Federal Government Incentivizes Supplier Climate Action via New Standard on Disclosure and Target Setting

The CCSP sat for the fourth Peer Exchange of the year on June 22^nd. In this session, members received a special update directly from the Federal Government on its new Standard on the Disclosure of GHG Emissions and Setting of Reduction Targets. 

On April 1^st, 2023, a new Federal Standard came into effect to further incentivize Canadian businesses to take action on reducing their carbon emissions. The Standard on the Disclosure of GHG Emissions and Setting of Reduction Targets applies to Federal procurements over $25 million and requires suppliers to measure and disclose their greenhouse gas (GHG) emissions and adopt a science-based target to reduce their emissions (in line with the Paris Agreement). Based on data from 2018 – 2021, this new Standard is projected to influence around 140 contract per year.

CCSP members heard from senior representatives from the Treasury Board of Canada Secretariat (TBS), Public Services and Procurement Canada (PSPC), and Environment and Climate Change Canada (ECCC) to learn more about how this standard is being implemented in procurement and the new disclosure initiative being managed by the Federal Government.

Policy Context

The Government of Canada’s Greening Government Strategy (GGS) guides activity towards several significant objectives, including achieving net-zero emissions by 2050 and ensuring overall green and climate resilient government operations; procurement is identified as one of the key drivers for getting there. TBS plays a lead role in advancing this work and has the authority to develop standards that accelerate implementation of the GGS and the Federal Policy on Green Procurement. This new Standard is one of two published under the Policy on Green Procurement since 2022; the first being the Standard on Embodied Carbon in Construction.

Implementing the New Standard

While TBS manages the Standard and provides related guidance to other departments, PSPC and Shared Services Canada (SCC) are the primary bodies responsible for integrating the obligations of the Standards into procurement processes. PSPC has issued direction on implementing the Standard via updates to the PSPC procurement policies and guidelines and delivering training to over 800 purchasing personnel so far.

There are four possible pathways to implement the Standard depending on the commodity, procurement strategy, and general market-readiness. These include:

1. Conditionally Limited Solicitation: limiting bidding to suppliers who demonstrate evidence of participation in GHG disclosure and target setting.
2. Evaluation Criteria: applying a mandatory or point-rated evaluation criteria that requires evidence of participation.
3. Certification: a signed document certifying participation in a disclosure initiative.
4. Evidence of Participation: demonstration of participation in the ECCC Net Zero Challenge or an international equivalent such as the UN Race to Zero, Science-Based Targets Initiative, Carbon Disclosure Project, or International Organization for Standardization (ISO) during the contract period.

Supplier Readiness

The new Standard will induce certain suppliers to examine their emissions and set meaningful reduction targets – but many are already there. PSPC scanned its current suppliers for contracts over $25 million and found that over 50% are already participating in a disclosure or target setting initiative. For many suppliers, this is validation that the Government of Canada values this effort, while for others, it may be just the push they need to act on climate mitigation.

Suppliers of large contracts must read the solicitation and contract documents carefully to determine what is required for individual procurements.

The Canadian Government expects that disclosure of GHG emissions will become more industry standard, and an increasing number of suppliers will join the charge towards a net zero 2050.

The Net Zero Challenge, ECCC’s Disclosure Initiative

The Net Zero Challenge (NZC) encourages business to develop and implement credible and effective plans to transition their facilities and operations to net-zero emissions by 2050. The NZC now exists to provide Government of Canada suppliers a structured program that supports their disclosure and net-zero journey.

All business operating in Canada, even those who are not suppliers to the federal government, can participate in one of three streams, including 1. large industrial emitters, 2. financial institutions, and 3. all other businesses. Currently, there are over 100 companies participating throughout Canada.

Participants can repurpose existing net-zero plans or can use participation in other disclosure initiatives as evidence to meet minimum requirements or can start from scratch following this five-step process:

1. Sign a commitment letter,
2. Develop a preliminary plan and submit a net zero participation checklist,
3. Develop a comprehensive plan and submit a net zero participation checklist,
4. Report on their progress each year, and
5. Update their plans every 5 years.

Along with joining hundreds of others transitioning to net zero by 2050, the program boasts benefits such as reducing business costs, assuming a competitive position, attracting new investments and becoming more resilient against market disruptions.

The Canadian Government, like other jurisdictions including the UK and the US, is using its purchasing power to signal to the market that prominent suppliers must be taking action to combat climate change by publicly disclosing and reducing their GHG emissions. If we are to reach interim 2030 reduction targets and net zero by 2050, planning must be paralleled by immediate and persistent action. Starting with the $25 million threshold allows the government to target its largest emitters while setting the stage for procurements at lower thresholds and from other levels of government to follow-suit in asking suppliers to reduce emissions.

“The public sector has the purchasing power to influence the economy and the availability of sustainable goods and services in Canada. This new Standard is a great indicator of how multiple departments within the Federal Government have collaborated on an initiative that will have ripple effects across Canada’s value chain.”

• Jane Keenan, Director, Centre for Greening Government, Treasury Board of Canada Secretariat

WRITTEN BY: MEG TURNER, SPECIALIST AT REEVE CONSULTING & AMANDA CHOUINARD, PROGRAM MANAGER AT THE CANADIAN COLLABORATION FOR SUSTAINABLE PROCUREMENT (CCSP)

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