) is designed to do just that by requiring public sector suppliers to have a Carbon Reduction Plan (CRP) in place to be eligible to bid for large central government contracts.

Below we explain everything you need to know about PPN 06/21.

Carbon Reduction Plans - quick fire questions

At a high level, what are businesses required to do?

Complete and publish on your website a Carbon Reduction Plan in line with the format set out in the CRP template published by the government here.

You'll need to provide a carbon footprint measured according to the GHG Protocol standards, to confirm your commitment to achieving net zero, set targets to reduce emissions, and describe initiatives to achieve these targets, all with management sign off.

When should PPN 06/21 be applied?

PPN 06/21 must be applied by all central government bodies (and those acting on their behalf) when procuring goods/services with an advertised average annual contract value of over £5m per year (ex VAT), where Public Contracts Regulations 2015 applies, and where 'proportionate' (leaving some ambiguity). It's up to the contracting authority to include a CRP as a selection criterion. This has been in force for new contracts from 30th September 2021.

NHS procurement has gone a step further. As of April 2024, a full CRP is required for all NHS procurement regardless of contract value. Again, the caveat of 'where proportionate' is applied in guidance to contracting authorities.

Although not mandatory for devolved governments, PPN 06/21 has been adopted by the Welsh government and encouraged as best practice across the whole public sector.

Beyond these formal requirements, PPN 06/21 has been adopted informally as ‘best practice’ across a wide range of public sector procurement activities. For example, businesses that are applying for a place on government procurement frameworks via the Crown Commercial Service can be assessed on whether they have a CRP that aligns to the PPN 06/21 – even if the expected contract sizes are less than £5m.

What about subcontracting?

A CRP is required by organisations entering directly into a relevant (as above) contract, including where there is a consortium of suppliers. Subcontractors do not need to produce a CRP if not bidding themselves.

My parent company has a CRP - am I exempt as a subsidiary?

Current guidance is that if certain conditions are met (you as the subsidiary are wholly owned by the parent with the CRP, it's stated in the CRP that you as the bidder are included in, support, and are able to act on the CRP, and you publish the CRP on your website) then a separate CRP isn't needed. However - the guidance suggests this may be a 'temporary measure,' and that 'bidding entities must take steps to ensure they have their own CRP as soon as 'reasonably practicable.'

How is the CRP assessed?

There is no formal scoring or comparison with respect to the PPN 06/21. According to the rules, the contracting authority should use the CRP as a binary ‘pass/fail’ exercise rather than comparing (for example) suppliers’ emissions, net zero targets, or carbon reduction measures.

That said, a strong CRP can make a difference. The guidance notes that suppliers may wish to explain any increase in emissions and measures they are taking to tackle this – suggesting that there is some subjective assessment.

How does the CRP remain valid?

A CRP must be completed annually to remain valid, and updated within 6 months of the supplier's financial year end. It must also be published on the supplier’s website.

How is PPN 06/21 different from PPN 06/20: Social Value Model?

PPN 06/21 and 06/20 are very much separate criteria. The CRP is applied by the contracting entity as pass/fail at selection. PPN 06/20 is applied later on at the award stage and answers are scored. 'Fighting Climate Change' is one of five themes assessed in PPN 06/20, and typically addresses anticipated environmental impact from the project rather than at an organisational level.

So, what does a compliant CRP look like?

The government has published extensive 'technical guidance' for proper submission of a CRP here. Below, we set out and discuss the 5 key steps of a good Carbon Reduction Plan.

1.     Net Zero target

2.     Emissions data (baseline and latest year)

3.     Emission targets

4.     Emission reduction measures

5.     Sign off

Here’s a brief guide to what’s needed for each.

1.     Net Zero target

The CRP requires businesses to make a public commitment to Net Zero by 2050 at the latest. This simply involves writing:

‘[Supplier name] is committed to achieving Net Zero emission by 20[50]’.

Oddly, there is very little guidance on what this actually means, opening it to allegations of constituting more of a tick box exercise than a genuinely useful measure to encourage decarbonisation. As discussed above, the UK government defines Net Zero as balancing GHG emissions with removals, often termed carbon neutrality. The CRP guidance is silent on the extent to which net zero must be achieved through emissions reduction vs. removals.

The Science Based Targets Initiative is a United Nations backed body that sets guidance on the rate at which businesses should reduce and remove greenhouse gas emissions (GHGs). Its aim is to encourage a standardised approach to Net Zero, tackling the issue of emissions reduction vs. offsetting, that will achieve the goal of limiting global average temperature increases to 1.5°C above pre-industrial levels as recommended by the Intergovernmental Panel on Climate Change (IPCC). The SBTi is viewed as a gold standard Net Zero framework, and companies from H&M to Sainsbury's have set targets with the SBTi.

Net Zero as defined by the SBTi stipulates that businesses should reduce GHG emissions by 90% from the baseline year and offset the remainder, and by no later than 2050. This is a long-term commitment which requires serious work from businesses across their operations and supply chain – it should not be taken lightly!

If the PPN 06/21 is updated, we would expect more guidance around the Net Zero definition. In the meantime, be sure to formulate your net zero commitment so that it is clear to you and your stakeholders exactly what it means. Best practise is to align with the SBTi. Setting an SBTi-aligned 2050 net zero target whilst still pursuing more ambitious emissions reduction is a prudent approach. Many businesses are committed to completely unrealistic 2025 or 2030 targets which (embarrassingly for all involved) will need to be updated if the government clarifies the definition of ‘Net Zero’ and aligns to the SBTi.

2.     Your carbon footprint

Business must then report on their emissions, covering their baseline year (the year from which progress is measured – usually their first footprint), and the latest year.

Your emissions should be measured in accordance with the GHG Protocol – the global gold standard for carbon accounting. This involves converting data about your activities as a business into emissions, using appropriate emission factors.

Among other things, the GHG Protocol splits emissions into 3 categories or ‘scopes’. You should include all Scope 1 and 2 emissions, and a subset of Scope 3. Specifically:

Scope 1. Emissions from sources you directly own or control. This includes emissions that occur at your facilities (e.g. gas boilers in the office) or from fleet (i.e. combustion engines).

Scope 2. Emissions from purchased energy. This is primarily emissions that occur at the power plant as a result of your electricity usage. It also includes EVs.

Scope 3. Other indirect emissions. This is usually the largest bucket, on average ~80% of an organisation's total footprint, and includes all other emissions across your value chain. The CRP currently only requires a subset (5 out of 15 categories) of these to be reported:

- Upstream transportation and distribution

- Waste

- Business travel

- Employee commuting

- Downstream transportation and distribution

You can include other types of Scope 3 emissions (e.g. from your suppliers); just be sure to break the categories out.

You can also add any context that is useful for understanding your emissions. For example, if your emissions have increased, or you’ve updated your baseline year, make sure to explain why. Though not formally scored, it is considered best practice to include further detail about how your footprint has been measured; for instance, any assumptions or exclusions made.

3.     Emission targets

Next, specify the emission reduction targets your business has in place. The suggested format is to consider what your emissions will be in absolute terms in 5 years. However, you can simply restate your Net Zero target in more detail, for example by explaining what your pathway to net zero means for the next 5 or 10 years. To stay aligned with the SBTi, this usually means an annual reduction of between 4-8%, depending on when your baseline is.

In addition, growing businesses are likely to increase their absolute emissions (e.g. as activity and headcount increase), in which case it may be good to specify a target based on a relevant emission intensity metric. The most common ones are:

- Emissions per employee

- Emissions per £m revenue

You can also use a more specific intensity metric. For example, if you manufacture products, you could specify a target for emissions per product sold.

This will allow you to track and report on your progress in a more representative way, and help you to provide context/justification to any increase in absolute emissions.

For transparency, you should also include a graphical representation of your progress to date against your targets, although this is not required.

4.     Reduction initiatives

Here’s where you can explain the emission reduction measures that your business has implemented – and plans to implement.

Ideally, the assessor will want to see a good number of statements (10-20) that fit this format:

‘We have implemented [specific reduction initiative] to address [specific emission type]’.

For example:

‘We have implemented annual energy efficiency audits to reduce office energy emissions.’

‘We have implemented the cycle-to-work scheme to reduce commuting emissions.’

However, you can also include wider sustainability initiatives. For example, if you have signed up to climate commitments (such as the Race to Zero or SBTi), this is useful information. Likewise, if you have invested in offsetting initiatives to reduce or remove emissions, this can also be included for context.

5.     Declaration and sign off

The final step is to make a declaration to confirm compliance with the requirements of the PPN 06/21. The wording for this is available on the CRP template published here.

To ensure senior buy-in, the declaration requires sign off from the board of directors or similar management body, and a specific signature on behalf of the supplier to confirm this.

We can help

At Seedling, we provide an all-in-one solution for PPN 06/21 compliance.

The most difficult, time-consuming part of the CRP is compiling the required emissions data in compliance with the GHG Protocol. With our platform and dedicated support, we make this process easy for any SME.

We also support with every other element of the CRP, including bespoke emissions reduction advice, reducing the burden on your team and ensuring compliance.

If you need support, get in contact at hello@seedling.earth

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