The U.S. government has issued a proposal that is out for public comment. If finalized, it would “amend the Federal Acquisition Regulation (FAR) to implement a requirement to ensure certain Federal contractors disclose their greenhouse gas emissions and climate-related financial risk and set science-based targets to reduce their greenhouse gas emissions.”
The proposal acknowledged similarities exist between the proposed SEC climate disclosure rule and this current proposal, but:
“… this proposed FAR rule specifically requires the Federal contractors with significant Federal contracts to provide their disclosures using the CDP Climate Change Questionnaire to maximize the consistency, comparability, and accessibility of disclosure data for use in managing Federal procurements and supply chains. In addition, per this proposed FAR rule, major contractors will also be required to set science-based targets to reduce their GHG emissions.”
The rule would explicitly codify into U.S. regulations the CDP framework as it is aligned with TCFD, the GHG Protocol and the Science Based Targets Initiative (SBTI). It would also have a broad impact – “cover[ing] 86 percent of annual spend and about 86 percent of supply chain GHG impacts.” Scope 3 reporting would also be required.
In explaining the types of entities potentially impacted:
“This rule proposes to separate ‘major Federal suppliers’ into two categories: significant contractors and major contractors. Per this proposed rule, both significant contractors and major contractors would be subject to annual Scope 1 and Scope 2 GHG emissions disclosure requirements …, while only major contractors would be subject to the annual climate disclosure, which includes disclosure of Scope 3 GHG emissions, and science-based target requirements …”
- A “significant contractor” is one that “received $7.5 million or more, but not exceeding $50 million, in Federal contract obligations (as defined in OMB Circular A-11) in the prior Federal fiscal year as indicated in the System for Award Management (SAM) at https://www.sam.gov.”
- A “major contractor” is one that “received more than $50 million in Federal contract obligations (as defined in OMB Circular A-11) in the prior Federal fiscal year as indicated in SAM.”
“According to award data available in the Federal Procurement Data System (FPDS), there were approximately 4,413 entities that received between $7.5 million and $50 million in Federal contract obligations in FY 2021, of which 2,835 (64 percent) are estimated to be small businesses. There were approximately 1,353 entities that received more than $50 million in Federal contract obligations in FY 2021, of which 389 (29 percent) are estimated to be small businesses.”
This proposal was issued under Executive Order (E.O.) 14030 of 2021.
Comments are due on or before January 13, 2023.