Complexity

UK Business and Government

In 2021, amid the confusion of trying to get through COVID, Brexit and unstable political leadership a government body almost “sneaked” out a seemingly insignificant document, PPN 06/21 (Procurement Policy Note 06/21). At first glance, the document is fairly innocuous, just typical bureaucracy asking businesses to generate yet another piece of paper for the civil servants to file.

But, similar to how a leak can lead to a flood or a small disturbance to an avalanche; this policy note is highly likely to have long-term and far-reaching impacts on every business in the UK. Addressing it strategically could protect your business from unnecessary risks and costs.

Why does it matter?

So, what’s that got to do with your UK SME?

As mentioned, these big contracts with companies must be awarded to those with a carbon reduction plan. Those plans must take into consideration the carbon generated throughout the supply chain. In other words, the companies bidding for these contracts need to account for ALL the suppliers, sub-contractors, service providers etc. associated with the supply of related goods and services.

In the UK over 90% of registered companies fall into the SME’s category: business to business suppliers, who work into other bigger companies until they reach the size and turnover of those directly competing for huge government based contracts. Statistically, most UK businesses will be part of the government supply chain in one way or another even if you are far removed from the end contract. So, jumping back to the previous flood/avalanche analogy, the requirement for carbon reduction plans will undoubtedly trickle down the supply stream.

An environmental management system complying with ISO 14001 will make it far easier to generate such a plan should you need to. Especially as generally this isn’t a one off requirement, the plans need to be kept up to date, so year on year you are going to have to have access to the data to update the plan and show that your carbon generation is reducing. The reduction of environmental impact is a main building block and driver of ISO 14001 systems.

The Enviroment (Death) and Taxes

Benjamin Franklin famously said, “In this world, nothing is certain except death and taxes”. Though it may not have hit you yet, the links between environmental performance and taxation have already been established, for instance, if you sell anything in packaging (!) you’ll probably be paying a levee on the quantity of packaging provided per annum. It isn’t going to stop there.

Remember the EU, that thing we spent millions getting out of… In Europe CBAM has been implemented. CBAM is the Carbon Border Adjustment Mechanism (CBAM), a tax on carbon-intensive goods imported into the European Union (EU) at this point it directly affects cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen. But, given its role as a generator of revenue for the thirsty EU government, it seems naïve to think taxation will finish there. The UK version of CBAM tax is set to come into effect in 2027.

What can you do about it?

Environmental regulations are not going away. Businesses that proactively address their carbon footprint and sustainability by implementing a solid management framework like ISO 14001 will be better positioned to compete, comply, and thrive in this changing landscape. ISO 14001 is recognised internationally as the current best practice for environmental management. Whether you choose to lead the way or wait until compliance is unavoidable, the time to start preparing is now.

The UK Government has begun asking UK companies to provide Carbon Reduction Plans with new tenders over a certain value. They’ve also provided a template for such plans, and a service to review them for suitability, though they don’t seem to want to say how much the review is going to cost. These documents can be seen here. The government’s own plan and policies can be seen here, and covers reductions in business travel the government expects to see. Presumably Rishi Sunak hasn’t yet read this policy as his excessive level of private air travel has already been reported in the press (see here).

There seem to be two key pieces of information covering this issue at present:

In addition, the International Standards Organisation has also released a series of standards on carbon neutrality, in the range ISO 14060, with ISO 14064-2 describing the methods to be used for baselining and reducing carbon generation.

They all describe methods for quantifying and reducing carbon generation, though perhaps redictably each has a slightly different method, so will give different answers!

The ISO also produced IWA 42:2022, an “International Workshop Agreement” which defines Net Zero Guidelines. This last document goes further in defining the various terms used in carbon reduction discussions, which, while there is no internationally agreed method of measuring carbon generation, does show that the various powers that be are beginning to take the issue slightly more seriously. Interestingly it also includes 3.2.9 Residual Emission: greenhouse gas emission that remains after taking all possible actions to implement emissions reductions – which seems like the first formal, but sensible, acceptance that the creation of greenhouse gas emissions can never be fully prevented.

The UK Governments Guidance on PPN 06/21, includes the following statement:

Between 1990 and 2017, the UK reduced its emissions by 42% while growing the economy by more than two thirds. In 2019 the UK Government amended the Climate 9 Change Act 2008 by increasing the target for reducing greenhouse gas emissions in the UK to at least 100% lower than 1990 levels by 2050. This is otherwise known as the Net Zero target.

At present it doesn’t seem clear why the phrase “100% lower” was used. After all, if the target is zero greenhouse gas emissions by 2050, then why not simply say that?

It’s also not clear where this leaves “residual emissions” or who will stipulate what is an acceptable residual, and when.

In July 2023 a tender issued by the NHS was due for response. Within that tender was a request to supply a Carbon Reduction Plan. This is now a UK Government requirement on all tenders above a set value, and will undoubtably flow down the supply chain to SME’s over the next few months.  The government policy can be seen here.

Through an actively implemented ISO 14001 management system we’ve been assisting organisations to reduce their environmental impact for around 15 years.

The carbon reduction plans now being requested on government contracts are very similar to the intent of the targets and objectives specified in ISO 14001, clause 6.2, though the government’s requirement is for measured commitment to reduction over a much longer period of time.

Key Insights from IWA 42.2022: Navigating Challenges in International Standards for Greenhouse Gas Reduction

International Standards document IWA 42.2022, which seems to be the most recent attempt to get international agreement on the technicalities of reducing greenhouse gases, contains some interesting points, reflecting the sense which seems to be eventually seeping into the environmental movement:

The intent is for all organisations to be setting targets consistent with reducing Green House Gas (GHG) emissions by 50% by 2030, compared to the baseline of 2018 levels.

It is hoped this will restrict global warning to 1.5^oC above pre-industrial temperatures. There is much debate over the figures, but it looks likely that we are about 1^o above at present, and some sources suggest we will surpass 1.5^o within five years.

Sounds a good idea, so how is it going to be done?