On November 10, the Biden Administration announced a proposal to amend the Federal Acquisition Regulation (FAR) to require “major federal suppliers” and “significant federal suppliers” to disclose their greenhouse gas (GHG) emissions and assessments of climate-related risks, and to set targets for GHG emission reductions. The rest of this note summarizes this proposal.
What is the Federal Acquisition Regulation?
The US federal government describes itself as the world's single largest buyer of goods and services—purchasing over $630 billion in the last fiscal year. The FAR presents over 2000 pages of policies and procedures that (executive branch) federal agencies are to follow when acquiring products or services using Congressionally appropriated funds. These rules are issued under the joint authorities of the Administrator of General Services Administration (GSA), the Defense Department (DOD), and the National Aeronautics and Space Administration (NASA); the Office of Management and Budget (OMB) Office of Federal Procurement Policy provides oversight.
The latest proposal would revise multiple FAR sections to require “major federal contractors” and “significant federal contractors” to:
- Disclose their GHG emissions
- Evaluate their “climate-related financial risk”
- Set “science-based targets” to reduce their GHG emissions
The proposal defines these types of contractors, and their required actions.
Which contractors would be covered by the latest proposal?
For purposes of this proposal:
- Major federal contractor - an offeror of goods and/or services that received more than $50 million in total Federal contract obligations in the prior Federal fiscal year
- Significant federal contractor - an offeror of goods and/or services that received more than $7.5 million but not more than $50 million in total Federal contract obligations in the prior Federal fiscal year
Which GHG emissions and activities must be disclosed?
Subject contractors will be required to calculate and disclose their emissions of all of the following GHGs: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, nitrogen trifluoride, and sulfur hexafluoride.
Beginning 1 year after this proposal is finalized, major and significant federal contractors must do the following annually
- complete an inventory of Scope 1 (entity direct emissions) and Scope 2 (emissions from purchased energy) GHG emissions
- report totals in the government’s System for Award Management
Beginning 2 years after this proposal is finalized, major federal contractors must also do the following annually
- complete an inventory of Scope 3 emissions (attributable to the entity but occur elsewhere, such as at suppliers or customers)
- submit an Annual Climate disclosure consistent with provisions in the Recommendations of the [G-20 sponsored] Task Force on Climate-Related Financial Disclosure (which cover governance, strategy, risk management, and metrics and targets)
- develop a “science-based target” for GHG emissions reductions, aligned with the Paris Agreement, and provide it on a publicly-available Internet website
Exceptions are available for nonprofit research entities and universities, state and local governments, nonprofits, and small businesses. Entities can also request waivers, under specified circumstances.
Subject contractors must also certify these reports and submissions.
What happens next?
Written comments are due by January 13, 2023. After that date, the agencies (GSA, DOD and NASA) are expected to move to finalize the requirements. Because this is an administrative action, it is unlikely that Congress will interfere. If the organization qualifies as a “significant” or “major” federal contractor – or is seeking to become one by pursuing federal contracts – it will be required to comply with final requirements in order to qualify for federal contracts. Even if the organization is not directly subject to these requirements, if they are adopted they will reinforce stakeholder expectations that similar GHG accounting and management are underway.
Does the organization contract to provide the US federal government with good and services, subject to requirements of the Federal Acquisition Regulation?
Does the organization contract to provide the US federal government with:
- $7.5 - $50 million in goods and services in any year
- More than $50 million in goods and services in any year
Does the organization do each or any of the following annually:
- Prepare an inventory of GHG emissions, for Scope 1, Scope 2, and or Scope 3?
- Evaluate climate-related financial risks
- Set targets for GHG emissions reductions (including through use of science-based targets)
- Report on these activities and results
Is the organization tracking the FAR rulemaking discussed in this note?
- If so, is it preparing to submit comments?
Where can I go for more information?
- US Council on Environmental Quality, “Federal Supplier Climate Risks and Resilience Proposed Rule” web portal - https://www.sustainability.gov/federalsustainabilityplan/fed-supplier-rule.html
- GSA/DOD/NASA proposed revisions to FAR (11/14/22 Federal Register) - https://www.govinfo.gov/content/pkg/FR-2022-11-14/pdf/2022-24569.pdf
- Acquisition.gov (FAR home website) - https://www.acquisition.gov/
About the Author
Jon Elliott is President of Touchstone Environmental and has been a major contributor to STP’s product range for over 30 years.
Mr. Elliott has a diverse educational background. In addition to his Juris Doctor (University of California, Boalt Hall School of Law, 1981), he holds a Master of Public Policy (Goldman School of Public Policy [GSPP], UC Berkeley, 1980), and a Bachelor of Science in Mechanical Engineering (Princeton University, 1977).
Mr. Elliott is active in professional and community organizations. In addition, he is a past chairman of the Board of Directors of the GSPP Alumni Association, and past member of the Executive Committee of the State Bar of California's Environmental Law Section (including past chair of its Legislative Committee).
You may contact Mr. Elliott directly at: email@example.com