On May 25, the three federal agencies that comprise the Federal Acquisition Regulatory Council published a proposed rule in the Federal Register that, if finalized as proposed, would require federal contractors with awards that cumulatively exceed a numerical dollar threshold to indicate whether they publicly disclose information on their greenhouse gas (GHG) emissions and, if so, where they make the disclosures. In other words, the proposal would not require such parties to disclose GHG emissions directly to the government but to disclose whether they disclose information about their GHG emissions publicly. The proposed rule, which would be issued by the General Services Administration, Department of Defense and National Aeronautics and Space Administration, would also provide a voluntary option for other federal contractors to make similar disclosures. The agencies are accepting comments on the proposed rule through July 25.
Below are five highlights from the proposed rule.
1. To Which Federal Contractors Would the Proposed Rule Apply? The proposed rule would amend the Federal Acquisition Regulation (FAR), found in Title 48 of the Code of Federal Regulations. The FAR establishes "uniform policies and procedures for acquisition by all executive agencies" with some exceptions. 48 C.F.R. 1.101. The proposed rule, in turn, would apply to federal contractors that are subject to the FAR. Agencies that are not subject to the FAR include, but are not limited to, the Federal Aviation Administration and the U.S. Postal Service. See Fed. Aviation Admin., Acquisition Management Policy 11 (2016); U.S. Postal Serv., Supplying Principles and Practices 361 (2015). However, these agencies could choose to adopt the proposed rule or similar language as a matter of agency policy.
2. What Does the Proposed Rule Require? The proposed rule would require those federal contractors subject to the FAR that received over $7.5 million in contract awards in the previous federal fiscal year to certify whether and where they publicly disclose the results of a GHG inventory. Proposed Rule, Federal Acquisition Regulation: Public Disclosure of Greenhouse Gas Emissions and Reduction Goals -- Representation, 81 Fed. Reg. 33192, 33195 (May 25, 2016) (to be codified at 48 C.F.R. 23.803(b)). If the contractor discloses GHG emissions data or a quantitative GHG emissions reduction goal publicly, the proposed rule would require the contractor to provide the link to the website on which such data appears. Id. The proposed rule explicitly states that the reporting requirement is optional for contractors that received less than $7.5 million in contract awards in the previous federal fiscal year. Id. at 33196 (to be codified at 48 C.F.R. 52.223-ZZ).
3. What Counts as "Public Disclosure"? While the proposed rule does not define public disclosure, it provides some guidance as to what that term would mean if the rule were finalized in current form. First, the proposed rule identifies "a publicly accessible Web site" as public disclosure. Id. at 33196 (to be codified at 48 C.F.R. 52.223-ZZ). A "publicly accessible Web site" includes "the supplier's own Web site or ... a recognized, third-party greenhouse gas emissions reporting program." Id. Second, the proposed rule would consider disclosure by either the contractor itself or a parent company to qualify as public disclosure. Id. at 33192.
4. Why Is the Government Pursuing This Rule? The proposal states that the agencies issued the proposed rule "to help the Government assess supplier [GHG] management practices and assist agencies in developing strategies to engage with contractors to reduce supply chain emissions, as directed in the Executive Order (E.O.) 13693." Id. at 33194. Executive Order 13693 establishes for the federal government "a clear overarching objective of reducing [GHG] emissions across Federal operations and the Federal supply chain." Exec. Order No. 13693, 80 Fed. Reg. 15871, 15871 (Mar. 19, 2015). That executive order "requires the seven largest procuring agencies to implement procurements that take into consideration contractor GHG emissions and directs the Council on Environmental Quality to release an annual inventory of major suppliers that includes information on whether those suppliers publicly disclose GHG emissions and GHG reduction targets." 81 Fed. Reg. at 33192.
5. What Are the Potential Consequences of This Proposed Rule? The thrust of the proposed rule appears clear -- the federal government seeks to gather information that would enable it to take GHG emissions into consideration when deciding what items to procure and from which potential contractors to procure those items. Moreover, while the proposed rule would not require actual disclosure of emissions but rather would obligate contractors to inform the federal government if they are already disclosing information on GHG emissions, it could be a step toward more detailed disclosure or a future requirement that federal contractors disclose whether they assess risks from climate change. Indeed, the proposed rule itself indicates that the agencies "are considering approaches to make disclosures of climate change risk analyses from Government suppliers available to agencies to help inform agency inventory and management of climate change related risks to Federal facilities, operations, and missions, including supply chains." Id. at 33193. The Federal Register preamble includes possible future regulatory language asking contractors to disclose whether they conduct such risk analyses and solicits comment on that language in particular. The proposed rule would also create additional burdens for corporations already required to report GHG emissions under the federal GHG reporting program. See, 40 C.F.R. pt. 98.