Proposed Federal Supplier Climate Risks and Resilience Rule

In November, 2022, the Dept. of Defense, General Services Administration, and NASA jointly proposed a Federal Supplier Climate Risks and Resilience Rule, which will require major Federal contractors publicly disclose their greenhouse gas emissions and climate related financial risks and set emissions reduction targets.

The implications of this reach far beyond only Federal contractors, as contractors calculate their Scope 3 greenhouse gas emissions which include upstream and downstream emissions in that business’ activities. The US government is the world’s single largest buyer of goods and services, purchasing over $630 billion annually. This Rule covers approximately 86% of the emissions associated with that Federal supply chain (which in context, are estimated to be more than twice as large as all the emissions from operating the Federal government’s more than 300,000 buildings and 600,000 vehicles combined).

Specifically, the proposed Rule focuses first on “major” Federal suppliers. Under the Rule, those largest suppliers including Federal contractors receiving more than $50 million in annual contracts will be required to publicly disclose Scope 1, Scope 2, and Scope 3 emissions, disclose climate related financial risks, and set science-based emissions reduction targets. Additionally, “significant” Federal contractors with more than $7.5 million but less than $50 million in annual contracts will be required to report Scope 1 and Scope 2 emissions (of course, unless they are in the value chain of a major contractor and then they would have to provide Scope 3 data). Federal contractors with less than $7.5 million in annual contracts will be exempt from the rule (again unless they are in the value chain of a major contractor). Small businesses (which represent more than 25% of Federal contracts), with over $7.5 million in annual contracts would only be required to report Scope 1 and Scope 2 emissions under the proposed Rule.

As proposed, compliance with the proposed Rule will be required as a condition to a contract award.

The comment period for the proposed Rule closes on January 13, 2023. When implemented, the United States will become the first national government to regulate its supply chain by requiring government suppliers to disclose and reduce GHG emissions with the goal of achieving net zero emissions by 2050.