Investment in sustainable, environmental initiatives
ESG is an increasingly discussed topic across both the public and private sectors. Leading the way is the UK Government. ESG has been a growing focus for both central and local Government in recent years as the world responds to the climate emergency, with sustainable practices no longer simply a ‘nice-to-have’.
A greater focus on the environmental and social impact of policies is already taking hold, but what does the future of ESG in Government look like? First, let’s explore exactly what ESG means day-to-day.
What is ESG?
Environmental, Social and Governance (ESG) are three principles used to determine cultural behaviour and its impact on the environment. ESG is a term primarily associated with the financial sector, as investors use ESG practices of sustainability or ethics to measure the future performance of a company. However, it’s becoming increasingly important to use the principles of ESG in Government to run everything from services to procurement procedures.
From post-pandemic recovery to embracing the future of ESG at the centre of policies and procedures, let’s take a look at what the next few years are likely to hold for ESG in the UK Government.
1. COVID-19 recovery
The COVID-19 pandemic exacerbated existing economic and social challenges and created many new ones, and ESG plays a particularly instrumental role in propelling communities out of economic hardship. Social value, which forms a crucial part of ESG, provides benefits that can help local communities and economies speed up their recovery, through efforts surrounding employment, re-training, and support through resources. In doing so, ESG can effectively support the development of local communities in a collaborative and meaningful way.
The Government has played more of an active role in cementing ESG practices in procurement during the pandemic. In September 2020, the Government published the Procurement Policy Note (PPN) 06/20, which required themes related to ESG to be part of the procurement selection process, using a social value model for evaluation:
“Central Governments should use this model to take account of the additional social benefits that can be achieved in the delivery of its contracts, using policy outcomes aligned with this Government’s priorities.”
It adds: “Social value should be explicitly evaluated in all central government procurement, where the requirements are related and proportionate to the subject-matter of the contract, rather than just ‘considered’ as currently required under the Public Services (Social Value) Act 2012.”
A minimum of 10% must be given to ESG objectives in each procurement, and bidders must be able to demonstrate or verify ESG practices (and those who cannot face significant disadvantages to winning the contract). This is a compulsory requirement for all contracts awarded by the UK Government departments, their executive agencies and non-departmental public bodies regulated by the Public Contracts Regulations 2015.
The Social Value Model is split into 5 categories:
- Helping local communities recover and manage from the impact of the COVID-19 pandemic
- Tackling economic inequality
- Fighting climate change
- Providing equal opportunities
- Improving wellbeing
2. Sustainability
COP26 in November 2021 accelerated a new sense of urgency on ESG in Government and climate action in the public sector, putting net zero targets front and centre in priorities and policies. The Cabinet Office recently announced firms must commit to net zero by 2050 before they can bid for major Government contracts (worth more than £5 million). This is the first measure of its kind implemented by any country in the world. The UK Government has itself pledged to be net zero by 2050, along with assemblies in Wales and Northern Ireland. Scotland has committed to reaching net-zero earlier, in 2045.
Achieving net zero is fundamental to reducing rising global temperatures, and it is feasible and cost-effective. It is also not a change that has happened overnight, as the Committee on Climate Change cites:
“This is the continuation of an important journey in the UK. In 2003, the UK pursued a target to reach CO2 emissions by 60% from 1990 levels on the understanding it would carry a cost of 0.5-2.0% of GDP in 2050. In 2008, on advice of this Committee, Parliament moved to an 80% target for all greenhouse gases, accepting that costs were between 1-2% of GDP in 2050. Now, our analysis demonstrates that we can adopt an even more ambitious target, within the same envelope as before.”
The sheer scale and breadth of public procurement means it will be a huge driver of sustainable initiatives and contribute significantly to reducing carbon emissions. The UK Government spends some £290 billion a year on contracts for public services, and therefore the potential for environmental value is vast and the expectations of ESG practices are high. Sustainability will not fade from view in the future – the presence of ESG in Government policy and action will only increase and become more ingrained in how we live, and within public services and Government. ESG practices are forming a more meaningful and considerate future.
The Future of ESG in Government
ESG incorporates a social value in Government that did not have a solid place before. It indicates an investment in sustainable, environmental initiatives that can boost productivity, and an investment in people that can provide more equal opportunities across the UK, therefore helping to level up the economy.
ESG has far-reaching benefits, but it is also an evolving term. Communities of employees, citizens, suppliers, and other stakeholders are demanding more careful consideration over how the UK Government manages its ecosystem and operations, and the wider impact it has on the world.
ESG is set to become more crucial in everyday service delivery, and it is almost a certainty that the Government and those looking to work with it, will be influenced even more by social value in the months and years ahead.
How Restore Digital is Supporting ESG Government Policy
At Restore Digital, we’re committed to becoming a net zero organisation by 2035, and we’re helping our customers meet their own ESG goals too, with our Restore our World ESG Strategy.
Whatever stage of the digital journey you’re at, our expert team can help. Whether it’s lightening your paper load through our bulk document scanning services, or automating your current processes, we’ll help you go digital faster. Find out more about how we support Central Government and Local Authorities.