Understanding Carbon Neutrality & Net Zero

Why They Matter in Bidding

Carbon Neutrality and Net Zero have become increasingly important in the UK industry in recent years and are now widely used as key elements of companies’ operations and strategy. However, these terms are often used interchangeably, so it’s important to understand the key difference between them and what they mean for the bidding landscape.

What is Carbon Neutrality?

In simple terms, carbon neutrality means that a company achieves a balance between the amount of carbon emitted and the amount that is offset or removed from the atmosphere. Examples of carbon neutrality initiatives include tree planting, carbon capture etc. In sectors such as transport and energy, businesses are increasingly pursuing such initiatives. The key takeaway here is that carbon neutral policies aim to match efforts in carbon reduction with carbon emissions, not to reduce carbon emissions completely.

What is Net Zero?

Whilst a carbon neutral approach aims to balance carbon emissions and reduction efforts, a net zero strategy means reducing greenhouse gas emissions as much as possible and offsetting the remaining unavoidable emissions. A key distinction here is that is to reduce emissions at source, whereas a carbon neutral approach allows a company to rely more heavily on offsets. With the UK government’s 2050 Net Zero target, all businesses are expected not only to be carbon neutral but also to adhere to a net zero framework.

The Importance of Carbon Reduction Plans in Bidding

In 2021, the UK Government published the UK Procurement Policy Note (PPN) 06/21 on Carbon Reduction Plans, which stipulates that any business bidding for major government contracts must submit a Carbon Reduction Plan (CRP). This move is in line with the government's aim to achieve net zero emissions by 2050 and underlines the role that businesses must play in national and global efforts to reduce carbon emissions.

A Carbon Reduction Plan outlines how a company intends to reduce its greenhouse gas emissions over time. CRPs are now a prerequisite for bids involving contracts worth £5 million or more per year. The plan must detail current emissions, actions taken to reduce them and future strategies to achieve significant reductions. Companies are expected to report on emissions from a range of sources, including Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from purchased electricity).

Carbon Neutrality and Net Zero Supporting Social Value

One of the most significant changes in modern procurement, particularly in public sector contracts, is the emphasis on delivering Social Value. Social Value refers to the wider social, economic, and environmental benefits that an organisation can provide in the delivery of a project or service.

Achieving carbon neutrality and pursuing net zero strategies are key opportunities for companies to create Social Value. Reducing carbon emissions is directly linked to environmental benefits - one of the key pillars of Social Value. By adopting sustainable practices, businesses are helping to combat climate change, reduce pollution, and protect natural resources. These environmental improvements contribute to public health by improving air quality and reducing the risk of climate-related health issues, problems that can disproportionately affect vulnerable communities.

Ways of Achieving Carbon Neutrality and Net Zero

Carbon Credits

By investing in projects that reduce, remove, or avoid emissions elsewhere, companies can receive carbon credits or offset credits, which account for the net climate benefits that one entity brings to another.

Some examples of companies that utilise carbon credits in their operations are Apple, Hyundai, General Motors, Amazon, Comcast etc.

Tree Planting

By taking part in or leading initiatives which involve planting new trees, companies can help offset carbon in the air, with each tree absorbing between 10 and 40kg of CO2 on average.

Several businesses plant trees as part of their carbon reduction initiatives such as AstraZeneca, HSBC, Salesforce, Hyundai, Capgemini etc.

Switching to Renewable Energy

Another method of carbon reduction is switching to a form of energy sourced from natural resources and replenished on a human timescale such as solar energy, wind power, hydropower etc.

Companies which are fully or partially using renewable energy in their everyday operations include Apple, Intel, Microsoft, Unilever, Starbucks etc.

Switching to Electric / Hybrid Vehicles

By switching to forms of transportation powered either entirely (electric) or partially (hybrid) by electric motors, businesses can reduce their carbon emissions.

Several businesses have adopted the use of either hybrid vehicles or electric vehicles such as Uber, Walmart, Unilever, Lyft, Apple etc.

Remote Working

By employees conducting work partially (hybrid work) or fully (remote work) from their homes or other spaces rather than from an office, companies can reduce pollution caused by commuting and office energy usage.

Examples of companies that have transitioned to partially or fully remote work include Microsoft, Adobe, Amazon, Salesforce, Dell etc.

Conclusion

In summary, carbon neutrality and net zero have become critical factors in the awarding of major government contracts. Companies that prioritise these sustainability goals are better able to meet procurement requirements and compete in a competitive bidding environment. Alignment with carbon reduction targets not only enhances a company’s reputation but also demonstrates leadership in addressing the urgent global challenge of climate change.

By incorporating carbon neutrality and net zero strategies into their business models, companies can gain a significant competitive advantage. These efforts reflect a forward-thinking approach that aligns with government priorities and creates lasting Social Value, making businesses more attractive partners in delivering projects with both economic and environmental benefits.