The Obama Administration recently took an important step towards greening the U.S. government’s $400 billion supply chain.
In May, the administration proposed a new rule where companies bidding on government contracts worth $7.5 million or more must indicate if and where they report their carbon footprint, emissions-reductions goals and climate change-related risks. The rule is anticipated to affect 5,500 companies.
To be clear, companies will not be required to report the amount of greenhouse gases they emit—only whether they report emissions—and the rule does not say that companies with lower emissions profiles will be favored. But the rule does lay the groundwork for more climate-friendly government purchasing in years to come.
As the White House explains on its blog, “By understanding where larger contractors and vendors that sell goods and services to the Federal Government disclose this information, we’ll be able to better assess supplier greenhouse gas management practices, manage direct and indirect greenhouse gas emission, address climate-risk in the Federal Government’s supply chain, and engage with contractors to reduce supply chain emissions.”
Resources on Greenhouse Gas Accounting
The Greenhouse Gas Protocol offers businesses a number of resources to measure their emissions, including:
- The GHG Protocol Corporate Accounting and Reporting Standard: Used by thousands of companies worldwide, this document provides guidance on how to prepare a corporate greenhouse gas emissions inventory. It covers scope 1 and 2 emissions, defined as the emissions from a company’s own operations or leased assets (scope 1) and emissions from purchased energy (scope 2).
- The GHG Protocol Scope 2 Guidance: This document provides important additional information on accounting for emissions from purchased electricity, steam, heat and cooling.
- The GHG Protocol Corporate Value Chain (Scope 3) Standard: For companies already able to measure their emissions from their own operations and energy use, the next step is to measure emissions from other locations of the company’s value chain in order to comprehensively account for the company’s total carbon footprint. The Scope 3 Standard provides guidance on accounting for emissions categories both upstream and downstream of the company’s operations.
- GHG Protocol Online Courses: Convenient, online courses are available to help corporate sustainability officers get up-to-speed on the GHG Protocol standards.
- CDP Climate Change Reporting Program: Once a company has conducted a greenhouse gas inventory, it can join the ranks of thousands of companies that are reporting their emissions to CDP. This can improve a company’s standing with investors and, as aforementioned, critical customers such as the US federal government.
A Really Big (Potential) Carrot for Low-Carbon Business
The U.S. government is the nation’s largest purchaser, spending more than $400 billion on contracts for goods and services in 2015. From office supplies to cutting-edge defense technology, the U.S. government procures goods and services from all corners of the economy.
Its purchasing power makes it a force for low-carbon economic growth. As of 2013, only 33 of the top 100 highest-paid government contractors reported their emissions to CDP, a global emissions reporting platform widely used by companies. The remaining 67 that did not report their emissions to CDP received $121 billion from the U.S. government in 2013. The proposed rule as written would not divert this huge sum towards more climate-conscious companies, but it sends a clear signal to large contractors that the U.S. government is willing to embed climate change-related data in its procurement processes.
Encouraging disclosure of emissions is not entirely new for the federal government. The Department of Defense, which spent more than $273 billion on contracts in 2015, is the second-largest U.S. purchaser of renewable energy, next to Google. The U.S. Navy recently announced that it will require its top 100 energy suppliers to disclose emissions data, citing security concerns of relying on fossil fuel-based energy.
What This Means for Companies with Government Contracts
If your company relies on U.S. government contracts and does not currently report emissions, it should consider doing so in order to stay in front of evolving government rules.
In fact, the majority of the world’s largest companies are already disclosing emissions to CDP. Most rely on Greenhouse Gas (GHG) Protocol standards to guide how they calculate and report their emissions inventories. The standards are free to download, and online training can help corporate sustainability leads get up to speed quickly.