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Chapter 7 The public sector leading by example

7.1 Although the public sector is not the biggest energy consumer and therefore only a minor source of carbon dioxide emissions in Scotland, its influence on overall emissions outweighs its direct contribution. The public sector must take a leading role in designing, procuring and building public sector projects such as new schools and hospital which are exemplars in terms of energy efficient sustainable design. The public sector has considerable purchasing power and it has a significant role to play in encouraging others, both individuals and organisations, to take action. For this reason it is essential for the public sector to lead by example.

7.2 In 2004, the Executive launched a new £20 million Central Energy Efficiency Fund ( CEEF) to help public sector organisations lead the way in energy efficiency. Of the total £20 million fund, £15 million was allocated to local authorities, £4 million to NHSScotland Health Boards and £1 million to Scottish Water. The money is administered at a local level and is used to set up a revolving loan fund ring-fenced purely for energy efficiency projects which bring about energy, cost and carbon savings. The financial savings made must be re-invested in further energy efficiency measures, and any profit can be used to improve frontline services. At the time of the scheme's inception, the annual energy spend of these public bodies was over £100 million resulting in emissions of over 250,000 tonnes of carbon each year.

7.3 The programme has ambitious goals - it aims to facilitate:

• A 20% reduction in energy consumption by local authorities and Scottish Water, and a 15% reduction by health boards over 5 years;
• A saving in public sector energy bills over the first 5 years estimated at around £70 million (and an ongoing saving of up to £30 million per annum thereafter); and
• A reduction in carbon dioxide emissions estimated at around 500,000 tonnes of carbon over the first 5 years (and around 100,000 tonnes of carbon per annum thereafter).

7.4 The CEEF programme was also set up to encourage and develop best practice across the public sector. The Executive has supported this by developing:

• A web based tool which provides generic guidance, allows the sharing of best practice and helps to stimulate new project ideas.
• A technology list which gives guidance on the technical aspects of a variety of energy efficient technologies and interventions.

7.5 The Executive recently completed an interim evaluation of the local authority part of the CEEF programme as this is where the majority of projects have been implemented. This was to assess its impact and effectiveness and to gain a better understanding of the financial and carbon savings that have been and can be achieved. The report is due to be published in March 2007 and the key findings are:

• The scheme is on track to achieve a 20% reduction in energy consumption with identified lifetime financial savings of nearly £30 million so far. If this progress is maintained, the scheme could lead to lifetime savings of up to £104 million by 2010. These are conservative estimates - recent fuel price increases will almost certainly mean the true savings will be even better;
• Identified carbon savings so far are estimated at over 80,000 tonnes of carbon and, by 2010, savings of more than 390,000 tonnes of carbon are predicted; and
• The loan fund is a very effective model and it has been pivotal in raising awareness of energy efficiency issues within local authorities. It has facilitated other initiatives, for example, authorities setting individual targets for reductions in energy usage.

7.6 This evaluation does not take account of the savings achieved by the NHS and Scottish Water and the Executive will carry out a full evaluation of the scheme in 2010 when the scheme will have been fully operational for 5 years.

7.7 These interim results show that CEEF is clearly a success - as well as delivering financial and carbon savings, it is raising the profile and stimulating behavioural changes across the organisations. The Executive therefore recently announced an additional £4 million to extend the fund to the Further and Higher Education sector. Working with the sector, the Executive will use the findings from the evaluation and learn the lessons from other similar public sector funds to develop the programme for further and higher education institutions. This funding will be made available from 1 April 2007 and further details will be available during Spring 2007.

Sub-sector specific Actions

Scottish Executive Estate

7.8 The Executive recognises that it must lead by example in tackling its own corporate contribution to climate change. The Executive has already taken significant action and has:

• Produced a Greening Government policy which sets out objectives and targets for improving environmental performance - including energy consumption, vehicle use, waste and recycling, and the procurement of goods and services.
• Delivered major energy efficiency improvements - since 1991 has reduced carbon dioxide emissions due to energy use by almost 50%.
• Set a target to reduce carbon dioxide emissions by energy use in its buildings by 30% from 1999/2000 levels by March 2020.
• Committed to participate fully in the Carbon Trust's Carbon Management Programme to help further reduce energy and carbon dioxide emissions savings.

7.9 The Executive will:

• Continue to be an exemplar by implementing further energy and carbon savings where possible.
• Display energy certificates in all 14 of the target buildings detailed in its annual environmental report (despite only 10 buildings requiring them). This represents around 90% of the Executive's estate (and 94% where the Executive is the major occupier).
• During the summer of 2007 introduce a single carbon dioxide emissions reduction target to cover all activities, including business travel, energy use and waste production.
• Install microgeneration technologies on its own estate. The Executive is currently investigating which of its current buildings are most suitable and will publish further details during 2007.

7.10 The Executive reviews and reports on progress being made against meeting these targets and objectives on an annual basis in the Scottish Executive Environmental report.

Executive Agencies and Non-Departmental Public Bodies

7.11 The Executive recently tasked its agencies and non-departmental public bodies ( NDPBs) with improving their environmental management practice by putting in place policies, procedures and to set targets for reducing their environmental impact by the end of 2006. Targets include energy consumption, carbon dioxide emissions, waste, biodiversity, transport and travel. Policies and targets will be published and reviewed on an annual basis by each organisation and the Executive will ensure that future targets that are set remain challenging.

7.12 The Executive estate currently refers solely to the buildings used by the Executive and we intend to widen this definition to include our agencies and NDPBs. This will mean that the environmental performance targets will also apply to our agencies and NDPBS. The Executive will announce how this will be implemented during 2007.

Local Authorities

7.13 Local Government is Scotland's largest public sector employer and therefore has a critical role to play in taking action to combat climate change through both its own local activities and its influence on the wider community.

7.14 Local authorities have committed to demonstrating that leadership and taking action through the Scottish Climate Change Declaration. The declaration was launched early in 2007 and has energy efficiency as one of its key actions. Councils have signed up to:

"Produce and publicly declare a plan, with targets and time-scales, to achieve a significant reduction in greenhouse gas emissions from our own operations. This will include our energy sourcing and use, travel and transportation, waste production and disposal, estate management, procurement of goods and services and through improved staff awareness"

7.15 The Executive will continue to support local authorities in meeting their commitments in the long term. For example, the Executive:

• Has provided resources to assist the Sustainable Scotland Network ( SSN) develop a climate change programme for local government in Scotland. This programme, which will be in place by the end of 2007, will co-ordinate and strengthen the wide range of activity taking place at local authority level and set the strategic framework and direction for future action.
• Supports the network of energy officers from all 32 Scottish Local Authorities to help them to reduce energy consumption and carbon dioxide emissions by sharing best practice, to benchmark energy data and to move quickly on the introduction of new and improved energy efficient and renewable technologies.
• Will continue to work with COSLA, the Sustainable Scotland Network, the local authorities and other partners to ensure the right information and guidance is in place.
• Will work with the local authorities and other partners to develop a simple and practical way for local authorities to monitor and report greenhouse gas emissions and to use this information for benchmarking and setting targets for reducing emissions.

Schools

7.16 One of the Executive's main priorities is to modernise the school estate with well designed, well built and well managed schools. The Executive provides extensive funding to local authorities to support investment in school buildings in the form of revenue support for Public Private Partnership ( PPP) projects, loan charges support for conventional borrowing and capital grants.

7.17 Sustainability is a key aspect when considering the whole life costs of a building. It is not just the initial purchase price of an asset but consideration must be given to the ongoing running and maintenance costs. This is a key feature of PPP contracts but should also be considered under conventional procurement. This provides the opportunity to demonstrate better value for money and to deliver public services in a more environmentally sensitive way, including being more energy efficient.

7.18 The Executive is already encouraging greater energy efficiency for schools - the Schools Fund Capital Grant for 2006-07 was enhanced by a further £30 million, with energy efficiency being a key focus for the additional monies.

7.19 There is more to be done and the Executive wants to encourage and deliver greater energy efficiency and uptake of renewables throughout the entire procurement process. To gain a better understanding of the energy standards of existing schools and to help identify future action, the Executive has commissioned:

• a project with a small number of the Councils who are in the early stages of procurement of a schools PPP project. During 2007, the councils will receive support in investigating the options, preparing the output specification, evaluating contract bids and agreeing the final contract terms to seek to ensure that provisions for energy efficiency and renewables are retained in the contract.
• a study to examine the energy efficiency of a number of schools built during different periods and under different contractual arrangements. The project, which is due to report in late Spring 2007, will consider a range of issues including the effectiveness of current guidance, the scope for grant support for the use of renewables, and the impact of factoring in the cost of sustainable energy systems compared to other heating and fuel systems when calculating whole life costings for school buildings.

NHSScotland

7.20 As an integral part of the commitment to the health and well-being of the community, the NHS must ensure that its activities are environmentally sustainable. Sustainability is a key theme running through a number of Health Department policies that relate to NHSScotland property, and each NHSScotland body must have in place local policies for property management, environmental management, construction procurement and design quality that adhere to the Executive's sustainable development objectives and that include targets for reducing energy consumption and greenhouse gas emissions.

7.21 Over the 19 year period to 2004/05, NHSScotland has made a significant achievement, it has:

• reduced energy consumption by around 36%; and
• reduced carbon dioxide emissions by nearly 39%

7.22 NHSScotland continues to pursue energy efficiency and has set a national target to further reduce energy consumption by 2% each year until 2010. This represents a total saving of almost 50% in energy consumption by 2010 over 1990 levels.

Public Sector Procurement

7.23 It is estimated that, currently, £8 billion is spent per year on public sector procurement. As well as securing Value for Money and adhering to public procurement policy and legislation, energy efficiency is one of the key aspects to good procurement practice. This is viewed in combination with a range of activities, including environmentally preferable products, minimising waste, encouraging use of recycled materials and products, reducing carbon dioxide emissions and giving a fair opportunity to local suppliers.

7.24 The Executive already promotes best practice across the public sector by:

• Maintaining online guidance;
• Supporting the development of a Sustainable Development Procurement Toolkit for Local Authorities;
• Issuing advice to public sector procurement officials;
• Working with partners, including the Sustainable Scotland Network, the Association for Public Service Excellence, Remade Scotland and WRAP (the Waste and Resources Action Programme); and
• Providing specific training on how to incorporate sustainable development issues into procurement.

7.25 The Executive is also developing a Scottish Sustainable Procurement Action Plan that will build on progress already being made in Scotland and will take into account the work of the UK Sustainable Procurement Task Force. The Scottish Action Plan will identify key performance indicators and benchmarking opportunities to deliver on the Executive's ambition to be a leader in this field.

7.26 For the public sector to be exemplar, there is more that could be done to increase energy efficiency and whole life costing principles. The Executive is currently considering what further action it can take. Possible options include: setting higher than minimum standards for the goods and services the public sector procures; contractual guidance; advice and training on incorporating energy efficiency and renewable energy into contracts and capital investments; exploring the opportunities for reducing costs through public sector bulk-buying; and by supporting a number of pathfinder projects to act as demonstrators for the public sector as a whole. The Executive will publish how it intends to take this forward during 2007.

7.27 As part of the wider Efficient Government initiative, a review of public sector procurement in Scotland was led by Mr John McClelland. The McClelland Report (2006) concluded that :

• A step change in procurement practice is required to achieve targets for future years;
• Substantial savings are available from collaboration by buyers, both within specific sectors, (e.g. the NHS, Local Government, etc) and across the public sector at large; and
• "Commodity Centres of Excellence" should be put in place to support collaboration.

One of the key recommendations was to ensure corporate and social responsibilities such as sustainability are made part of purchasing policy and practices in every public sector organisation. A Public Procurement Reform Board, chaired by John McClelland, has been established to consult further on, and implement, the range of recommendations set out in the report. The Executive is also currently establishing a team to take forward the recommendations that came out of the review and it is anticipated that this team will be in place by April 2007.

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