A proposed rule from the Biden Administration would reduce the harmful climate-related financial impacts of the $637 billion of products and services annually purchased by the U.S. government. The proposed rule also would enable the government to capitalize on climate-related economic opportunities.
The proposal, known as the Federal Supplier Climate Risk and Resilience Rule, requires the largest federal contractors – those representing roughly 1.3 percent of contractors but 85 percent of the greenhouse gas (GHG) emissions in the federal supply chain – to disclose their GHG emissions from direct operations and use of electricity. A subset of these contractors, those representing 0.3 percent of contractors, also would be required to disclose indirect GHG emissions, perform assessments of their climate change risks and opportunities and establish science-based targets for reducing GHG emissions.
The rule would help strengthen the resilience of the federal supply chain and the overall U.S. economy by making possible “critical updates to contracting strategies and programs aimed at reducing climate risk to taxpayers and industries that the federal government and American people rely on for essential products and services,” Ceres said in public comments filed today.
Under the proposed rule, two categories of disclosures would apply, depending on the suppliers’ contract volume in the previous fiscal year. Suppliers with $7.5 million to $50 million in contracts with the government would disclose Scope 1 and 2 emissions, whereas those with more than $50 million – which is just 0.3 percent of registered contractors – would be required to disclose their Scope 1, 2 and relevant Scope 3 emissions, assessments of climate risks, and establish validated science-based targets for emissions reductions. All disclosures and targets would use established standards, such as those of the Task Force on Climate-Related Financial Disclosures (TCFD), that have been widely embraced by the private sector.
Ceres’ comments included several recommendations for reducing the government’s GHG emissions, including:
- Establishing federal standards for calculating GHG emissions, assessing climate-related financial risks and opportunities, and establishing science-based targets;
- Limiting the use of “mission-essential” waivers and improved transparency around the use of all waivers;
- Preventing businesses with large impacts on the government’s climate risk from taking advantage of regulatory relief aimed at small businesses; and
- Strongly encouraging disclosure by the largest contractors of any voluntary efforts to address the needs of historically-disadvantaged communities and fossil fuel-dependent communities.
Ceres calls for the rule to be finalized quickly to increase climate risk disclosures and emissions reduction targets by large contractors as soon as possible.
“Given the federal government’s enormous purchasing power, this is an opportunity for the U.S. to greatly accelerate investment in and deployment of proven climate solutions while promoting innovation among the private sector,” said Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets, Ceres.“ The government has the world’s largest supply chain and its impact cannot be overstated: for example, over half of all cement produced in the U.S. is purchased with federal dollars. Concrete and cement have significant carbon footprints and are poised for technological breakthroughs, opening a significant window through which to drive a whole-industry transition to low-carbon production and cleaner supply chains.”
Rothstein added, “This proposal is a major step forward in the government’s efforts to reduce risks to our economy and environment from the harmful impacts of climate change. For too long, the federal supply chain has remained vulnerable to climate disasters and unprepared for a zero emissions economy, posing a threat both to the government’s finances and its ability to deliver essential services. This rule has been carefully tailored to protect taxpayers while strengthening our economy and national security.“
Leslie Cordes, Vice President of Programs, Ceres, said the federal government has the “right and responsibility to require contractors being considered for federal contracts to disclose their climate change risks in a decision-useful format. It also has enormous leverage to reduce the quantity of greenhouse gas emissions embodied in its supply chain, These GHG emissions leave the government highly vulnerable to both transition risks, with its suppliers unprepared for the inevitable shift to a low-carbon future, and the physical risks suppliers face from extreme weather and other climate change impacts.”
The Biden administration’s proposal is open for public comment until February 13, 2023. Click here to read Ceres’ full comments about the proposed rule.
In addition, Ceres has other resources for investors, companies and other key stakeholders who want to learn more about the rule. Click here to watch a webinar Ceres hosted with the Sustainable Purchasing Leadership Council that discusses the rule and includes comments from The White House’s U.S. Chief Sustainability Officer Andrew Mayock. Click here to listen to a Sustainable Finance podcast interview with Ceres’ Steven Rothstein that discusses the proposal.
