Proposed Federal Acquisition Regulation: Disclosure of Greenhouse Gas Emissions, Climate-Related Financial Risk

Description

The U.S. Department of Defense, General Services Administration, and NASA recently published a proposed rule that would amend the FAR to require federal contractors that receive annual federal contract obligations over a certain amount to disclose their GHG emissions and climate-related financial risk and set science-based targets to reduce GHG emissions. The purpose of the proposed rule is to allow the federal government to analyze and mitigate climate risks via a standardized disclosure process. Unlike the Securities and Exchange Commission's proposed rule regarding climate disclosures by public companies, this significant proposed rule applies to all companies, including private ones, with federal contracts above a specified amount.

The rule affects two categories of federal suppliers: "significant" contractors and "major" contractors. A contractor is classified as "significant" if it has received between $7.5 million and $50 million in federal contract obligations in the prior federal fiscal year. A contractor is classified as "major" if it has received over $50 million in federal contract obligations in the prior federal fiscal year.

Under the proposed rule, both significant and major contractors are required to inventory their annual Scope 1 and Scope 2 emissions and report them in the System for Award Management annually. Additionally, major contractors are required to disclose Scope 3 GHG emissions and develop science-based reduction targets. Contractors that do not make the required annual disclosures--and are not subject to a specific exception, exemption, or waiver as set forth in the rule--may be deemed nonresponsible, resulting in ineligibility for federal contract awards.

Listen as our distinguished panel discusses and provides an analysis of the proposed FAR rule amid the current administration's robust commitment to pursue climate-related initiatives via the federal government's procurement process. The panel will also offer best practices and practical next steps for establishing systems to track and prepare for future GHG disclosures since regulatory pressure is unlikely to go away.