The Biden administration plans to require the largest federal contractors to set targets for slashing their greenhouse gas emissions in line with goals established under the Paris climate accord in 2015. The proposed rule, announced on Wednesday, could have wide repercussions throughout corporate America as the U.S. federal government is the world's largest consumer of goods and services.
The administration's new proposal would also require that contractors make their emissions public as well as detail the risks climate change poses to their business. The list of the largest suppliers to the federal government includes aerospace giants like Boeing and Lockheed Martin as well as pharmaceutical companies such as Pfizer and Moderna.
The announcement comes as leaders from around the world met in Sharm el-Sheikh, Egypt, at a United Nations climate summit, where the Biden administration is under pressure to help developing countries already shouldering the burden of rising temperatures, while cutting its own emissions. According to the Washington Post, which broke the news, Biden is expected to tout the new plan when he arrives at the meeting on Friday.
With more than $630 billion in purchases over the past fiscal year, the U.S. government is the world's biggest buyer by a landslide. A fact sheet from the White House says that climate change poses significant financial risks to the government through disruptions to supply chains, such as when heat waves lead to power outages.
At present, over half of the biggest federal contractors are voluntarily disclosing climate-related information, but a full picture of their emissions is missing. One of the main ways that greenhouse gas emissions are measured and assessed is by looking at them within three different "scopes": Scope 1 emissions are controlled directly by the company; scope 2 are caused indirectly when the energy it purchases are produced; and scope 3 are those produced by the companies' own suppliers.
Under the new proposal, federal contractors receiving more than $50 million in annual contracts would be required to publicly disclose Scope 1, Scope 2, and Scope 3 emissions and climate-related financial risks. Businesses with less than $50 million in annual contracts but more than $7.5 million would be required to report Scope 1 and Scope 2 emissions. Those with less than $7.5 million in annual contracts would be exempt.
It's part of Biden's larger push to slash emissions throughout the federal government, including orders to have the government's entire vehicle fleet run on electricity and have federal agencies get their power from carbon-free sources. The administration's federal sustainability plan set a goal to achieve net-zero emissions for the federal procurement by 2050, with the latest proposal playing a crucial role, according to the White House. The new rule would apply to 85 percent of the emissions connected to federal contractors, estimated to be more than twice as large as the emissions from the government's 300,000 buildings and 600,000 vehicles combined.