How the Federal Government’s Commitment to Net-Zero Affects Your Company’s Future
Executive Order 14057
Executive Order 14057 establishes a policy that the Federal Government will lead by example to help transition the Nation to a net-zero emissions economy by 2050 by setting ambitious government-wide goals for a 65 percent reduction in scope 1 and 2 greenhouse gas (GHG) emissions by 2030 from 2008 levels and achieving net-zero emissions procurement. To achieve these government-wide goals, the EO 14057 requires agencies to set individual scope 1 and scope 2 reduction targets, as well as scope 3 reduction targets, and meet building, fleet, and operational goals aimed at reducing these emissions. These goals and requirements are quickly flowing down to Federal contractors.
What are Scope 1, 2 and 3 emissions? Scope 1 GHG emissions are from sources that are owned or controlled by a company. Scope 2 GHG emissions result from the generation of electricity, heat or steam purchased by a company, e.g purchased electricity, heat and cooling. Scope 3 GHG emissions are from sources not owned or directly controlled by a company but related to the company’s activities. Think your company is not affected? If you purchase goods and services, capital goods, fuel and energy, transportation and distribution services, waste removal, and business travel; or use leased assets, process sold products, use sold products, conduct end of life treatment of sold products, operate franchises or investments; or have employees who commute – you are included.
Federal Supply Chain. The Federal Government’s supply chain is a major source of GHG emissions from Federal operations. GSA has estimated that in 2019, contractors and subcontractors emitted a total of 150 million metric tons CO2e associated with Federal contracts, more than twice the Federal Government’s own scope 1 and scope 2 emissions combined. Using a whole-of-government approach, EO 14057 requires the Federal Government to use its scale and procurement power to achieve net-zero emissions and requires each agency to use procurement to promote environmental stewardship, and drive emissions reductions by Federal suppliers.
What is Net Zero Emissions Procurement?
EO 14057 encourages amendment of the Federal Acquisition Regulation (FAR) to require major Federal suppliers to publicly disclose GHG emissions and climate-related financial risk and to set science-based reduction targets and ensure that major Federal agency procurements minimize the risk of climate change.
Pending updates to the FAR and issuance of government-wide policy or guidance on reducing supply chain emissions, agencies are pursuing procurement vehicles, including pilot projects, that aim to reduce contractor emissions or embodied emissions from the purchase of products and services. Some Agencies have already established agency-specific standards, policies, and programs for sustainable acquisition that incentivize contractors to account for and reduce emissions and climate risks. For example, GSA Alliant 3 and GSA OASIS PLUS have incorporated substantial points in the evaluation of proposals; and they have mandated GHG and other environmental reporting for subsequent GWAC Task Orders; and they have included this reporting in future CPARs. This is just the tip-of-the-iceberg for the future of Environmental Sustainability Planning and Reporting.
No Federal contractor is going to escape compliance; and delaying implementation will reduce your company’s competitiveness and future contract performance.
Why is Small Business Included? Federal contractors are estimated to emit more than three times the entire Federal government; and small businesses collectively are a large proportion of those emissions. 45,661 distinct small businesses received contracts in the top 100 NAICS codes in the last reporting period, and there are many times more small business subcontractors. Small business contributions toward net zero are just as important as large businesses. The temporary reprieve for small businesses bidding OASIS+ is likely to be short-lived in view of Executive Order 14057.
Value Chain GHG Emissions for VAR Companies
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