A forthcoming proposed rule from the Biden administration will require contractors supplying goods and services to the federal government to disclose greenhouse gas (GHG) emissions and other climate-related risks. The rule follows similar requirements proposed by the Securities and Exchange Commission (SEC) related to the disclosure of climate change risks.
The proposed changes to the Federal Acquisition Regulation (FAR) fall under the authority of the Federal Acquisition Regulatory Council (FAR Council). The FAR governs most acquisitions by the executive branch of the federal government. The U.S. government reports it is “the largest buyer of goods and services in the world, and executive branch agencies—particularly the Department of Defense—make most of these purchases.”
The draft proposed rules are in line with implementing Executive Order (EO) 14030, Climate-Related Financial Risk and EO 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability and would require the FAR Council to amend the FAR to:
- Require GHG and other climate risk disclosures from major federal suppliers (FAR case 2021-15).
- Require federal agencies to consider and minimize agency climate risks in major procurements (FAR case 2021-16).
- Set “goals for the procurement of sustainable products and services, [update] the definition of ‘biobased product,’ and [reorganize and clarify] FAR Part 23, Environment, Energy and Water Efficiency, Renewable Energy Technologies, Occupational Safety, and Drug-Free Workplace,” says law firm Sheppard Mullin (FAR case 2022-006).
“The proposal is just one element of the Administration’s Federal Sustainability Plan, issued in December 2021,” reports Wilmer Cutler Pickering Hale and Dorr LLP in a Lexology article. “The Federal Sustainability Plan aims to use the federal government’s procurement power to achieve ambitious net-zero targets, with the goal of shifting to net-zero procurement by 2050 and 100% carbon-free electricity by 2030.”
The final rule will detail the exact requirements for federal contractors to measure and report GHG emissions metrics.
Industry Preparation and New Opportunities
Federal contractors are advised to devise and execute procedures to document and track GHG emissions information both companywide and those attributable to specific procurement contracts.
The FAR cases linked to the expected regulatory changes refer to the terms “major Federal suppliers” and “major agency procurements,” neither of which has been defined at this point. The proposed rule is expected to define these terms.
EOs 14030 and 14057 create opportunities for new companies to begin supplying goods and services to the federal government. “Firms that provide products or services that can help the federal government achieve its goals (including realizing carbon-pollution-free electricity, procuring zero-emissions vehicles and related infrastructure, investing in innovative clean energy technologies, increasing energy and water efficiency in Federal facilities, increasing resilience against climate-related supply chain disruptions, and prioritizing products that can be reused, refurbished, or recycled) should familiarize themselves with the rules and specific risks related to Federal procurement, including commercial-item procurement,” advises Sheppard Mullin.