Network Rail carbon reduction targets to impact supply chain

Out-Law News | 05 Nov 2020 | 3:41 pm | 3 min. read

Existing and prospective suppliers to Network Rail can expect to see the company's commitments to lowering its carbon footprint reflected in its expectations of them over the coming years, legal experts have said.

Network Rail, which manages Britain's railway infrastructure, announced three climate-related targets, including two aimed at reducing its direct and indirect greenhouse gas emissions by 2029, and one committing the company to ensuring that at least 75% of its suppliers by emissions, in terms of purchased goods and services and capital goods, set their own "science-based targets" by 2025.

Stacey Collins and Nigel Blundell of Pinsent Masons, who specialise in decarbonisation strategies and major projects and contracts in the infrastructure sector respectively, welcomed the measures which Network Rail said make it the first railway anywhere in the world to commit to cutting emissions to the extent of limiting global warming to 1.5°C (in line with the Paris Agreement signed by over 190 countries around the world in 2015).

Blundell Nigel

Nigel Blundell

Partner

Having been one of the first organisations to embrace alliancing, commitments to zero carbon will lend itself to working closely in the delivery of projects with the supply chain

Collins said: "It’s great to see this decarbonisation commitment from Network Rail. It’s also a common theme among many businesses that the majority of carbon issues come from its supply chain. This is not just about the fuel used for vehicles, but wider issues like what carbon is created in the supply chains’ products and processes."

"We are seeing many different approaches by businesses seeking to incentivise their supply-chain partners to decarbonise. There is no ‘one size fits all’. On one hand you may have collaborative approaches that encourage innovation in finding alternatives to carbon intensive products or processes. On the other, you may have contractual obligations that place financial risk on suppliers that fail to decarbonise adequately. Although there are benefits to collaborative approaches, the longer-term outlook is likely to be that supply chain businesses that fail to decarbonise swiftly will increasingly be penalised, and lose work to those with better carbon credentials."

Blundell said that Network Rail's carbon reduction targets will straddle two so-called 'control periods', which are five yearly cycles that Network Rail works to for budget and planning purposes. The current control period (CP), CP6, began in 2019 and runs until 2024. CP7 will run from 2024 to 2029.

"The timing of the announcement is interesting, particularly as it is a couple of years before the end of CP6 and the retendering of work in CP7," Blundell said. "Bearing in mind the focus of work in the current control period is around maintenance and renewal rather than large scale capital works, it will give Network Rail the opportunity to test how best to engage and incentivise the supply chain before the tendering of CP7."

"There are mechanisms within the CP6 frameworks which allow for peer review and for framework members to work collaboratively to achieve results. This announcement may indicate that Network Rail will be looking to collaborate closely with the supply chain. Having been one of the first organisations to embrace alliancing, commitments to zero carbon will lend itself to working closely in the delivery of projects with the supply chain," he said.

Blundell said that CP7 is considered an important period in which Network Rail is expected to push forward with the digitisation of the railway in Britain in an effort to realise the efficiencies that are anticipated to follow on. He said the carbon reduction targets set by Network Rail are likely to shape that work programme.

Collins Stacey Nov_2019

Stacey Collins

Partner

Supply chain businesses that fail to decarbonise swiftly will increasingly be penalised, and lose work to those with better carbon credentials

In its statement, Network Rail said its targets have been independently verified by the Science Based Targets Initiative (SBTi). SBTi brings together environmental non-profit organisation CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature.

Network Rail chief executive Andrew Haines said: "Rail is already the cleanest and greenest mode of transporting large numbers of people and goods, but we’re committed to cutting our carbon footprint even further. That’s why we’ve set carbon reduction targets backed by science rather than simply ones we think are easy to achieve."

Martin Frobisher, Network Rail’s safety, technical and engineering director, said: "Most of our carbon emissions come from our supply chain, so we need to give our suppliers confidence that we are serious about this and must make the changes needed to meet these challenging targets. Many of our suppliers are already making great strides to this end which we can learn from. Working with them to find creative engineering solutions and clever ways to reduce the energy we consume, for example, is key to delivering these targets."