On November 10, 2022, the federal government proposed a rule that would require government contractors to publicly disclose their greenhouse gas (GHG) emissions and set emissions reduction goals. Jointly proposed by the Department of Defense, the General Services Administration, the National Aeronautics and Space Administration, and the Office of Federal Procurement Policy in the Office of Management and Budget (OMB), the proposed rule would amend the Federal Acquisition Regulations (FAR) to require contractors to make these disclosures in order to qualify for future federal procurement contracts. Specifically:
- Direct and Indirect GHG Emissions. Each “significant” contractor ($7.5 million to $50 million in annual contract obligation) and “major” contractor (above $50 million) would be required to prepare a GHG inventory of its annual direct (Scope 1) and indirect (Scope 2) GHG emissions.
- “Scope 3” Emissions. Each major contractor would also be required to disclose its Scope 3 GHG emissions. This extends beyond the contractor’s operations, to include emissions that are a consequence of the contractor’s operations, but occur elsewhere at sources other than those owned or controlled by the contractor.
- Climate Disclosure Report. Each major contractor would have to publish an annual climate disclosure report that would include a qualitative disclosure of climate-related risks.
- GHG emission reduction targets. Each major contractor would also be required to publish science-based targets to reduce GHG emissions in line with what the latest science deems necessary to meet the goals of the Paris Agreement, as validated by a third party — the Science Based Targets initiative (SBTi).
These would be expansive new requirements for government contractors — and would go even further than the extensive climate-related disclosure rules proposed by the Securities and Exchange Commission (SEC) earlier this year. Federal contractors should review carefully the implications of the proposal. Comments are due by January 13, 2023.
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