What Does the Proposed Federal Supplier Climate Risks and Resilience Rule Include?

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On November 10, 2022, the Biden-Harris Administration proposed the Federal Supplier Climate Risks and Resilience Rule, which would require major federal contractors to disclose their greenhouse gas (GHG) emissions and climate-related financial risks, and set science-based emissions reduction targets. The U.S. Federal Government is the world’s largest single buyer of goods and services and faces significant financial risks from climate change and supply chain disruptions. Intended to strengthen the resilience of Federal supply chains and reduce climate risk, this action would make the United States the first national government to require its suppliers to disclose GHG emissions reduction targets in alignment with the Paris Agreement.

What are the compliance requirements of the proposed Federal Supplier Climate Risks and Resilience Rule?

Federal Contractor

Requirements

Category

Size of Annual Federal Contract Obligations

Greenhouse Gas (GHG) Emissions

In alignment with the GHG Protocol Corporate Standards

Climate-Related Financial Risks

In alignment with TCFD

Science Based Emissions Reduction Target

In alignment with SBTi
Major Contractor > $50 million Scope 1, Scope 2, and “relevant categories” of Scope 3 Emissions

Disclosure Location: CDP, www.sam.gov

 Yes

Disclosure Location: CDP

 Yes

Disclosure Location: SBTi
Significant Contractor > $7.5 million Scope 1 and Scope 2 Emissions only

Disclosure Location: www.sam.gov

 No No
Other Contractor < $7.5 million None No No

What third-party standards does the proposed rule leverage?

GHG Protocol Corporate Accounting and Reporting Standard and Guidance

Task Force on Climate-Related Financial Disclosures (TCFD)

  • The proposed rule requires major federal contractors to complete an annual climate disclosure in alignment with the recommendations of the TCFD released in 2017. These recommendations are structured around four thematic areas: governance, strategy, risk management, and metrics and targets.

  • About TCFD: In 2015, the Financial Stability Board (FSB) created the Task Force on Climate-Related Financial Disclosures (TCFD) to develop consistent climate-related financial risk disclosures for use by companies, banks, and investors in providing information to stakeholders. The purpose of the TCFD is to provide climate-related information to investors about what companies are doing to mitigate the risks of climate change.

CDP Climate Change Questionnaire

  • The proposed rule requires major federal contractors to use the CDP Climate Change Questionnaire to disclose their Scope 1, 2, and relevant Scope 3 categories as well as the annual climate disclosure aligned with TCFD recommendations. CDP has identified the portions of the questionnaire that align with the TCFD here.

  • About CDP: CDP is a not-for-profit that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts, and drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources, and protect forests.

Science Based Targets Initiative (SBTi)

  • Major federal contractors are required to develop science-based targets and have such targets validated by SBTi under the proposed rule. The targets must be made available on a publicly accessible website; targets published on the SBTi website will satisfy this requirement.

  • A target is considered to be ‘science-based’ if it is in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement to limit global warming to well below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C.

  • About SBTi: The Science Based Targets Initiative (SBTi) is a collaboration between CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), the World Wide Fund for Nature (WWF), and one of the We Mean Business Coalition commitments, to champion science-based target setting as a powerful way of boosting companies' competitive advantage in the transition to a low carbon economy.

Who is exempt from the proposed rule?

The proposed rule identifies a list of major or significant contractors to whom the requirements would not apply, which includes:

  • An Alaska Native Corporation, a Community Development Corporation, an Indian tribe, a Native Hawaiian Organization, or a Tribally owned concern, as those terms are defined in 13 CFR 124.3;

  • A higher education institution (defined as institutions of higher education in the OMB Uniform Guidance at 2 CFR part 200, subpart A, and 20 U.S.C. 1001);

  • A nonprofit research entity;

  • A state or local government; or

  • An entity deriving 80 percent or more of its annual revenue from Federal management and operating (M&O) contracts that are subject to agency annual site sustainability reporting requirements.

When does the public comment period end?

The public comment period was recently extended to February 13, 2023. Comments can be submitted to the Regulatory Secretariat Division at www.regulations.gov by searching for “FAR Case 2021-015”.

KERAMIDA has a team of trained experts who can help federal contractors to disclose their greenhouse gas (GHG) emissions and climate-related financial risks. We can help suppliers to determine and disclose their GHG emissions, as well as set science-based emissions reduction targets. For more information, please contact us or call (800) 508-8034 to speak with one of our Sustainability consultants today.

Author

Erica Skowron, M.S.
Senior Sustainability Analyst
KERAMIDA Inc.

Contact Erica at eskowron@keramida.com

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