How government contracts can shape climate policy and regulation

Climate action in law and policy is often framed as flowing from legislation, regulation, and formal government guidance. In practice, governments tend to look for evidence that new approaches are workable before embedding them into binding frameworks.

That evidence often comes from delivery. How requirements perform in real contracts, how suppliers respond, and how public bodies manage implementation all influence whether ideas are taken up at scale.

Contracts as an underused lever

Government contracts are typically understood as tools for delivery. Less attention is paid to their role as testing grounds for policy ideas.

In reality, contracts allow public bodies to trial new expectations within existing contractual relationships. They make it possible to observe cost implications, supplier capability, data availability, and operational burden before committing to wider regulatory or policy change. In that sense, contracts can reduce uncertainty and build confidence in advance of formal frameworks.

This upstream role remains relatively underused, but it is increasingly important in areas such as climate action, where ambition often runs ahead of established delivery models.

From practice to policy: how influence travels

Influence from contracts to policy does not move in a straight line. It tends to develop through iteration and political cycles.

Early adopters within government explore more ambitious contractual approaches. These approaches generate a feedback loop that provides data on  what works, what needs adjustment, and what support suppliers require. Over time, this experience helps surface common standards and reduces perceived risk for wider adoption.

An illustration from climate-aligned procurement

In the period before the UK Cabinet Office issued PPN 01/24, and alongside the mandatory requirements introduced under PPN 06/21 for larger contracts, public bodies were working through how climate-related requirements could be implemented, sequenced, and managed at contract level in practice.

These early approaches demonstrated that it was possible to integrate carbon-related requirements into contracts in a way that suppliers could engage with and delivery teams could manage, helping to surface where flexibility, sequencing, and proportionality were needed in practice.

When PPN 01/24 was later issued, it reflected a direction of travel that had already begun to take shape across parts of government practice, drawing on models and approaches that had been tested through contracts rather than introduced solely through top-down policy design.

This example is intended to illustrate how contractual practice can inform and help de-risk policy development, rather than to suggest a linear or causal account of regulatory change.

This pattern is visible in the way specific contractual mechanisms have been developed and adapted over time. For example, gain-share and contract modification clauses originally developed through The Chancery Lane Project were later adapted for use in public procurement contexts, including within the optional carbon reduction contract schedule introduced under PPN 01/24. These clauses were designed to be modular, proportionate, and adaptable to supplier maturity, reflecting lessons learned through real-world contracting rather than abstract policy design.

Why this matters for climate governance

Climate policy often struggles with the gap between ambition and implementation. Contracts offer a way to narrow that gap.

By using contracts to test, refine, and normalise climate-related requirements, governments can move more quickly and confidently toward formal frameworks. Policy, regulation, and guidance are then informed by delivery realities rather than assumptions. This provides an important, and little used, complement to more centralised approaches to policy development.

What next

If government frameworks are to keep pace with climate ambition, greater attention needs to be paid to how contracts are used upstream, not just as delivery tools but as mechanisms for learning and influence, right across policy.

A small number of case studies explore how public and commercial contracts have been used to test climate-related approaches, shape expectations, and support the development of wider government guidance.

For those working on climate policy as a key intervention point, whether in government, advocacy, or philanthropy, these examples invite reflection on how contracts can be used as a practical, upstream complement to existing policy efforts. We welcome conversations with teams interested in exploring this further.