The role of finance in driving down carbon emissions

By Becky Jones, Social Value Specialist at NHS Arden & GEM CSU and George Curtis, Director at Carbon Neutral Group

Carbon reduction commitments already play a role in the assessment of public sector suppliers, but for this to genuinely shift the dial towards net zero, we all need to improve how we understand, assess and monitor carbon reduction both within our own organisations and among our suppliers. 

Since April 2023, suppliers for all new government contracts worth over £5 million per year must publish a Carbon Reduction Plan for their UK scope 1 and 2 emissions and a subset of scope 3 emissions in line with PPN 06/21. From April 2024, this requirement will be extended to cover all new procurements. 

Finance and procurement teams have an important role to play in making a meaningful dent in the NHS's carbon footprint, working proactively with commissioning colleagues at an earlier stage so that climate impact is baked in from the start, and we avoid a 'rinse and repeat' approach to ongoing contracts. Balancing the aim of being net zero by 2040 against growing scepticism about carbon offsetting and criticism of 'greenwashing' puts additional pressure on us all to ensure carbon reduction commitments are genuine, measurable and will help reduce scope 3 emissions.

Core considerations to help reduce your carbon footprint

Different integrated care systems are at varying stages of maturity when it comes to carbon reduction. However, there are four elements we believe are essential to deliver achievable and meaningful progress towards net zero.

 1. Understand your starting point. First and foremost, take the time to really understand the biggest contributors to carbon emissions in your own trust or system. With your own baseline established, you're in a stronger position to identify where change is needed most and what will deliver the most impact. While this activity may not be led by finance teams, you have an important role to play in understanding where money is being spent, the criteria applied and the opportunities (or priorities) for cost savings.

2. Review operational contracts for opportunities to cut emissions. It's easy to fall into a repeated cycle of tweaking and renewing core contracts. But how often do you apply a fresh eye, through a carbon reduction lens? What is built into operations that could be needlessly contributing to carbon emissions? For example, when working with one trust we noticed that their diesel generator was being tested weekly. We suggested changing that to fortnightly and for half the time. The result was a significant drop in carbon emissions from that area without impacting operational performance.

Heating is another obvious target with hospital buildings often uncomfortably warm. Building management systems enable trusts to manage how different parts of their estates are heated, provided they are used correctly. Reducing unnecessary heating will not only make inroads into your carbon footprint but will quickly reduce energy bills too.

3. Implement robust monitoring to evaluate the impact of your contracts. What processes do you have in place to follow up on the promises made in supplier tenders regarding carbon emissions? How is that feeding into your scope 3 emissions?  And what action could or should you and your contract management colleagues take if performance is lacking. There is growing media interest in ensuring climate promises are delivered, with investigations exposing issues such as local authority recycling that had been shipped overseas and burnt. Understanding and monitoring supply chains will help drive greater commitment to meaningful carbon reduction.

Delivering benefits from system working

Bringing together different organisations across a system provides an opportunity to understand your ICS's carbon footprint as a whole and find ways to work together on an action plan to address priority areas. Partners may have different priorities and budget allocations for the specific areas they want to tackle, but that can create opportunities to widen the impact of each initiative and make best use of funding rather than duplicating activity.

Alongside this is the thorny issue of cost. The overall cost of services and supplies continues to be the biggest driver in most public sector contracts, and it can be hard to argue against this given the financial pressures facing the sector. But by focusing on short term costs, are we missing long term savings?

If one supplier is slightly more expensive but offers a solution which will reduce costs through improved productivity or lower use of raw materials longer term, do the mechanisms that currently exist allow us to score those variations appropriately? This is particularly important when looking at more innovative ideas with a limited track record. By finance and procurement teams getting involved early on and understanding the outcomes the organisation or system is seeking to achieve, you will be better able to create or update contracts which support this more holistic approach.

This is a complex area. Different parts of the public sector have their own procurement and supply chain requirements and different ways of assessing and monitoring progress. There is no quick or universal fix but the urgency is increasingly palpable. 

It is incumbent on us all to embed environmental sustainability into everything we do and successfully reduce carbon emissions now if we are to achieve NHS net zero in 2040. 

This blog was originally published by Public Finance: https://www.publicfinance.co.uk/opinion/2024/01/role-finance-driving-down-nhs-carbon-emissions