Biden proposes new law Requiring Emissions Disclosures from Federal Suppliers.
Big news in the world of ESG and Sustainability! The Biden administration announced a new proposal that will require federal contractors to disclose environmental data through CDP and set science-based decarbonization targets.
This new initiative from the White House is part of the administration’s Federal Sustainability Plan that was launched in December. This plan outlines the goals and initiatives for the U.S. federal government to achieve net zero emissions by 2050.
Within this Federal Sustainability Plan, this new policy that has been proposed outlines that the federal government will now require suppliers to the U.S. federal government to publicly disclose greenhouse gas emissions (GHG) and climate-related financial risk. This is applicable to federal contractors with over $7.5 million in annual contracts to report scope 1 and 2 emissions. Contractors with over $50 million will report scope 1 and 2 emissions along with relevant categories of scope 3 emissions. It will also ask these companies to take action by setting science-based GHG reduction targets.
These proposals will leverage the CDP environmental reporting system, which is the global non-profit that run an environmental disclosure system for companies, cities, states, and regions. It will also leverage the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations. TCFD in summary is a framework that provides information to investors about what companies are doing to mitigate the risks of climate change, as well as be transparent about the way in which they are governed. Last but not least, it will also use the Science Based Targets Initiative (SBTi) criteria which are widely considered the most ambitious decarbonization targets available.
“Environmental impact must be a top priority for all powerful economic actors in their decision-making going forward. Just like any large corporation, the U.S. government needs quality data from suppliers to see the full picture of its environmental impact. The Federal Supplier Climate Risks and Resilience Rule will follow the model that CDP pioneered in our sustainable supply chain work, demonstrating the power of procurement by ensuring that federal suppliers disclose vital environmental data and set ambitious decarbonization targets. This will give the White House a comprehensive picture of environmental risks as well as opportunities for sustainability action. Moreover, this disclosure data will be useful in informing the Justice40 implementation, helping all companies, municipal governments and investors make greener, more equitable, smarter decisions about where to invest capital.” -Simon Fischweicher, Head of Corporations and Supply Chains, CDP North America.
This announcement is of massive importance as it represents one of the most significant supply chain rules in US history. As many are reporting, the US federal government is the largest purchasing organization in the world meaning if passed into law, the impacts of this will be felt far and wide. It very likely going to change the landscape of sustainability and ESG reporting in the US, and will also have a global affect. CDP reported that,
“Those who will be asked to disclose for the first time will join nearly 20,000 organizations that currently disclose through CDP, including 18,700+ companies representing US$60.8 trillion (half of global market capitalization) and over 1,100 cities, states and regions. Earlier this year, the U.S. Securities and Exchange Commission proposed another disclosure rule that would require all U.S. public companies to disclose environmental data – confirming a now-mainstream understanding that disclosure drives environmental action.” - CDP
“We can’t emphasize enough how gratifying it is to see the federal government wield its enormous purchasing power to further advance environmental impact and the just transition. We take great pride in the fact that the Biden Administration has now made CDP disclosure the law. The White House’s leadership will undoubtedly send ripple waves of change throughout both U.S. and global supply chains – and signal to the companies that are lagging on their sustainability journeys that it’s time to take action if they hope to be competitive and resilient in the 21st century economy. Ultimately, this is further evidence of the impact CDP has had and will continue to have by raising the bar higher for the major players in the climate crisis.” - Elizabeth Small, General Counsel and Head of Policy, CDP North America.
Sources:
https://www.cdp.net/en/articles/media/in-bold-new-move-biden-administration-makes-cdps-model-the-law
https://www.esgtoday.com/biden-to-require-federal-suppliers-to-disclose-emissions-set-climate-targets/
https://www.linkedin.com/feed/update/urn:li:activity:6996546553742008320/
