New Reporting Requirements for US Federal Contractors

On November 10th 2022, the Biden-Harris Administration made a historic proposal to protect US Federal supply chains from climate-related risks. Entitled the “Federal Supplier Climate Risks and Resilience Rule”, the Administration is proposing a requirement for major Federal contractors to set science-based targets and publicly disclose their greenhouse gas emissions and climate-related financial risks.

The US is the largest buyer of goods and services in the world – making up USD$630 billion worth of purchases within the last fiscal year alone. This means that they also face many climate-related risks, as with a greater supply chain, disruptions have greater potential impact. The rule would closely follow Task Force on Climate-Related Financial Disclosure (TCFD) recommendations, Science-Based Targets Initiative (SBTi) criteria as well as the CDP (Carbon Disclosure Project) reporting framework.

The proposed rule establishes reporting requirements for suppliers, who have faced many disruptions within the last year that have impacted every sector of the economy. Federal contractors in the US are worth more than half of global market capitalization. This underlines the importance of the need for mandatory public disclosure to increase the resilience of the federal supply chain.

One year following the rule publication, any contractor receiving USD$50 million or more in annual contracts would be required to publicly disclose their scopes 1, 2 emissions through the CDP, and within two years disclose relevant scope 3 and set targets validated by the SBTi. Smaller contractors would only be required to publicly report their scopes 1 and 2 emissions and contractors receiving less than USD$7.5 million/annum would be exempt.

This announcement from the White House comes just over a year after the UK Government announced Public Procurement Notice 06/21 (PPN 06/21), which requires all UK companies who wish to bid on public contracts worth £5 million or more to measure their carbon emissions as well as setting a goal to be NetZero by 2050. The public disclosure of these emissions includes scopes 1 and 2 and partial scope 3.

If the Biden-Harris Administration proposal comes into effect, it would be the first government-wide strategy to enforce disclosure and management of the climate risks that face the American economy, businesses and people. This announcement comes in tandem with many proposed regulations on mandatory public disclosures being announced worldwide. The standardization and unification of different standards frameworks such as the ISSB and TCFD are being integrated into the majority of proposals. This may just be the next rule in a historic global shift towards making climate disclosure mandatory.