Federal Contractors Climate Disclosures

In an effort to get the US on track to meeting the Paris Commitments, the Biden administration proposed the Federal Contractors Climate Disclosures in November 2022  through the Federal Acquisition (FAR) Council. The proposed guidelines will require certain companies doing business with the federal government (primarily the DoD, GSA, and NASA) to disclose emissions and reduction strategies. With over $650 Billion dollars in contracts awarded every year, the US Federal Government is the largest customer in the world. The proposed rule is still being finalized but is expected to be approved in the coming months, meaning the time is now to start preparing. This blog post will provide you with all the information you need to understand these requirements and ensure your business is not left out from such a major opportunity.

These proposed FAR guidelines come on the heels of the proposed SEC Climate disclosures that were proposed just a couple of months ear. While the two are similar in content, they do have their differences and cater to very different audiences. Because the SEC Disclosures are intended for publicly traded companies, they tend to include more financial risk reporting. The FAR guidelines are intended for suppliers to the federal government as a way to meet emission reduction targets, so these generally focus more on carbon accounting and decarbonization.

What is Required in this Disclosure?

There different levels of disclosures for both “significant” and “major” suppliers. A “significant contractor” is defined by a company that does more than $7.5 Million dollars in business with the government every year, but not more than $50 Million dollars. A “major contractor” on the other hand, is a company that does over $50 million dollars in business with the government every year. In 2021, there were 4,413 significant contractors, and 1,353 major contractors meeting these criteria.

Significant contractors will need to disclose their scope 1 and 2 emissions only within 1 year of the rule becoming finalized. There is no requirement for scope 3 disclosures, target setting, or risk assessment, though these can be included as they are best practice for decarbonization. Major contractors also need to disclose scope 1 and 2 emissions within a year of the final ruling, but they have further requirements as well. Major suppliers also need to disclose scope 3 emissions, a CDP questionnaire and score, climate and transitional risks, and must set an SBTi Target- all within 2 years of the rule becoming finalized. There are also some important exceptions to take note of, which include tribal and native corporations, higher education institutions, nonprofit organizations, local governments, and businesses with 80% or more of annual revenue from federal contracts.

Optimizing Disclosures

You business may be obligated under both the proposed FAR guidelines and the SEC climate disclosures. Both of these disclosures, along with many others, leverage the GHG Protocol and TCFD recommendations. This is by design, so that the same data may be used for multiple different disclosure requirements if your business has adopted a strategy that is aligned with these protocols and frameworks. Thankfully, the SINAI platform is aligned with GHG Protocol, TCFD recommendations, and is certified by TÜV Rheinland, and has a proven record in helping companies disclose their emissions to various reporting agencies.