According to the government, the rules will support its plans to "build back greener” by ensuring that potential suppliers have published plans for reducing their carbon emissions across their operations before they are able to bid for lucrative public contracts. The UK is the first country to introduce this requirement.

From September, companies hoping to win contracts above £5m per year will need to have committed to the national target of net-zero greenhouse gas emissions by 2050 and also have published a plan for reaching this goal. Companies which do not meet these requirements will be excluded from the bidding process.

A carbon reduction plan should identify the sources of an organisation’s carbon emissions and the impacts of green measures they have in place already. Scope 1 refers to direct carbon emissions and Scope 2 refers to indirect emissions. According to the government statement, companies will need to go further and report their Scope 3 emissions which represent a significant part of an organisation’s carbon footprint, taking into account business travel; employee commuting; transportation; distribution, and waste.

Some companies – particularly the largest petroleum companies – have been criticised for creative carbon accounting which excludes major sources of greenhouse gas emissions when reporting their progress towards net-zero. According to a report by Carbon Tracker, seven of the top 10 biggest oil and gas companies do not have climate goals which involve cutting carbon emissions overall, while their emissions targets vary from a full spectrum of company activities to just a select fraction of emissions.

Lord Agnew, minister for efficiency and transformation, commented: “The government spends more than £290bn on procurement every year, so it’s important we use this purchasing power to help transform our economy to net zero.

“Requiring companies to report and commit to reducing their carbon emissions before bidding for public work is a key part of our world leading approach. These measures will help green our economy, while not overly burdening businesses, particularly SMEs.”

Tom Thackray, director of infrastructure and energy at the CBI, commented on the new rule: “As the world looks towards the UK and COP26 for leadership on decarbonisation, business is already playing a vital role in driving progress towards a greener future.

“The CBI has long supported using procurement policy to ensure government spending supports the UK’s environmental objectives and these changes will encourage more firms across the country to demonstrate their own commitment to net zero when bidding for government contracts.

“Partnership between the public and private sectors can make the UK a global role-model, not only in delivering vital public services but working together to tackle climate change.”

The government is likely to face questions over how it will fairly apply the new rule. In April, Transparency International UK reported that 20 per cent of Covid-19 contracts between February and November 2020 (worth more than £3.7bn) raised at least one “red flag for possible corruption”.