PPN 06/21 - 5 steps to build your Carbon Reduction Plan

In 2019, the UK became the first country to build a Net Zero target into legislation, which means that the government is now committed to implementing deep, long-term cuts in greenhouse gas emissions. The Policy Procurement Notice 06/21 (PPN 06/21) is one example of the UK government taking steps toward this Net Zero goal.

With public sector spending at ~45% of GDP, the government has a strong direct influence over the British economy. Capitalising on this influence to support the UK’s transition to Net Zero, the government now requires public sector suppliers to have their own Net Zero target and Carbon Reduction Plan in place to be eligible to bid for large contracts.

Below we explain everything you need to know about PPN 06/21 – read on to find out more.

The basics

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

The purpose of the PPN 06/21 is to encourage businesses to think about their impact on the environment and commit to reducing emissions in line with the government’s target to be Net Zero by 2050.

To comply, businesses must set their own Net Zero target and explain how they will meet this using a formal Carbon Reduction Plan (CRP).

Which public sector organisations use it?

The PPN 06/21 must be integrated into the procurement processes of any organisation defined as ‘In-Scope’. This includes all central government bodies, their agencies and non-departmental public bodies that are conducting procurement processes under the Public Contracts Regulations 2015.

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

Which bids does it apply to?

Any contract with a value of over £5m (excluding VAT) must integrate PPN 06/21 at the selection stage of the procurement process. In order to be eligible to proceed, a bidder must comply with the requirements of the PPN 06/21.

When did it come into force?

Any processes beginning from 30^th September 2021 must include the requirements of the PPN 06/21.

How is the CRP assessed?

There is no formal scoring or comparison with respect to the PPN 06/21. According to the rules, public sector organisations 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. This may influence decision-making later in the procurement process.

How does the CRP remain valid?

A CRP must be completed annually to remain valid. It must also be published on the supplier’s website.

How does the PPN 06/21 affect my business?

The PPN 06/21 clearly affects any business that wishes to bid for public sector contracts with a value of £5m or more.

However, the PPN 06/21 specifications, and especially the format of the CRP, have 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. As many large suppliers already have a CRP in place, smaller SMEs may find themselves at a competitive disadvantage unless they put together a CRP too.

PPN 06/21 also has a wider trickle-down effect for smaller SMEs. Net Zero targets (if formulated properly) include all emissions – Scope 1, 2 and crucially Scope 3, which covers the emissions from suppliers. As a result, large enterprises with Net Zero targets must consider the emissions of their suppliers in order to set compliant Net Zero targets. So even SME subcontractors that do not directly engage with public sector procurement can find themselves under pressure to measure and reduce their own emissions in support of their large clients’ Net Zero targets.

So, what does a compliant CRP look like?

The government has published the full context of the PPN 06/21, including the required template for CRPs and technical guidance for completion, here.

The CRP consists of five elements:

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] 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.

According to the SBTi, the main standard for Net Zero target setting, a business has achieved Net Zero if it has reduced emissions by 90% from the baseline year and offset the remainder. This is a long-term (and very ambitious) 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 this element. To stay on the safe side, formulate your Net Zero commitment in line with the SBTi so you’re clear on exactly what it means, and make sure it is achievable. 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 from your facilities (e.g. gas boilers in the office) and 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, and includes all other emissions across your value chain. The CRP only requires a subset 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 Net Zero, 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 become Carbon Neutral, 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