From 30 September, contractors seeking to bid projects worth more than £5m a year will have to publish clear and credible carbon reduction plans before being considered.

The move mirrors the prompt payment measure introduced in 2019, which allowed a contractor’s performance in paying their subcontractors promptly to be taken into account when bidding for government work.

The Cabinet Office has now warned firms that fail to set out a carbon reduction plan will be excluded from bidding for contracts.

A carbon reduction plan sets out where an organisation’s emissions come from and the environmental management measures that they have in place.

Some large companies already self-report parts of their carbon emissions, known as Scope 1 (direct) and Scope 2 (indirect owned) emissions.

The new rules announced at the weekend will go further, requiring the reporting of some Scope 3 emissions, including business travel, employee commuting, transportation, distribution and waste.

These Scope 3 emissions represent a significant proportion of an organisation’s carbon footprint.

The new rules drive forward the government’s green agenda, while also striking a balance to not overly burden and potentially exclude small and medium-sized enterprises from bidding for government work.

The Carbon Reduction Plan should be updated at least annually and published on a firm’s website.

Director will be expected to sign off the pledge to demonstrate a clear commitment to emissions reduction at the highest level.

Minister for Efficiency and Transformation, Lord Agnew of Oulton, said:  “The government spends more than £290bn on procurement every year, so it’s important we use this purchasing power to help transform our economy to net-zero.

“Requiring companies to report and commit to reducing their carbon emissions before bidding for public work is a key part of our world-leading approach.

“These measures will help green our economy, while not overly burdening businesses, particularly SMEs.”

The measures will apply to all central government departments and arms-length bodies.

Click here for further information and a template plan.