Competing for tenders in a net zero world: A guide for SMEs

Net zero by 2050 is a distant-sounding goal but one that is delivering real pressure for businesses to cut their carbon now and show with a degree of rigour what they are doing to reduce their emissions. Here, we’ll describe the call to action for businesses to make a net zero pledge and set up a carbon reduction plan to enable them to win business and do their bit for the climate. This article will focus on sustainable procurement as the direction of travel for big procurement bodies and how this will affect SMEs. The learnings here may be transferable to meeting the net zero requirements for public and corporate tenders.

Net zero and procurement

Big procurement bodies including the public sector and large corporations that have boldly made this commitment are now asking their value chains to help them deliver their own net-zero commitments. The reason for this is clear: our carbon footprints extend far beyond the operation of our buildings and company-owned transport (largely our scope 1 and 2 greenhouse gas emissions), and it is no longer acceptable for large purchasing departments to ignore the significant influence they can have on emissions largely within their value chain. Value chain emissions or supply chain emissions for many service sectors are likely to be most intensive in their indirect or ‘embodied carbon’ within the goods and services purchased.

To see a breakdown of the basics of a carbon footprint, read Calculate your Carbon Footprint.

If you’re a business that wants to bid for public sector tenders, developing a credible plan for your own net zero targets will give you a major edge in winning new business. Currently, public sector suppliers in the UK are required to start disclosing their carbon footprint through a carbon management plan that will show their emissions across each scope and their plans for reducing by conforming to PPN 06/21.

How to prepare

To meet this requirement,

  • You will need to provide disclosure on your carbon footprint and on how your company plans to reduce it by publishing this information on your company website. You must confirm in writing and in policy practice your commitment to reaching net zero by 2050 at the latest.
  • A Carbon Reduction Plan (CRP) should be created.
    • Detail your UK emissions for Scope 1, 2, and 3. You can learn how to do this from iiE guidance here and here.
    • Detail the environmental management measures you have in place, this may include ISO 14001:2015, PAS 2060, or Investors in the Environment (iiE)! There is no specific requirement for accreditation at this stage but any evidence you have to show that you are taking a systems approach to tackle your footprint will give you an edge.
    • A CRP is freely available via PPN 06/21. Find out more below.

This is a brilliant idea for any company procurement process to request suppliers to do this to meet sustainability requirements at the pre-qualification stage  – and is a more influential step than asking whether they have an environmental policy. Encourage your suppliers to let you know what their emissions are and what measures they are taking to reduce them.

Other environmental priority areas for procurers

Net zero commitments do not exclude other areas of impact from your organisation, but what’s good for a stable climate is good for human wellbeing, biodiversity, and a sustainable bottom line. Here are some other areas you should include in your carbon reduction plan.

Reducing greenhouse gas emissions and preventing air pollution

If road transport is a big area of impact for your organisation, you should be thinking about low emission vehicles, delivery consolidation practices to reduce mileage, and ‘last mile innovations.’ But it isn’t only about obvious emissions, those involved in food production and sourcing will also need to start thinking about how they incorporate regenerative agricultural practices and food waste reduction, both major sources of emissions.

Engaging in circular economy principles

There is a focus here on reducing consumption alongside waste. Suppliers will need to show how they are reducing single-use plastic for both packaging and products. You may also look to show how you take into account life cycle consideration for products throughout their lifespan, including their sourcing, proper use, and disposal.

Read more about the circular economy in our blog: Reinventing the wheel: Practical inspiration for a greener 2022.

Should small organisations be worried about new requirements?

Many large suppliers are adopting sensitive criteria into this process to make it easier for small- and medium-sized enterprises (SMEs) and VCSEs (voluntary, community, and social enterprises) with fewer resources to still apply for, and win, contracts. Working with smaller businesses is also how they will deliver social value, so many are keen to be inclusive in this process – some even doing extra work to educate and resource this transition for their suppliers.

The carbon management plan is not an overly burdensome requirement, but it will require some carbon literacy within the organisation. iiE can directly help with this through resources and support made freely available to members. This will make it much easier for SMEs and VCSEs to understand what data they need to be collecting and reporting on, and how they will be reducing their emissions in each focus area.

Delivering on net zero: NHS Case study

The NHS is a leader on the road to net zero. With more than 60% of NHS carbon emissions occurring in the supply chain, working with suppliers will not only enable them to reach net zero but will deliver significant social value – cutting costs for the NHS, improving health and wellbeing, and supporting local economies (Greener NHS, March 2022). To do this, the NHS has created a net zero roadmap are working with their suppliers, with a phased plan to encourage them to start acting now but setting a net zero ambition and planning for decarbonisation in the next few years. Change is coming fast – by 2024 suppliers will be required to publish a carbon reduction plan for their UK Scope 1 and 2 as a minimum, and in 2027 will need to disclose global emissions aligned to the NHS net zero target, for all of their Scope 1, 2 and 3 emissions..

This is not dissimilar to other organisations – we don’t do business in a vacuum and our carbon emissions are really a result of a nexus of mutual activity. We expect to see this pressure increasing across the board, year on year. Last year it was about large organisations needing to disclose their carbon footprint in their financial accounts; this year we see this pressure really trickling down across the whole economy as the gears of climate policy get traction.

Find out more about disclosing your carbon footprint in our webinar: An overview of Carbon Footprint Reporting and SECR

Search NHS in our Green Directory to view our pioneering NHS iiE members and learn what good looks like in their healthcare settings.

Looking ahead and what’s next

The UK Government is developing its Net Zero Strategy alongside greening government commitment, government buying standards, and setting up a sustainable procurement unit. This is great news for the environment and will send even stronger signals to the marketplace to act on climate.

To see the power of procurement, one needs look no further than the amazing traction iiE has achieved in the veterinary sector in the UK. Through the power of awareness and collective action, more and more businesses need a clear pathway to net zero, along with the tools and guidance to keep them on track.

There is a lot we’re not able to anticipate for how exactly net zero targets will be achieved globally. The net zero plan for each company will change as technology, policies, and behaviours/expectations change in the coming years. The intention here is that a net zero plan will include everything that can be done now and in the medium-term on scopes 1-3 with a credible action plan for continual improvement. Your environmental management system will enable your organisation, whatever size, to review and adapt the plan and annual targets or focus areas to meet net zero.

Find out more