Addressing carbon emissions in supply chains

John Coyne, director of commercial and procurement at the Welsh Government, talks about the value and challenges of decarbonising public procurement.

The Welsh Government currently has a Welsh public sector procurement expenditure of around £8 billion per annum on procured goods, works, and services. The most recent emissions assessment for the whole of the Welsh public sector showed that the supply chain activities associated with this expenditure makes up 65 per cent of all emissions.

Coyne explains that the Welsh Government is examining cross-sectoral means of reducing emissions. The Climate Change (Wales) Regulations 2021 (March 2021) brings Wales in-line with the UK net zero 2050 target. This was an amendment to the Environment (Wales) Act 2016 that set an 80 per cent emissions reduction target by 2050.

Like Northern Ireland, the Welsh Government measures targets and carbon budgets against the baseline year of 1990 (although some gases can only be examined from 1995) established in the Environment (Wales) Act 2016.

The legislative commitment to net zero by 2050 is supported by a collective Welsh public sector net zero by 2030 ambition, set out in the Net Zero Carbon Status by 2030: Public Sector Route Map, published in July 2021.

“We are very much on a journey in Wales where we need to up our focus and we need the necessary investment to do that.”

Although reducing emissions from procurement presents significant challenges, Coyne is optimistic, stating: “Supply chain activities can be influenced by the purchasing organisation’s procurement processes, specifically procurement strategies, which give us insights as to how we approach the market; how we specify requirements; evaluate tenders and set KPIs; and by ensuring the anticipated outcomes are delivered through our contract management relationships.

“We can go further by planning our future procurements to incentivise continuous improvement and innovation over the period of the contract.”

Supporting the private sector

At the heart of Coyne’s argument is that there is a need for “considerable step change around how we work with our supply chain” for the private sector to be incentivised, rather than feeling coerced, into decarbonising their procurement, which will lead to decarbonisation across entire supply chains.

“If you want to make big targets like that you need to fundamentally change the way we engage with our supply chain and we have to fundamentally change how we support our supply chain,” he says.

“If we are expecting SMEs to invest £10 million in becoming much more carbon neutral, they will not do it because the reality of life is that their goal is to keep people employed and make a profit to reinvest.”

Arguing that suppliers are currently sent a very strong signal but not sufficient in terms of how they can reduce their carbon output, Coyne states: “We can send as many strong signals as we wish, but if we need to recognise that sometimes, support is not just about issuing new regulations, sometimes support comes from an investment.”

Cost challenges

On meeting the necessary investment for decarbonising procurement, Coyne says that the Welsh Government is “currently in a very difficult position in relation to its budget”.

“We are not investing in our supply chain to actually back up the strong signals that we have been sending suppliers. It is a piece of work that we must do as we go forward.”

Although there are cost challenges, Coyne praises the role played by the Welsh Government’s Business Wales unit, which he says is “highly effective at targeting support and skills development within the supply chain”.

However, he nonetheless is realistic on progress made so far, outlining: “We are only scratching the surface so far and we really need to invest in this area. That is a particularly common theme that comes into my discussions with ministers.

“We are tinkering around the edges, we are making very bold statements like the need for net zero by 2030, and you just have to have an element of realism in the room.”

Reflecting on Wales decarbonising and procurement journey, he concludes: “We are very much on a journey in Wales where we need to up our focus and we need the necessary investment to do that, so watch this space.”