In November 2022, the Government of the USA issued a proposal to amend the Federal Acquisition Regulation. It requires several US government contractors to reveal their GHG – GreenHouse Gas Emissions and other climate-related financial risks. Moreover, it also proposes to determine science-based targets to control GHG emissions.
It also covers Climate-related Financial Risk factors in furtherance of the EO’s recognition of which impacts climate change. Also, it covers the factors that pose a physical risk to the assets and probable supply chain disruptions. Moreover, the proposed rule will also benefit the Biden-Harris administration’s objective of attaining a net-zero emissions economy by 2050.
Proposed Changes in Federal Acquisition Regulation
The proposed rule gives two categories of government contractors: major and significant contractors. Both major and significant contractors are required to undertake annual GHG emission inventories. However, major contractors will also be subject to an annual climate disclosure requirement.
It will include the development of science-based emission control targets. From a government contracts point of view, current commercial and non-commercial Federal Acquisition Regulation provisions will also be amended. Moreover, it will require new presentations from all the contractors. The SAM – System of Award Management will also be revised to accumulate new climate-related information. Similarly, under the new rule, the government of the USA contracting officers will be directed to declare responsibility determinations.
It will be based on a contractor’s adherence to the new climate-oriented elements of the Federal Acquisition Regulation. Also, it requires prominent federal suppliers to disclose greenhouse gas emissions and all climate-related financial risk factors publicly. The new rule is implemented by dividing all the major federal suppliers into significant and major contractors. A significant contractor will receive funds from $7.5 million to $50 million in federal contract obligations in the last fiscal year.
On the other hand, a major contractor will receive more than $50 million in federal contract obligations in the last fiscal year. As per the proposed law, the significant and major threshold will cover over 86% of the US government’s supply chain GHG impacts. This rule also includes various exceptions from disclosure and inventory requirements. Major and significant contractors will not be required to hold scope 1 or scope 2 emissions inventories.
Moreover, a major contractor will not be required to make a climate disclosure annually or determine science-based emissions control targets. It will happen when the contractor is an Alaska Native Corporation, a non-profit research entity. Or an institution of higher education, an entity getting 80% or more of its revenue from the federal operation and management contracts, or a local or state government.
There are also some more exceptions for major contractors. It is not required to make climate disclosure annually or determine science-based emissions control targets if it is a non-profit organization. Apart from this, if it is based on NAICS – North American Industry Classification System, it is not required to report the outcomes of these inventories.
These contractors will need to register in the SAM and represent annually whether they are major contractors or significant contractors. However, there will be some exceptions here. Contractors can check the official website for more details.
