New national sustainable procurement policy to apply to construction, ICT, furniture and textiles

The Federal Government has launched Australia's first national Environmentally Sustainable Procurement Policy (ESPP) applying to procurements of construction services, textiles, ICT goods and furniture, fittings and equipment. The ESPP is intended to generate local demand for recycled goods and encourage products that minimise greenhouse gas emissions, are safe for the environment and retain their value for longer.

The project categories were selected for their significant impacts on the environment and their considerable potential to create jobs in Australia's domestic recycling sector.

The ESPP is intended to deliver on Target 4 of the National Waste Policy Action Plan and aligns with recommendations made in the Circular Economy Ministerial Advisory Group interim report.

The ESPP is anticipated to impact roughly 2% of Federal Government construction service contracts in its first financial year. However, due to the $7.5 million threshold, it will encompass projects representing about half the value of all procurement contracts in Australia.

Timing

The policy will be phased in, with the first wave starting 1 July 2024.

Businesses bidding for Federal Government construction services projects that meet the above threshold must meet agreed sustainability outcomes, which may include cutting or repurposing waste and replacing single-use materials with recycled materials, according to Environment Minister Tanya Plibersek. When the policy is extended to cover tenders for textiles, ICT goods and furniture, fittings and equipment from 1 July next year, procurement contracts may include requirements to recover and recycle worn-out uniforms that can be processed into new materials.

Scope and application of the Policy

Non-corporate Commonwealth entities and prescribed Commonwealth entities listed in section 30 of the Public Governance, Performance and Accountability Rule 2014) (relevant entities) must comply with the ESPP. Although not required to, other Commonwealth entities are encouraged to apply the ESPP. The policy does not apply to Commonwealth grants or other financial arrangements, and only applies to procurements that are conducted in Australia. Contracts delivered overseas in whole or in part and procurements for the direct purposes of providing foreign assistance are not within the scope.

The table below outlines the principles that must be achieved and demonstrated by relevant entities and their suppliers for the purpose of the policy.

Entities should select which principles to achieve and demonstrate based on their relevance to the goods and services being procured.

Procurement process

Commonwealth entities looking to purchase a good or service will appoint officials to oversee the procurement (procuring official). Procuring officials will invite potential suppliers to participate in a procurement to which the ESPP applies and specify a requirement for tenderers to address and report against environmental sustainability, through a Supplier Environmental Sustainability Plan (SESP). The SESP is to be submitted as part of the tender.

The tenderer must respond to specific questions in the SESP that address:

• how they will optimise environmental sustainability in delivery of the goods or services being procured, in reference to the principles outlined above;
• opportunities for innovation and how these will be considered throughout delivery of the contract; and
• their corporate sustainability performance.

For construction services procurements, procuring officials will determine whether to set a Sustainability Rating for the project that the potential supplier will be required to achieve. The metrics are set out in the ESP Policy Reporting Framework.

Once the SESP is agreed to by the procuring official and the appointed supplier, it will become a clause to the contract and the supplier is responsible for meeting the commitments made in the SESP.

Reporting requirements

The policy introduces a new framework for measuring and reporting environmental outcomes, including verification mechanisms across project categories. Suppliers must report to relevant entities on all contracts covered by the ESPP, with these entities then submitting suppliers' reports to the Department of Climate, Energy, the Environment, and Water every six months. Reporting is required at least twice per financial year and at the end of each contract, although the frequency will be agreed upon by the relevant entity and the supplier. While no specific targets have been set yet, baseline data from reported metrics may be used to establish targets in future versions of the policy.

The compliance scheme of the policy is limited and places the responsibility for monitoring and managing the performance of suppliers on the relevant entities. The ESPP encourages entities to embed environmental sustainability considerations into their procurement framework, documentation and contract management processes to support monitoring and reporting.