New Rule Requires Federal Contractor Disclosure of Existing Greenhouse Gas Emissions Reporting

As part of a federal government-wide initiative to significantly reduce its greenhouse gas emissions, in addition to setting new efficiency standards for federal agencies,¹ the federal government is reaching beyond the agencies themselves and engaging with major federal suppliers to encourage them to adopt similar practices. To this end, a new provision in the Federal Acquisition Regulations (FAR), which govern federal government contractors, will require disclosure by certain contractors of their emissions reporting. To be clear, this new regulation does not require calculation of greenhouse gas emissions, but only disclosure to the extent the federal contractor is otherwise reporting its greenhouse gas emissions. The final rule, published in the Federal Register on November 18, 2016 will go into effect December 19, 2016.²

The rule adds FAR 52.223-22, which will require all offerors for federal government contracts that earned at least US$7.5 million on government contracts in the previous fiscal year to state whether the bidder publicly discloses its greenhouse gas emissions and reduction goals. If the bidder does publicly disclose this information, it must also state where it does so. Offerors below the US$7.5 million threshold may choose to voluntarily submit this information, but are not obligated to do so under the rule.

Mechanically, the provision requires companies to check two boxes when proposing under a solicitation for a federal contract and, if applicable, to provide a website URL:

(1) The Offeror (itself or through its immediate owner or highest-level owner) [ ] does, [ ] does not publicly disclose greenhouse gas emissions, i.e., makes available on a publicly accessible Web site the results of a greenhouse gas inventory, performed in accordance with an accounting standard with publicly available and consistently applied criteria, such as the Greenhouse Gas Protocol Corporate Standard.

(2) The Offeror (itself or through its immediate owner or highest-level owner) [ ] does, [ ] does not publicly disclose a quantitative greenhouse gas emissions reduction goal, i.e., make available on a publicly accessible Web site a target to reduce absolute emissions or emissions intensity by a specific quantity or percentage.³

If an offeror checks "does" under either provision, "the Offeror shall provide the publicly accessible Web site(s) where greenhouse gas emissions and/or reduction goals are reported."⁴

As above, the rule stems from Executive Order 13693, which the FAR Council claims as the legal authority for requiring the disclosures.⁵ This 2015 Executive Order set the goal of reducing federal government emissions to 40% below 2008 levels by 2015. Towards this goal, the rule will "assist agencies in developing strategies to engage with offerors to reduce supply chain emissions"⁶ and "enable the Federal Government to better understand the greenhouse gas management practices of its industry partners."⁷ Even while the rule does not require additional reporting of greenhouse gas emissions, it is yet another step in a broader government effort to utilize its information-gathering powers to influence emission levels.

The final rule is largely similar to the proposed version released in May 2016 but makes several important clarifications.⁸

First, to alleviate fears that companies would be required to disclose proprietary information, the final rule clarifies that the provision only covers information already made public. Namely, the standard for whether a company discloses its emissions or emission reduction goals—and therefore must report doing so under FAR 52.223-22—is whether it makes such goals available on a publicly accessible website, specifically, "the Offeror's own Web site or a recognized, third-party greenhouse gas emissions reporting program."⁹ Therefore, companies will not be required to disclose any information not already part of a previously made disclosure. The FAR Council reiterated that the only disclosure required under the rule is the URL of the publicly available website where the contract offeror makes its disclosures, if it does so.¹⁰

Second, the final rule changes the prior reference to "recognized" standards to "accounting standards with publicly available and consistently applied criteria."¹¹ The FAR Council explained the standard was "intentionally left open, so as not to require any specific accounting or reporting methodology."¹² To further clarify the flexibility of the final rule, the language was amended to state that the Greenhouse Gas Protocol Corporate Standard is only one example of a greenhouse gas accounting standard, not the only acceptable standard.¹³

Finally, the rule clarifies that offerors not required to report information on the emissions practices of their parent companies or for facilities that they do not own.¹⁴

While contractors may be concerned that this new disclosure requirement will affect future contract awards, the FAR Council is clear that "The rule does not establish evaluation criteria to be used in a source selection decision."¹⁵ Therefore, contractors' reporting—or nonreporting—of emissions standards or goals should have no effect on contract award decisions, at least under this rule.

Notably, the rule contains no exemption for commercial or commercial-off-the-shelf items, or for acquisitions below the Simplified Acquisition Threshold. In fact, the rule establishes a commercial item equivalent to FAR 52.223-22 at FAR 52.212-3, that requires the same disclosure as the non-commercial item provision. The FAR Council noted that while 41 U.S.C. §§ 1905-1907 loosens some statutory requirements for these acquisitions, Executive Orders continue to apply in full force.¹⁶ Thus, this disclosure requirement will apply to all contractors seeking to participate in a federal government procurement that meet the US$7.5 million in contracting revenue threshold.