Net Zero: Supplier Guide

‘Net Zero’ has become a climate buzz-phrase in recent years. But with various definitions found from multiple large companies and institutions, it can be difficult to understand.

 

Put simply, net-zero refers to the balance between the amount of greenhouse gas produced and that removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away. But where has this ideology come from and why should you have a net-zero strategy?

 

Why have a Net Zero Strategy?

Science has continually shown us that our effects on the planet and environment are adverse. In 2018, the Intergovernmental Panel on Climate Change (IPCC) confirmed that to limit global warming to 1.5°C, the world needs to halve CO2 emissions by around 2030 and reach net-zero CO2 emissions by mid-century. In addition, the IPCC stresses the need for deep reductions in non-CO2 emissions across the economy to achieve this limit. The world must reduce emissions to as close to zero as possible, with the remaining emissions absorbed through natural carbon sinks like forests, and new technologies like carbon capture.

It’s recognised there are lots of different definitions of net-zero, but the most appropriate is considered to be from the Science Based Targets initiative (SBTi): neutralisation via 90% reduction and offsetting of the final 10%. The ‘net’ in net-zero is important because it will be very difficult to reduce all emissions to zero on the timescale needed. The SBTi’s Net-Zero Standard is the world’s first framework for corporate net-zero target setting in line with climate science. Its aim is to guide companies to set science-based net-zero targets consistent with limiting global temperature rise to 1.5°C. Corporate net-zero targets are being approached inconsistently, making it difficult to assess these targets’ contribution to the global net-zero goal. SBTi hopes to unite all organisations so that we all are working towards the same goal.

 

Key requirements of the SBTi’s Net-Zero Standard

The SBTi’s Corporate Net-Zero Standard (also referred to as the Net-Zero Standard) provides guidance, criteria, and recommendations to support corporates in setting net-zero targets through the SBTi. It lays out 4 requirements for net-zero standards, which as a supplier you will need to consider in-depth:

1. Focus on rapid, deep emission cuts
2. Set near- and long-term targets
3. No net-zero claims until long-term targets are met
4. Go beyond the value chain

 

The UK’s Net Zero Strategy

The UK’s net-zero emissions target was among the first to be declared with a goal of 2050. Less than 30% of global GDP was signed up to net-zero or carbon neutrality targets when the UK was confirmed as the host of COP26. Since then, nations across the world have introduced strategies to make this figure now over 80%. The overarching worldwide goal brings nations together to slow climate change processes in the ‘Race to Zero’.

The Net Zero Innovation Portfolio is a £1 billion fund to accelerate the commercialisation of low-carbon technologies, systems and business models in the UK. This covers all industries, especially power, fuel supply and hydrogen, industry, heat and buildings, transport, natural resources and waste, and greenhouse gas removals. The Portfolio will decrease the costs of decarbonisation and set the UK on the path to a low carbon future.

 

What role does the Public Sector play in the pursuit of Net Zero?

The Net Zero strategy will require all of the public and private sectors to fundamentally change how they work. This includes how public bodies decide to procure products and services, and, in turn, how private suppliers must operate to secure government contracts. The UK Government spends £290 billion per year on procurement. The scale and breadth of spend makes public sector procurement an essential tool in driving net-zero progress.

If you’re a public sector supplier or looking to become one, understanding Net Zero initiatives is pivotal to securing contracts. For example, the NHS alone is responsible for around 4% of England’s total carbon footprint. However, the NHS was among the first organisations in the public sector to produce a carbon reduction strategy 10 years ago, and it has been measuring emissions since 2007. It aims to reach net-zero by 2040. Measuring, monitoring and reporting on energy and carbon reduction targets in public sector organisations are not ‘nice-to-have’ initiatives but requirements. You can find more detail on this in the Greening Government Commitments (GGC), a policy paper in place since 2014.

Some large companies already self-report parts of their carbon emissions, known as Scope 1 (direct) and Scope 2 (indirect owned) emissions as part of the Streamlined Energy and Carbon Reporting regulations published in 2018. The new rules will go further, requiring a commitment to achieving Net Zero by 2050 at the latest, and the reporting of some Scope 3 emissions; including business travel, employee commuting, transportation, distribution and waste for the first time.

 

What should Public Sector suppliers do?

If you’re looking to bid on smaller contracts, you need to demonstrate a commitment to Net Zero where applicable. However, new measures introduced in September 2021 now require businesses to commit to net-zero by 2050 before they can bid for major government contracts. Suppliers bidding for contracts worth more than £5million a year must commit to achieving Net Zero emissions by 2050 and have published a Carbon Reduction Plan (CRP). Firms that fail to do so will be excluded from bidding for the contract and may face exclusion from public sector bidding entirely.

We advise all suppliers to begin analysing their current business model concerning the following questions:

1. Does your business model consider a net-zero strategy? To what extent?
2. Can you easily transition towards lower-carbon products, operations and goals?

 

We also recommend reading up on reports and legislation as it comes in. Below is a list to get started on to understand Net Zero better (we recommend reading through at least the Executive Summaries!):

• PPN 05/21, National Procurement Policy Statement
• Transforming Public Procurement (Green Paper)
• The Net Zero Strategy
• Industrial Decarbonisation Strategy

 

And here are some further resources that make this heavy subject a little bit easier!

• IEA – Net-Zero by 2050
• Net Zero Climate – What is Net Zero? – includes a handy list of similar terms to help get a grasp on these buzzwords we always hear!

 

The UK needs to take into account all business practices to meet net-zero targets. If you don’t sharpen up your net-zero strategy and CRP now, you’ll find yourself getting left behind. All organisations need to begin understanding their carbon emissions and putting in place tangible measures to reduce them.