The Commonwealth’s ESP Policy, released by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) in July 2024, seeks to integrate sustainable outcomes into procurement processes. The ESP Policy mandates that non-corporate Commonwealth entities and certain corporate Commonwealth entities integrate environmental sustainability into their procurement activities.
The ESP Policy focuses on three key focus areas: climate, environment, and circularity. These areas encompass principles such as minimising greenhouse gas emissions, reducing waste to landfill, and promoting use of recycled materials (refer to the ESP Policy for the exhaustive list of principles against the focus areas).
The ESP Policy currently only applies to procurements of construction services valued at $7.5 million or more by non-corporate Commonwealth entities and certain corporate Commonwealth entities. In June 2025, the ESP Policy will apply to the following categories of procurements:
The Government has signalled its intent to transition Australia towards a circular, net-zero economy. Based on this commitment, additional procurement categories may fall under the ESP Policy in future.
DCCEEW have developed the Sustainable Procurement Guide which provides general advice on implementing ESP Policy requirements into procurements. It provides example Approach to Market requirements and contract terms for inclusion in the relevant documentation.
DCCEEW has also released the following resources to assist Commonwealth entities in implementing the ESP Policy into relevant procurements:
There is currently no specific guidance for those procurement categories that will not fall under the ESP Policy until 1 July 2025.
The SESP is the means through which the supplier outlines how its current practices and proposed approach to the delivery of goods / services are consistent with sustainability outcomes and the ESP Policy. It will be a mandatory tender requirement for relevant procurement categories. It may also be included as a tender requirement for procurements to which the ESP Policy does not apply (e.g. a procurement not within the relevant procurement categories, or a procurement within the relevant procurement categories but does not meet the relevant value threshold) if the Commonwealth determines that some, or all, of the ESP Policy Requirements should apply.
Commonwealth officials will consider the following when evaluating a SESP as part of a supplier’s tender:
If a supplier’s tender is successful, the SESP will become a schedule attached to the finalised contract.
Once on-contract, the supplier is obligated to comply with the SESP. To measure compliance, the relevant Commonwealth entity will prescribe relevant metrics against which the supplier must regularly report.
Additionally, the relevant Commonwealth entity and the supplier will regularly review the SESP at agreed upon intervals, including reviewing the effectiveness of measures and procedures put in place to maximise sustainability. Should an area of improvement be identified, the relevant Commonwealth entity and supplier can agree to renegotiate the contract to include measures and procedures that will address this area of improvement.
Aldermane will follow developments in the ESP Policy and monitor wider changes to procurements that occur as part of the Government’s greater focus on integrating sustainability into its procurement activities.
If you have any questions or would like specific advice on the ESP Policy and how it might affect your procurement activities, please feel free to contact us.
Authors:
Rory Alexander, Managing Partner
Brenton Lam, Senior Associate
Veer Shrivastava, Graduate
