Federal Government Proposes Rule Requiring Major Federal Contractors to Disclose Greenhouse Gas Emissions and Establish Science-Based Emissions Reduction Targets

As part of the recent COP-27 climate summit last month in Egypt, President Biden announced an initiative with significant implications for major federal contractors. Under this proposal, the United States would become the first country to require major government suppliers and contractors to set science-based emissions reduction targets aligned with the Paris Agreement.  It would also require contractors to disclose their greenhouse gas (GHG) emissions and climate risks.

This initiative—the proposed Federal Supplier Climate Risks and Resilience Rule—would have wide-reaching impacts if finalized.  Collectively, the proposed rule encompasses about 86 percent of the federal government’s supply chain GHG impacts and 86 percent of federal annual spending. For comparison’s sake, in FY 2022 alone the U.S. government purchased more than $630 billion in goods and services.

As part of the rule, the White House is calling for:

• Federal contractors receiving >$50 million to publicly disclose Scope 1, 2, and 3 emissions (where “relevant” on Scope 3). [“Major” contractors]
• Federal contractors receiving >$7.5 million but<$50 million to publicly disclose Scope 1 and Scope 2 emissions. [“Significant” contractors]
• Contractors <$7.5 million would be exempted, and small businesses with >$7.5 million to only need to disclose Scope 1 and Scope 2. 

The proposed rule relies on four existing and well established carbon emissions disclosure standards, including the GHG Protocol Corporate Accounting and Reporting Standards and Guidance, the 2017 Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations, the Carbon Disclosure Project (CDP) Climate Change Questionnaire, and the Science Based Targets Initiative (SBTi) criteria. The Federal Acquisition Regulation (FAR) Council has invited comments on “the use of these standards in this proposed rule, including potential alternatives to be considered in the formation of the final rule.”

The proposed rule would also create a new FAR subpart 23.XX, entitled “Public Disclosure of Climate Information,” to expand climate-related representations already provided for at FAR 52.223-22 and FAR 52.212-3. As it stands, only 31 percent of “major” contractors and 10 percent of “significant” contractors already report disclosing their GHG emissions through the System for Award Management (SAM).

In addition, the proposed rule creates a new standard of responsibility by providing that a federal contracting officer is required to treat a significant or major contractor as non-responsible unless it has inventoried its annual GHG emissions and disclosed its total annual emissions in the System for Award Management (SAM), the federal government’s official procurement database. Under FAR 23.XX03(b), a major contractor shall also be treated as non-responsible unless it has made available on a publicly accessible website an annual climate disclosure that was completed using the CDP Climate Change Questionnaire in the current or previous fiscal year and set targets to reduce its emissions. By tying compliance with these climate-related disclosure requirements to responsibility standards for prospective contractors, the FAR Council is incentivizing adherence to the proposed rule’s reporting requirements as the FAR requires an affirmative determination of responsibility for federal contract awards.

The comment period for the proposed Federal Supplier Climate Risks and Resilience Rule closes on January 13, 2023.  The proposed compliance requirements for major contractors would start two years after publication of a final rule.  If promulgated, this rule may be challenged in court along the lines of the Biden Administration’s COVID-19 vaccine mandate for federal contractors. 

***UPDATE***

On January 10, 2025, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration announced that they are withdrawing a proposed rule.

The withdrawal notice explains that the agencies lacked sufficient time during the current administration to finalize the proposed rule “particularly given the large volume of public comments and the policy issues they raised” and that “[t]he agencies’ overall analysis of public comments indicates evolving practices and use of standards in industry, and since the publication of the proposed rule, differing domestic and international regulations covering greenhouse gas disclosures have been created.”

Following withdrawal of the proposed rule, there is no uniform, government-wide obligation to disclose GHG emissions and reduction targets for purposes of obtaining federal contracts. However, government contractors should still carefully scrutinize their contracts for bespoke climate-related requests, as they would for any other non-standard contract term.

Want to learn more about the new federal contractor requirements concerning GHG emissions? Please contact Alison Pepper, 4As EVP of Government Relations and Sustainability.