Decarbonising the Supply Chain – Welsh Government

Against the backdrop of COP26 and increasing scrutiny on projects and supply chain, the Welsh Government (on 3rd December 2021) released the Welsh Procurement Policy Note ("WPPN 12/21"), outlining actions that public bodies can take in order to reduce their Scope 3 greenhouse gas CO2 emissions.

WPPN 12/21 can be read here: Decarbonisation through Procurement – Addressing CO2e in supply chains.

The new guidance is important for contractors wanting to win work from the Welsh government. In particular, WPPN 12/21 highlights three key points for public bodies:

1. The requirement to ensure that medium or high CO2e contracts have decarbonisation measures built into them to ensure CO2e is reduced over the timeframe of the contract. If the measures have not been fully applied, they must consider the extent to which they can be activated under Innovation, Continuous Improvement, Change Control or Contract Variation clauses. If there are no plausible opportunities to rectify the contract, early termination should be considered.
2. The requirement for all bidders to include a Carbon Reduction Plan as part of the tender. This is to encourage bidders to invest in decarbonisation measures such as considering the use of different raw materials, achieving certain accreditations, changing their established processes, and/or changing how they deliver their contract requirements. Public sector organisations will need to consider how to incentivise these changes such as allowing for ‘commitment contracts’, extending contracts or providing bonus payment clauses.
3. The requirement to analyse key performance indicators and management information to ensure that CO2e are actively monitored as far as possible down the supply chain.

WPPN 12/21 encourages more sustainable procurement and is a step in the right direction for a net zero Welsh public sector by 2030. WPPN 12/21 further reflects the guidance set out in PPN 06/21 which also aims to decarbonise the UK government supply chain.

However, there are challenges in decarbonising Scope 3. There is a lack of high quality Scope 3 data, which makes it hard to measure. Furthermore, there is no common metric for measuring Scope 3 data, allowing data to vary from each organisation, creating issues in comparison. As such, issues of double counting can also arise. Scope 3 data cannot easily be ring-fenced, with organisations having a lack of control over those emissions.

These challenges are echoed in the construction industry, where there are comparatively large carbon emissions associated with, for example, on-site construction, the production of materials (such as steel, concrete, aluminium and coper) and material transportation. We have previously considered how some of these challenges might be addressed in offshore wind in our 6 part series (part 1, 2, 3, 4, 5 and 6).

Contractors seeking to win Welsh government contracts will now have to think how they can reduce emissions in their supply chain. A few options, which are in line with WPPN 12/21’s guidance, would be considering modern methods of construction and the use of different raw materials such as timber rather than structural steel and concrete, as well as localising the supply chain to reduce the CO2e associated with transportation as well as “flowing down” Welsh government requirements into supply chain contracts to ensure proper engagement and incentives for all parties.

How can we help? 

It will be vital for public bodies and bidders to familiarise themselves with the new guidance and plan their contracts accordingly.

We can help draft contracts to include, for example, innovative drafting, continuous improvement clauses and variation clauses to help contractors find creative ways to reduce CO2e levels in their supply chain over the length of the contract. Given our experience across energy, transport and other infrastructure projects there will be transferable learnings and initiatives that we can advise on to help meet these challenges head-on.

Article by Tamara Turner-Distin, Trainee Solicitor

WPPN 12/21 encourages more sustainable procurement and is a step in the right direction for a net zero Welsh public sector by 2030. However, there are challenges in decarbonising Scope 3.