Proposed Regulation Would Require Federal Contractors to Report on GHG Disclosures
Yesterday, the FAR Council issued a
Proposed Rule to amend the Federal Acquisition Regulation (FAR) to create a new annual representation for certain contractors as the first step in implementing President Obama’s
Executive Order 13693, Planning for Federal Sustainability in the Next Decade. This certainly is not the first time that the FAR Council has proposed using the FAR to implement the administration’s social and economic reforms. Although much of the recent rulemaking pertains to wage and labor issues, the growing focus on
environmental issues could signal that this Proposed Rule is the first step in a more comprehensive regime of environmental compliance for government contractors.
Executive Order 13693 required federal agencies to submit proposals to the Council on Environmental Quality and Office of Management and Budget to reduce scope 1 (direct), scope 2 (emissions from purchased energy), and scope 3 (supply chain, transportation, etc.) greenhouse gas emissions 40% by
2025 compared to a 2008 baseline. As two specific examples of these reduction targets:
- the Department of Defense committed to reducing Scope 1 & 2 emissions 42 percent from the FY 2008 baseline and committed to reducing Scope 3 emissions 25 percent; and
- the General Services Administration set a reduction target for Scope 1 & 2 emissions at up to 73 percent from FY 2008 levels and a target for Scope 3 emissions of up to 83 percent.
Because these goals explicitly contemplate reductions in supply chain GHG emissions they may, over time, require federal agencies to demand additional GHG reduction measures from their suppliers, including federal contractors.
The Proposed Rule takes the first step to implement these GHG reduction commitments by gathering information on GHGs that is already being reported by federal contractors. Contractors that received $7.5 million or more in federal contract awards in the preceding
federal fiscal year will be required to make an annual representation within the System for Award Management (SAM) as to whether and where they publicly disclose greenhouse gas emissions and/or greenhouse gas reduction goals or targets. Importantly, this requirement
applies to any “public disclosure,” and is not expressly tied to securities filings, meaning that any voluntary GHG reporting or goal setting a contract is engaged in may trigger a reporting obligation.
Although the Proposed Rule itself does not impose any affirmative obligations on making these greenhouse gas emissions reports—contractors simply must indicate whether they otherwise already make such disclosures—the rule explains that this rule likely is the first in what
will be a series “to help the Government assess supplier greenhouse gas management practices and assist agencies in developing strategies to engage with contractors to reduce supply chain emissions.”
Additionally, the Proposed Rule states that the Agencies are also “considering approaches to make disclosures of climate change risk analyses from Government suppliers available to agencies to help inform agency inventory and management of climate related risks to federal facilities,
operations, and missions, including supply chains.” The Proposed Rule notes that the Securities and Exchange Commission already requires disclosure of material risks associated with climate change including “impacts to personnel, physical assets, supply
chain and distribution chain,” and seems to be contemplating a system to make this already disclosed information more readily accessible to federal agencies.
Comments on the Proposed Rule are due on July 25, 2016.