Box-ticking is out, job-ticking is in as small firms face a new procurement shake-up
10 August 2026
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Liz Barclay
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ESG is dead ... Long live the paperwork
Small businesses were promised freedom from the endless ESG forms, diversity statements, net zero targets and social value questionnaires that have clogged up public sector contracts for years. Instead, many owners fear they've merely landed on another square in the great game of procurement snakes and ladders. Ministers insist the new rules will reward firms that create jobs, train young people and raise wages, but thousands of microbusinesses are asking a simple question: if they're already struggling to afford the staff they have, how are they supposed to hire even more people just to win the work?
ESG Snakes and Ladders
The Government is ripping up ESG, net zero & DEI rules in public procurement and small firms are wondering if they’re saved or sacrificed. What’s being called the biggest procurement shake‑up in a generation is coming as the government shreds the ESG rulebook, scraps net zero targets, DEI reporting, modern slavery tick‑boxes and the “social value” maze that has buried small firms in paperwork for years.
While microbusinesses are celebrating the end of ESG (Environment, Social and Governance) red tape public sector contract bids, many fear the new hiring and wage rules could leave them shut out again.
There’s further complication. Away from the world of public sector Procurement there are new rules coming next year on ESG reporting. How will they align, or will everyone just end up confused. More on that later.
Axed
For years, firms bidding for government contracts had to prove they were doing a myriad of things including cutting carbon, boosting diversity, tackling modern slavery and improving high street.
Small firms said they couldn’t compete with big corporates that had entire compliance teams dedicated to making sure they were supporting domestic abuse victims and meeting social value targets. This got labelled as a box‑ticking exercise. The new government agrees. The Cabinet Office says procurement has become bloated with too many priorities, too much paperwork, and too little focus on economic growth. From 2027, the boxes to tick are being stripped back and it’s all about jobs.
Jobs
The new procurement model will be ruthlessly focused on business growth, job creation, higher wages and training.
Under the new regime firms paying above minimum wage will be seen as good partners in public sector projects, and companies that retain staff and boost pay over time will score higher. Bidders must show how they will hire young people looking for education, employment or training). For contracts over £1m bidders must prove they will create jobs. Contracts over £5m will have a 20% weighting for job creation, double the current social value score. This is a massive shift in how the UK spends its £300bn‑a‑year procurement budget.
Relief
Microbusinesses have spent years drowning in trying to understand the scoring systems and working out how to prove they were meeting all the targets on everything from net zero reporting to modern slavery statements. Many couldn’t bid for government work without hiring consultants just to fill in the forms.
The new system aims to have fewer hoops and less bureaucracy by ditching the ESG traps and the glossy sustainability reports. For small firms this should mean they are less likely to be excluded from bidding because the hoops are easier to jump through. However, job creation isn’t easy especially when it costs so much to recruit and train the right people to deliver the project you’re bidding for.
Fear
Under the new rules firms will have to prove they’re creating jobs, hiring young people and raising wages. Training and retaining, and boosting local economies, will all have to be backed up with evidence.
Big companies can hire the people they need in short order and run huge apprenticeship schemes. They have deeper pockets that can absorb wage rises and offer training programmes.
Small firms are already struggling with rising costs and tight margins that leave them shedding jobs and leaving vacancies unfilled. They’re less likely to have HR people on their teams, and they have high overheads, all of which make it impossible to magic up 20 new jobs just to win and deliver a contract.
Big business advantage
Contracts over £1m require job creation; contracts over £5m give 20% weighting to hiring and training, firms paying above minimum wage get rewarded and companies offering progression will get extra points. Large corporates can score high instantly. Small firms may struggle to score at all.
Small businesses will welcome simpler procurement, fewer forms and less bureaucracy but when they get a chance to think it through, they may well feel they still can’t bid because of the current realities of creating jobs and paying rising wages and NICs.
Swapping ESG box‑ticking for workforce box‑ticking could simply be more of the same.
Construction
The construction sector is one of the biggest suppliers to government and is bracing for impact. On paper, the new rules look like a gift: construction firms already hire locally, run apprenticeships, and create visible jobs on every project. Industry leaders warn the shift could split the sector in two.
Major contractors say the new model “recognises the powerful role procurement can play” in creating jobs and skills, and they’re right. Big players can scale fast, absorb wage rises, and deliver training at volume.
Smaller construction businesses, however, fear being squeezed out. Job‑creation scoring could become a new barrier, replacing ESG with a different kind of compliance hurdle.
Unless the rules are applied flexibly, the construction industry could see big contractors hoover up government work while small firms are pushed to the edges of the supply chain, which risks many going out of business, and the whole sector struggling to find the skills it desperately needs.
The risk
The new rules could increase contract costs and favour large employers, which is already the case. The new job‑creation criteria could increase costs and complexity, not reduce them and the worry is the UK economy is too weak to absorb more burdens.
Earlier this year, the Bank of England’s tender for banknote suppliers was slammed for forcing manufacturers to comply with strict ESG and diversity standards just to pass the first stage. That tender became the lightning rod for the Government’s crackdown.
Winners and Losers
Firms that hire locally, train workers and pay above minimum wage, especially in deprived areas will be the winners.
Small and micro businesses struggling with wage costs, unable to prove job creation and without formal training programmes will lose out.
Procurement will become a jobs‑first battlefield and small firms may need help to compete. While the government is ripping the ESG pages out of the public sector procurement handbook, and replacing it with a hard‑edged, jobs‑first regime, it’s unlikely they will finally level the playing field.
Now for the new ESG rules coming in 2027
Small and micro businesses are about to face two big shifts at the same time, and they look contradictory unless you understand the logic behind them.
There will be two Systems and two Purposes. You’re dealing with two completely different worlds.
ESG rules (coming next year) are regulatory and investor‑driven. They’re about:
measuring climate and social risks
reporting what matters financially
showing investors you’re resilient
and proving you understand your impacts.
You don’t need to be perfect; you just need to be transparent and credible.
Procurement rules (changing for 2027)
These are government‑driven. They’re about job creation, wages, training, young people and local economies. ESG is being stripped out because government wants jobs, not paperwork.
How they fit together
ESG rules tell you what to measure. Procurement rules tell you what government cares about when buying.
They’re not fighting each other; they’re just focused on different outcomes. ESG is about risk and resilience. Procurement is about jobs and growth.
Tension
You’ll still have to do ESG reporting even if procurement doesn’t ask for it. Procurement won’t reward you for ESG anymore. It rewards recruiting and creating jobs.
Some small firms face a double whammy:
ESG reporting for regulators
And job‑creation scoring for government contracts
Large firms can handle both but small firms may struggle with either.
What small businesses could do
Don’t over‑invest in ESG paperwork. Procurement won’t reward it. Investors only want what’s material, not glossy. Focus on energy costs and supply chain risks, workforce stability and credible disclosures.
Prepare for job‑creation scoring early. If you want government work, start thinking about apprenticeships and placements, wage plans and training programmes. Local colleges may be able to help. You don’t need big numbers; you need proof.
Avoid consultants unless absolutely necessary. Use simple templates. Focus on what’s financially material.
There’s a contradiction
ESG rules are tightening and procurement ESG is being scrapped. Both are happening around the same time. However, the logic is that Government wants jobs and markets want to know where the risks sit. Small businesses need to do enough of both without drowning.
If you’re bidding for public contracts, prepare for job‑creation scoring. If you’re dealing with banks, insurers or investors, prepare for ESG reporting. If you’re preparing for both, do both and give yourself more time. You don’t need perfection. You need clarity, credibility and simplicity.
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