The Biden Administration has put forward a proposal aimed at mitigating the damaging financial effects of the $637 billion worth of goods and services the U.S. government purchases each year on the environment and climate. The proposal would also allow the government to take advantage of the economic benefits associated with addressing climate change.

The proposal referred to as the "Federal Supplier Climate Risk and Resilience Rule," mandates the top federal contractors—that account for approximately 1.3% of contractors but produce 85% of the greenhouse gas (GHG) emissions in the federal supply chain—to reveal their GHG emissions generated from direct operations and electricity consumption.

A smaller group of these contractors, about 0.3%, would also have to report their indirect GHG emissions, evaluate their risks and opportunities related to climate change, and set goals for reducing GHG emissions based on scientific data.

The rule would help strengthen the resilience of the federal supply chain and the overall U.S. economy by making possible “critical updates to contracting strategies and programmes aimed at reducing climate risk to taxpayers and industries that the federal government and American people rely on for essential products and services,” Ceres said.

According to the proposed rule, two different sets of disclosures would apply based on the number of contracts a supplier had with the government in the previous fiscal year. Suppliers with contracts ranging from $7.5 million to $50 million would be required to disclose their Scope 1 and 2 emissions, while those with contracts exceeding $50 million (representing only 0.3% of registered contractors) would be required to disclose their Scope 1, 2, and relevant Scope 3 emissions, as well as conduct climate risk assessments and set science-based targets for reducing emissions, validated using recognised standards.

These standards include those set by the Task Force on Climate-Related Financial Disclosures (TCFD), which have been widely adopted by the private sector.

• Ceres made several suggestions to decrease the government's GHG emissions, which include: Implementing federal standards for determining GHG emissions, evaluating the financial risks and opportunities related to climate change, and setting science-based targets;
• Restricting the use of "mission-essential" waivers and increasing transparency regarding the use of all exemptions;
• Preventing businesses with a significant impact on the government's climate risk from benefitting from regulatory relief intended for small businesses; and
• Encouraging the largest contractors to openly share information about any voluntary efforts aimed at supporting historically-disadvantaged communities and communities dependent on fossil fuels.

Steven M. Rothstein, Managing Director of the Ceres Accelerator for Sustainable Capital Markets, said, "Given the federal government's huge buying power, this is a chance for the U.S. to greatly speed up investments and deployment of proven climate solutions while encouraging innovation in the private sector. The government has the world’s largest supply chain, and its impact cannot be overstated: for example, over half of all cement produced in the U.S. is purchased with federal dollars. Concrete and cement have significant carbon footprints and are poised for technological breakthroughs, opening a significant window through which to drive a whole-industry transition to low-carbon production and cleaner supply chains.”

Rothstein added, “This proposal is a major step forward in the government’s efforts to reduce risks to our economy and environment from the harmful impacts of climate change. For too long, the federal supply chain has remained vulnerable to climate disasters and unprepared for a zero-emissions economy, posing a threat both to the government’s finances and its ability to deliver essential services. This rule has been carefully tailored to protect taxpayers while strengthening our economy and national security.“

Leslie Cordes, Vice President of Programmes, Ceres, said "The federal government has the right and responsibility to require contractors being considered for federal contracts to disclose their climate change risks in a decision-useful format. It also has enormous leverage to reduce the quantity of greenhouse gas emissions embodied in its supply chain. These GHG emissions leave the government highly vulnerable to both transition risks, with its suppliers unprepared for the inevitable shift to a low-carbon future, and the physical risks suppliers face from extreme weather and other climate change impacts.”

The Biden administration has opened up its proposal for public feedback until February 13, 2023. If you would like to read Ceres' full thoughts on the proposed rule, they are available for your perusal.

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Source: Ceres