Addressing climate change has been a priority for President Biden since his first day in office.  On December 8, 2021, President Biden continued that focus by issuing Executive Order (EO) 14057, Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, which includes a number of requirements directed at introducing sustainability to federal acquisitions.

This most recent EO announces an administration policy to achieve net-zero emissions from federal procurement by 2050 and comes on the heels of the public comment period extension to January 13, 2022 in response to EO 14030, Climate-Related Financial Risk.  Although the administration will likely be rolling out additional sustainability requirements in the coming months, contractors currently have an opportunity to help shape an initial requirement that may end up effectively establishing an environmental, social, and governance or “ESG” reporting requirement.  In particular, the Federal Acquisition Regulatory Council is seeking public comment to consider amending the Federal Acquisition Regulation (“FAR”) to:

(i) require major federal suppliers to both publicly disclose greenhouse gas emissions and climate-related financial risk and set science-based reduction targets; and

(ii) ensure that major federal agency procurements minimize the risk of climate change, including requiring the social cost of greenhouse gas emissions to be considered in procurement decisions and, where appropriate and feasible, give preference to bids and proposals from suppliers with a lower social cost of greenhouse gas emissions.

The administration’s current proposal is similar to recent activity at the agency level, with the U.S. Securities and Exchange Commission (“SEC”) announcing an “all-agency approach” in response to investor demand for ESG-related information.  The SEC is also seeking public comment in an effort to determine whether current climate change disclosures adequately inform investors and as of December 7, 2021 has received 5,867 comments.

In light of the rapidly evolving scope, demands, and attention placed on board and management accountability for sustainable business practices, Covington’s multidisciplinary ESG and Sustainability team created an ESG and Sustainability Toolkit as an entry point for analysis, understanding, and tailored advice on this wide ranging topic.

As part of an effort to reduce federal supply chain emissions, President Biden additionally ordered the General Services Administration to “track disclosure of greenhouse gas emissions, emissions reduction targets, climate risk, and other sustainability-related actions by major Federal suppliers, based on information and data collected through supplier disclosure” of greenhouse gas emissions (as discussed in consideration (i) above).

With new reporting, tracking, and emissions reduction targets potentially on the horizon, federal contractors should consider taking the opportunity to shape aspects of new requirements, such as the preferred method of tracking and reporting emissions data, including how to evaluate the social cost of such greenhouse gases.  For example, there would be a number of ways to measure the “social cost” of greenhouse gas emissions, which is generally an estimate of the monetized damages associated with incremental increases in greenhouse gas emissions.  As re-established under EO 13990, the Interagency Working Group on the Social Cost of Greenhouse Gases published interim estimates of the social cost of carbon, methane, and nitrous oxide in February 2021 that reflect one method for evaluating emissions data that could ultimately inform requirements imposed on contractors.  Although a coalition of states is currently challenging the administration’s use of social cost estimates to calculate regulatory costs and benefits under EO 13990,[1] the notice of public comment for EO 14030 still includes the social cost of greenhouse gases as one potential factor when considering greenhouse gas emissions in federal procurement decisions.

Comments may be submitted on the following questions on or before January 13, 2022 for FAR Case 2021-016 at https://www.regulations.gov/document/FAR-2021-0016-0001:

  1. How can greenhouse gas emissions, including the social cost of greenhouse gases, best be qualitatively and quantitatively considered in Federal procurement decisions, both domestic and overseas? How might this vary across different sectors?
  2. What are usable and respected methodologies for measuring the greenhouse gases emissions over the lifecycle of the products procured or leased, or of the services performed?
  3. How can procurement and program officials of major Federal agency procurements better incorporate and mitigate climate-related financial risk? How else might the Federal Government consider and minimize climate-related financial risks through procurement decisions, both domestic and overseas?
  4. How would (or how does) your organization provide greenhouse gas emission data for proposals and/or contract performance?
  5. How might the Federal Government best standardize greenhouse gas emissions reporting methods? How might the Government verify greenhouse gas emissions reporting?
  6. How might the Federal Government give preference to bids and proposals from suppliers, both domestic and overseas, to achieve reductions in greenhouse gas emissions or reduce the social cost of greenhouse gas emissions most effectively?
  7. How might the Government consider commitments by suppliers to reduce or mitigate greenhouse gas emissions?
  8. What impact would consideration of the social cost of greenhouse gases in procurement decisions have on small businesses, including small disadvantaged businesses, women-owned small businesses, service-disabled veteran-owned small businesses, and Historically Underutilized Business Zone (HUBZone) small businesses? How should the FAR Council best align this objective with efforts to ensure opportunity for small businesses?

[1] Louisiana v. Biden, No. 2:21-cv-01074 (W.D. La. filed Apr. 22, 2021).

Photo of Tyler Evans Tyler Evans

Tyler Evans is a partner in the firm’s Washington, D.C. office and a member of the government contracts group.  His practice covers multiple subject-matter areas, including research and development, non-traditional contracting, intellectual property, contract negotiations, flow-down requirements, small business issues, sourcing restrictions, costs…

Tyler Evans is a partner in the firm’s Washington, D.C. office and a member of the government contracts group.  His practice covers multiple subject-matter areas, including research and development, non-traditional contracting, intellectual property, contract negotiations, flow-down requirements, small business issues, sourcing restrictions, costs, and compliance.

Photo of Sarah Schuler Sarah Schuler

Sarah Schuler is an associate in the firm’s Washington, DC office. She is a member of the Government Contracts Practice Group, advising clients across a broad range of government contracting issues. She also maintains an active pro bono practice.