The Government of Canada has formalized a two-step approach towards “greening its operations and supporting Canada’s transition to a cleaner economy.”
Part one affects procurements initiated after Dec. 31, 2022, and focuses on embodied carbon in construction by supporting net-zero carbon concrete in new major government construction projects.
“Specifically, these projects must use lower carbon concrete, where available, so that the total GHG emissions associated with the project’s concrete is at least 10 per cent less than the regional average for concrete,” the Treasury Board of Canada Secretariat (TBCS) said at the time.
The net-zero concrete initiative affects procurements for design and construction services in projects valued at $10 million or more, and which are expected to use more than 100m3 of ready-mix concrete. The minimum project threshold will drop to $5 million after 2024. The list of materials covered under the standard may also be expanded.
A government-developed Embodied Carbon Disclosure Template must be completed prior to the completion of the project, disclosing information related to supplier sources, concrete mix information and other matters concerning the embodied carbon on each project.
Specific to carbon in concrete, vendors of design services must demonstrate a carbon footprint reduction of at least 10 per cent compared to baseline. Exemptions are permitted if “the required performance of a structural material hinders the implementation of the (reduction)” or if the carbon-reduced concrete is not available in the project area.
Part two of the government initiative then followed in April 2023, called the Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets. This is a broad standard that imposes obligations on suppliers of procured materials valued over $25 million.
“As of April 1, 2023, major Government of Canada suppliers will now be compelled to disclose their greenhouse gas emissions and set reduction targets,” said a media release issued by the TBCS.
“The objective of this standard is to induce major suppliers to disclose their greenhouse gas emissions and set reduction targets according to the commitments in the Greening Government Strategy,” the TBCS website says.
Again, exceptions are permitted, including “procurements using emergency contracting authorities or established through foreign military sales,” or if determined and approved that “it is not feasible or appropriate” to apply the standard.
Counsel Stevie O’Brien, partners Talia Gordner and Kailey Sutton, and associate Tayler Farrell of McMillan LLP, suggest both steps one and two will require action by vendors at various levels of the project pyramid.
“Vendors in the industry who anticipate participating in a federal public procurement for goods or services should begin considering now how they will adapt their bid responses to account for these additional standards.”
Action would be appropriate even for subcontractors affected by contract flow-through.
The McMillan authors suggest vendors “retain a qualified environmental consultant to assist in the greenhouse gas emissions calculations and budget accordingly for this work.”
This consultant could also advise on other carbon capture and storage matters and help ensure all submissions are accurate, verifiable and in keeping with the objectives of Canada’s green policy.
Pressure is ramping up around the world to find sources of low-emissions material.
That could be problematic, says McKinsey Global.
“Production capacity for many low-emissions materials appears set to fall far short of future demand. Companies that fail to secure adequate supplies of scarce green materials may need to pay steep premiums, or else they will fall short of their target commitments, potentially harming their relationships with customers, investors and other stakeholders.
“C-suite leaders should also prepare to invest now in longer-term solutions,” McKinsey continues, and “take near-term action to develop insights on emissions and market dynamics, plan sourcing strategies, and create capabilities.”
Another implication pointed out by the McMillan authors could be fewer bids on federal projects, higher bids, or both. They question whether government procurement teams have anticipated this and have taken steps to address the potential impacts of supply shortages and price variations in future budgets.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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