 "The NHS and Net Zero Targets. - What you need to know")
There is an increasing focus on environmental, social and governance (ESG) issues within the pharmaceutical industry. In particular, the environmental impact of businesses’ supply chain, manufacturing methods, transport, distribution and waste management processes are being brought into the spotlight.
As part of the UK government’s Net Zero Strategy, significant carbon reduction targets have been set for the NHS. Current NHS ‘net zero’ targets will place escalating ESG obligations on its suppliers over the next few years, as part of the NHS net zero supplier roadmap. An upcoming milestone on this roadmap begins in April 2023, when bidders for NHS contracts over £5 million will be required, as part of their bid, to include a carbon reduction plan for their emissions in the UK. Bidding suppliers must also confirm their commitment to achieve net zero by 2050 or earlier for their UK operations, a new and significant requirement.
This obligation is in addition to an earlier NHS roadmap milestone in place since April 2022 which requires all NHS trusts to apply a minimum net zero and social value weighting to tenders. In practice, this obligation requires suppliers to demonstrate how they will help the NHS to meet its net zero goals.
The NHS net zero supplier roadmap
Under the ‘Delivering a net zero NHS’ initiative, the NHS aims to be the first ‘net zero’ health service by meeting the following targets:
1. elimination of ‘direct’ emissions (controlled directly by the NHS) by 2040;
2. elimination of ‘indirect’ emissions (through goods and services supplied by third parties) by 2045; and
3. 80% reduction in carbon footprint by the years 2036-2039.
The process for achieving these goals is laid out in the NHS net zero supplier roadmap. Some NHS organisations (such as NHS Business Services Authority) have declared their intention to reach net zero even earlier the UK government targets.
Carbon reduction plan requirements
In February 2023, NHS England published details of the carbon reduction plan requirements for the procurement of NHS goods, services and works. The NHS requirements align with the UK Cabinet Office’s procurement policy PPN 06/21, which introduced a requirement for government suppliers of major public sector contracts to publish details of their commitment to achieving net zero through a carbon reduction plan (CRP), and specified the required standards for those plans.
According to the NHS CRP requirements, CRPs that comply with the guidelines of PPN 06/21 will be accepted by the NHS from April 2023. The CRP must cover the supplier’s UK emissions from the sources included in scope 1 and 2 of the Greenhouse Gas Protocol and a defined subset of scope 3 emissions. Relevant scope 3 emission categories include transport and distribution, waste generated in operations, business travel and employee commuting.
CRPs that comply with the guidelines of PPN 06/21 will be accepted by the NHS beginning in April 2023, according to NHS CRP requirements. The CRP must cover the supplier's UK emissions from scopes 1 and 2 of the Greenhouse Gas Protocol, as well as a defined subset of scope 3 emissions. Scope of application Transportation and distribution, waste generated in operations, business travel, and employee commuting are the three emission categories.
NHS suppliers Impact
The roadmap includes further and stricter milestones, which are rapidly approaching:
1. from April 2024, the requirement for CRPs will be extended to all procurements, regardless of value;
2. from April 2027, all suppliers will need to publish a CRP that takes into account their global emissions, aligned with the NHS’s net zero target;
3. from April 2028, new requirements to provide ‘carbon footprinting’ of individual products supplied to the NHS will come into force;
4. from January 2030, the NHS has pledged to no longer purchase from suppliers that have not aligned with its move towards net zero carbon.
Suppliers will not qualify for NHS contracts unless they can demonstrate progress in reducing carbon emissions, reporting using the NHS ‘Evergreen’ supplier assessment tool which is due to launch in 2023.
The NHS has sent a clear message to its suppliers that it expects them to be aligned with the NHS net zero targets. It is recommended that suppliers keep these upcoming milestones in mind and take steps to prepare for them, such as:
1. ensuring that you are familiar with the CRP reporting mechanism and the required standards;
2. putting systems in place to calculate and record scope 1 to 3 emissions; and
3. setting achievable carbon reduction targets for the business, which will need to be reviewed and updated regularly.
The NHS is offering support for SMEs and voluntary, community and social enterprises (VCSEs) at each stage of the roadmap. According to NHS guidance, a two-year grace period will be available for SMEs and VCSEs on key future milestones and requirements.