On May 25 2016 the Federal Acquisition Regulatory Council published a proposed rule in the Federal Register that would require federal contractors with awards cumulatively exceeding a given threshold to indicate whether they publicly disclose information on their greenhouse gas (GHG) emissions; and if so, where these disclosures are made.
The rule – which would be issued by the General Services Administration, the Department of Defence and the National Aeronautics and Space Administration – would not require parties to disclose GHG emissions directly to the government, but rather to indicate whether information about their GHG emissions is disclosed publicly. It would also provide other federal contractors with a voluntary option to make similar disclosures.(1)
Which federal contractors would the rule apply to?
The rule would amend the Federal Acquisition Regulation.(2) With some exceptions, the regulation establishes "uniform policies and procedures for acquisition by all executive agencies";(3) the rule would apply to federal contractors that are subject to the regulation. Examples of agencies that are not subject to the regulation include the Federal Aviation Administration and the US Postal Service; however, these agencies could choose to adopt the rule – or similar language – as a matter of agency policy.(4)
What does the rule require?
The rule would require federal contractors that are subject to the regulation and 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 emissions inventory.(5)
If the contractor publicly discloses GHG emissions data or a quantitative GHG emissions reduction goal, the rule would require the contractor to provide the link to the website where this data appears.(6) The 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.(7)
What counts as public disclosure?
While the rule does not define 'public disclosure', it provides guidance on what that term would mean if the rule were finalised in its current form:
- Public disclosure is identified as "a publicly accessible Web site", which includes "the supplier's own Web site or… a recognized, third-party greenhouse gas emissions reporting program".(8)
- To qualify as public disclosure, the rule requires disclosure by either the contractor or a parent company.(9)
Why is the government pursuing this rule?
Federal agencies issued the 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".(10)
Executive Order 13693 establishes "a clear overarching objective of reducing [GHG] emissions across Federal operations and the Federal supply chain"(11) and 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".(12)
What are the potential consequences?
With this rule, the federal government seeks to gather information that would enable it to take GHG emissions into consideration when deciding what items to procure and which contractors to procure those items from. While the rule would not require the disclosure of GHG emissions per se, it would oblige contractors to inform the federal government if they are already disclosing information on GHG emissions, and thus could be a step towards more detailed disclosure policies or a future requirement that federal contractors must disclose whether they assess risks from climate change.
The rule indicates that federal 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".(13) The Federal Register preamble includes and solicits comment on possible regulatory language that would require contractors to disclose whether they conduct such risk analyses.
The rule would also create additional burdens for corporations that are already required to report GHG emissions under the federal GHG reporting programme.(14)
For further information on this topic please contact Roger R Martella Jr, Michael A Nemeroff, Benjamin E Tannen or Joel F Visser at Sidley Austin LLP by telephone (+1 202 736 8000) or email (firstname.lastname@example.org, email@example.com, firstname.lastname@example.org or email@example.com). The Sidley Austin LLP website can be accessed at www.sidley.com.
(1) The agencies are accepting comments on the proposed rule until July 25 2016.
(2) See Title 48 of the Code of Federal Regulations (CFR).
(3) 48 CFR Section 1.101.
(4) See Federal Aviation Administration, Acquisition Management Policy 11 (2016); and US Postal Service, Supplying Principles and Practices 361 (2015).
(5) See Proposed Rule, Federal Acquisition Regulation: Public Disclosure of Greenhouse Gas Emissions and Reduction Goals in Representation, 81 Fed Reg 33192, 33195 (May 25 2016) (to be codified at 48 CFR Section 23.803(b)).
(7) Id at 33196 (to be codified at 48 CFR Section 52.223-ZZ).
(8) Id at 33196 (to be codified at 48 CFR Section 52.223-ZZ).
(9) Id at 33192.
(10) Id at 33194.
(11) Executive Order 13693, 80 Fed Reg 15871, 15871 (March 19 2015).
(12) 81 Fed Reg at 33192.
(13) Id at 33193.
(14) 40 CFR pt 98.
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