Wednesday, 16 May 2012

Down to Zero

Today The Prince of Wales’s UK Corporate Leaders Group on Climate Change (UK CLG) launched a new initiative in partnership with BIS. Called Down to Zero, the project champions Joint Public Private Low Carbon Procurement Compacts as a way of forcing the pace of transition to a low carbon economy.

Initially, the project has been restricted to three specific areas: transport, biomethane for heat and power, and catering. But the aim of the initiative is to convince potential suppliers that there is demand for low carbon goods and services and to provide a blueprint for a new model of collaborative procurement that can be applied to progressively reduce carbon emissions.

According to Vince Cable, Secretary of State for Business, Innovation and Skills, the project addresses a paradox that is holding back the commercialisation of low-carbon technologies: because low-carbon products and services are not available – or not available at realistic cost, - customers don’t specify them. And because there is no apparent demand, suppliers don’t invest in low-carbon innovation.

This may well be the case, and UK CLG is right to address it, but it’s by no means the whole problem. Sophisticated technologies often carry a higher price tag but pay back quickly by consuming less, requiring less maintenance or increasing productivity. Until public sector procurement professionals are measured and rewarded on cost and carbon savings across the product lifecycle, instead of cost savings at the point of purchase, they will continue to buy the products with the lowest capital cost. And this puts at a disadvantage the innovative suppliers that invest in the development of low-carbon solutions and need to recover that investment. The e-auctions used for the final stage of the tender process perpetuate this problem and it's hard to see how lifecycle costs could be integrated. 

The Down to Zero project will fail if it doesn’t also embed the concept of whole life costing, factoring both direct and indirect lifecycle costs into the procurement process right up to the point the contract is awarded.

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