The World’s Largest Purchaser wants its Suppliers to Disclose, Reduce GHG Emissions
From Environmental Leader, Published on August 29, 2016
With an estimated annual spend that exceeds $450 billion, the US federal government is the largest buyer of goods and services in the world. So rules it establishes for suppliers affect a huge number of companies — those that currently supply goods and services as well as firms looking to win government contracts.
In other words, when the feds say they will soon require contractors to disclose and reduce their greenhouse gases, a huge number of companies should take note.
In August 2016, the US General Services Administration did just that.
In documents published in the Federal Register, the GSA says it plans to require large- and medium-sized contractors on its Alliant2 government-wide IT contract list to inventory and publicly disclose their GHG emissions annually, and set targets for reducing those emissions.
The GSA is seeking public comment on the plan and says of the current Alliant2 contractors, about 40% already publicly disclose their GHG emissions. It also estimates disclosure will take contractors about 80 hours to complete.
“Public disclosure of GHG emissions and GHG reduction goals or targets has become standard practice in many industries, and companies are increasingly asking their own suppliers about their GHG management practices,” the document says. “More than 4,000 companies provided public disclosure through third-party organization CDP (formerly the Carbon Disclosure Project) in 2015. Performing a GHG inventory provides insight into operations and opportunities for energy and operational savings that can result in both environmental and financial benefits.”
Just how companies measure their emissions under the new rules, however, might get tricky. Unless the process is relatively uniform, the reported results may not mean much. But it is a good start and the comments will hopefully flesh all this out.
In the meantime, the GSA’s plan follows a White House proposal to require suppliers to publicly disclose climate-related risks and actions. And in April, the US Navy said it will ask its 100 largest suppliers to disclose their greenhouse gas emissions, as well as strategies for cutting them, via CDP.
Additionally, a presidential executive order signed in 2015 required the seven largest US procurement agencies “take into consideration contractor GHG emissions and GHG management practices.”
Dexter Galvin, CDP’s head of supply chain, said he expects the GSA’s plan to not only reduce emissions but also save suppliers’ money.
“We welcome GSA’s plans to require even more of its suppliers to disclose climate information,” he said. “Proper tracking and transparency on this issue shows us what can be achieved: in 2015, 63 suppliers disclosed to CDP a combined saving $1 billion from their emissions reductions activities.
CDP also endorsed the White House push for GHG disclosure in public comments submitted in July.
“By leveraging its huge spending power, the GSA is helping to drive significant environmental and financial improvements in the supply chain, safeguarding its own and its suppliers’ future performance,” Galvin told Environmental Leader. “The announcement by the GSA is further evidence that prudent attention to climate risk and efficiency in the supply chain is the new normal for America’s biggest purchasers.”
William J. Anaya, an attorney with the Chicago law firm Greensfelder, Hemker & Gale, says the move may cost taxpayers extra in the short term.
“As the largest consumer of goods and services in the world, it always seemed somewhat hypocritical for the United States to lag behind industry in requiring its contractors and vendors to report both GHG emissions and to commit to GHG reductions,” Anaya said in an email exchange. “But, taxpayers should be prepared to pay the extra costs in the short term.
“If it is the policy of the United States to reduce greenhouse gas emissions, then Congress should get with the program and update environmental statutes to reflect and reward — and not punish — responsible industries involved in developing technology and techniques to destroy greenhouse gases in order to achieve substantial reduction.”
Anaya says this involves updating definitions of solid waste in statutes such as the Resource Conservation and Recovery Act to exclude activities and technologies that reduce emissions in compounds such as ozone-depleting chlorofluorocarbons (CFCs). The Montreal Protocol banned the manufacture of CFCs, but previously manufactured CFCs remain in lawful use throughout the US and globally.
“Industry needs to be incentivized to invent and implement strategies to reduce carbon emissions, and Congress needs to act to avoid the current regulatory and statutory disincentives,” Anaya said. “The old command and control model of agency regulation is a serious disincentive to implementing the public policy of reducing carbon emissions identified by the GSA in the recent Federal Register notice.”
For additional reading regarding carbon emissions management, please refer to the following links:
How Does Positive CDP Performance Drive Positive Financial Performance?
Why is it Beneficial to Consistently Strive for a High CDP Score?
Setting Emissions Reduction Targets within the Corporate Sector – Part 3