Ropes & Gray partner Michael Littenberg provides an overview of current and forthcoming NHS supplier obligations relating to carbon reduction.
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Carbon reduction
The NHS has a goal to achieve net zero carbon emissions by 2045 for emissions the NHS can influence. These include emissions relating to goods and services the NHS purchases through its suppliers. In connection with this goal, NHS suppliers will be required to provide greenhouse gas emissions data, set emissions reduction targets, and measure the carbon footprint of individual products.
To help ensure that NHS suppliers align with its net zero target, in late 2021, the NHS approved a Net Zero Supplier Roadmap. The Roadmap details the steps suppliers must take to be eligible to receive NHS contracts. Earlier this year, the NHS published Carbon Reduction Plan Requirements for the Procurement of NHS Goods, Services and Works to provide further details to NHS suppliers on the implementation of milestones in the Roadmap.
Phase-in timeline
The Roadmap indicates the steps suppliers will be required to take to be eligible to receive NHS contracts. Milestones include the following:
- Since April 2022, the Roadmap has required NHS to apply a minimum 10% net zero and social value weighting to all procurements (i.e., requiring at least 10% of the valuation of a potential procurement to be based on factors relating to the procurement’s carbon footprint or social impact). Such factors are determined based on the type of product or service being procured and are scored based on questionnaire responses provided by the supplier.
- Since April 2023, for all contracts above £5 million per year (excluding VAT), the NHS has required suppliers to publish a Carbon Reduction Plan (CRP) for, at a minimum, their UK scope 1 and scope 2 emissions and a subset of scope 3 emissions.
- Starting April 2024, the NHS will extend the CRP requirement to all NHS procurements, regardless of contract size or value.
- From April 2027, the NHS will require suppliers to publish a CRP for global scope 1, 2 and 3 emissions that is aligned with the NHS’s net zero target.
- From April 2028, the NHS will introduce new carbon footprinting requirements for individual products supplied to the NHS. The NHS will work with suppliers and regulators to determine the scope and methodology of these requirements.
- From April 2030, suppliers will be able to qualify for NHS contracts only if they can demonstrate their progress through published progress reports and continued carbon emissions reporting through the Evergreen Sustainable Supplier Assessment, an online self-assessment and reporting tool that enables suppliers to share sustainable information with the NHS and provides suppliers with a sustainability score against NHS priorities.
In exceptional circumstances, where suppliers have an acceptable reason for being unable to provide required emissions data, they can provide a CRP with the data that is available. To comply with this exception, suppliers must (1) include an explanation as to why more fulsome data is not available and (2) indicate the steps they will take to improve data collection. The sufficiency of the explanation will be assessed on a case-by-case basis.
Carbon Reduction Plan requirements
A CRP must identify the supplier’s carbon footprint and the supplier’s plan for achieving net zero emissions. The CRP must include the following:
- Confirmation of the supplier’s commitment to achieve net zero emissions by 2050 or earlier for its UK operations. Although not required, the NHS encourages suppliers to set a 2045 net zero target.
- The supplier’s current GHG emissions for its UK operations (at a minimum), covering scope 1 and scope 2 emissions and at least the following scope 3 emissions categories:
- Upstream transportation and distribution (category 4)
- Waste generated in operations (category 5)
- Business travel (category 6)
- Employee commuting (category 7) and
- Downstream transportation and distribution (category 9).
- Emissions in CO2e (carbon dioxide equivalent) for the seven greenhouse gases covered by the Kyoto Protocol (i.e., carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulphur hexafluoride and nitrogen trifluoride).
- Environmental management measures in effect, including certification scheme or specific carbon reduction measures that have been adopted by the supplier. These should be measures the supplier can apply when performing the contract and that will support the supplier in achieving net zero emissions by 2050 or earlier.
The reporting period cannot fall more than 12 months prior to the commencement of the procurement. The CRP must be updated annually.
The CRP must also be:
- Board approved (or, if there is no board in place, company director approved); and
- Clearly marked and published on the supplier’s website.
The CRP should be specific to the bidding entity. However, a CRP may instead be provided at the parent company level if:
- The bidding entity is wholly owned by the parent
- The commitment to achieve net zero emissions by 2050 for UK operations is set out in the CRP for the parent, which includes a statement that the commitment will apply to the bidding entity
- The environmental measures set out in the CRP are stated to apply to the bidding entity in performance of the relevant contract and
- The CRP is published on the bidding entity’s website.
The NHS has published a technical standard for preparing CRPs and completing the NHS’s Carbon Reduction Plan Template.
Assessment of the CRP
The CRP will be subject to a pass/fail assessment at the selection stage of the NHS procurement process. The assessment is intended to ensure that the CRP meets the NHS’s requirements. If a CRP does not meet the minimum requirements, the supplier generally will not be able to proceed in the procurement process. The NHS is offering a free CRP Checking Service to provide suppliers feedback until September 30.
Where the application of the CRP requirements is not relevant or proportionate, including in civil emergencies and cases where the market for a particular type of contract is significantly limited such that delivery of public services is at risk or value for money is severely compromised, an NHS organisation may proceed with a supplier regardless of its fulfilment of CRP requirements.
