The ESP Policy: What It Means for Organisations
A practical guide to Australia's Environmentally Sustainable Procurement Policy
A practical guide to Australia's Environmentally Sustainable Procurement Policy - who it applies to, what it requires, and why partnering with social enterprises is your smartest path to compliance.
Procurement is no longer just about price. It's about the full value - environmental, social and economic - that every dollar of public spending can generate.
Australia's Environmentally Sustainable Procurement (ESP) Policy came into effect on 1 July 2024, marking a significant shift in how the Commonwealth Government approaches purchasing. For procurement teams, contract managers and suppliers, understanding the policy, and how to get the most from it, is now essential.
What is the ESP Policy?
The Environmentally Sustainable Procurement (ESP) Policy is a Procurement Connected Policy (PCP) administered by the Department of Climate Change, Energy, the Environment and Water (DCCEEW). It embeds environmental sustainability into government purchasing and uses the Commonwealth's buying power, around 17% of GDP, to drive Australia's transition to a net zero, circular economy.
The policy rests on three interconnected pillars:
Climate
Minimising emissions
- Optimise energy efficiency
- Low embodied carbon materials
- Reduce greenhouse gas output
Environment
Protecting ecosystems
- Optimise water efficiency
- Use safe, non-toxic materials
- Minimise waste generation
Circularity
Keeping resources in use
- Extend product life cycles
- Reuse and repair first
- Design out waste
The policy also establishes a mandatory reporting framework, the Supplier Environmental Sustainability Plan (SESP), which requires suppliers to document their approach to environmental sustainability and report against defined metrics throughout the life of the contract.
Who does it apply to?
The policy is mandatory for non-corporate Commonwealth entities and prescribed corporate Commonwealth entities. It applies only to procurements conducted in Australia and does not cover Commonwealth grants or contracts delivered wholly or partly overseas. Other entities are encouraged to adopt it voluntarily.
It is being phased in across four procurement categories:
Construction services
Threshold: $7.5M+
In effect: 1 July 2024
ICT goods
Threshold: $1M+
In effect: 1 July 2025
Furniture, fittings & equipment
Threshold: $1M+
In effect: 1 July 2025
Textiles
Threshold: $1M+
In effect: 1 July 2025
Why work with social enterprises to deliver on the ESP?
Social enterprises, businesses that trade to deliver social, environmental or community impact, are natural partners for organisations navigating the ESP Policy. Their missions are frequently aligned with the policy's three core pillars, generating compounding value that conventional suppliers often cannot match.
Here are the key benefits:
Circular economy alignment built in
Many social enterprises are founded on circularity principles — diverting waste, refurbishing goods and recycling materials. Contracting them directly contributes to the ESP's circularity requirements without additional effort.
Amplified value for money
The ESP Policy's definition of value for money includes social and environmental costs, not just price. Social enterprises deliver across all three dimensions simultaneously, strengthening your procurement case.
Stronger ESG credentials and reporting
Engaging social benefit suppliers generates measurable outcomes across ESG pillars, supporting both SESP obligations and mandatory ASIC sustainability reporting requirements for large organisations.
Supply chain resilience and diversification
Working with certified social enterprises broadens your supplier base, reducing over-reliance on a narrow group of conventional suppliers. Social enterprises often bring innovative, locally grounded approaches that improve resilience to market disruption.
Competitive advantage in government tenders
Demonstrating a track record of engaging social benefit suppliers strengthens SESP responses and tender evaluations — a genuine differentiator as government policy increasingly rewards this approach.
Reputation and community trust
Partnering with social enterprises signals a commitment to outcomes beyond profit, building employer brand strength, stakeholder trust and employee engagement.
Enable
Assembled Threads
Practical ways to work with social enterprises
You don't need to overhaul your procurement systems to start. Here are six practical steps organisations can take right now:
Map the market before you go to tender
Use certified directories to identify social enterprises operating in your procurement categories. Social Traders certifies social enterprises nationally, Supply Nation connects buyers with Indigenous businesses, and WEConnect International lists women-owned businesses. Understanding the market early allows you to design procurement processes that are genuinely accessible to social benefit suppliers.
Engage early and build relationships
Social enterprises are often smaller organisations with limited capacity to respond to complex tenders. Engaging potential suppliers before the formal process through market sounding or information sessions, helps them prepare and builds the relationships for strong SESP commitments.
Require social benefit subcontracting in large contracts
For contracts above the ESP Policy thresholds, include clauses that require prime contractors to engage certified social enterprises within their supply chain. Set a minimum spend target or a defined number of subcontractors and make it a reportable SESP commitment – creating pathways for social enterprises that may not have the scale to prime a large contract.
Break up large contracts where feasible
Consider structuring large procurement packages as smaller, discrete parcels. This widens the competitive field and gives specialist social enterprises a genuine opportunity to bid directly.
Weight evaluation criteria for sustainability
Include environmental and social sustainability as explicit, weighted evaluation criteria in your approach to market. Reward tenderers who demonstrate credible SESP commitments and active engagement with social benefit suppliers.
Set targets and track outcomes
Establish internal targets for social enterprise spend and track results across your portfolio. Use the ESP reporting framework as a baseline, add social value metrics where possible, and publish outcomes to build accountability over time.
The ESP Policy is an opportunity, not just a compliance obligation. Organisations that embed environmental and social sustainability into their procurement now will be better placed to win government work, meet ESG reporting requirements, and demonstrate genuine impact in the communities they serve. Working with social enterprises is one of the most direct ways to get there.
Australia's leading industry body in social performance
Social Traders takes the guesswork out of social procurement, so you can drive your social performance further.
Access a national network of certified social enterprises across industries and use our reporting capabilities to capture the social and environmental value your organisation is creating.
Join Social Traders and turn your procurement spend into measurable impact.