TEMPE, Ariz., March 22, 2023 /PRNewswire/ -- Nearly 1,400 companies would be required to submit their full greenhouse emissions data to bid for US federal contracts under the Federal Supplier Climate Risks and Resilience Proposed Rule, according to research carried out by Persefoni, the global leader in climate data disclosure and management software.
The US Government is the world's single largest buyer of goods and services, with purchases exceeding $630 billion in the last fiscal year alone. It is proposing the new measure due to the operational and financial risks driven by climate change, just as corporations across the private sector, as well as other governments, have already begun requiring this same data from their global suppliers.
Indeed, the United States is in danger of not having a seat at the table as mandatory climate disclosure regulations that impact US businesses roll out in other countries/regions, like the UK, EU, and Asia. Already this month, in a move that mirrors the Biden proposal, Canada announced that major suppliers to its government will be required to disclose greenhouse emissions and set targets to reduce them beginning this April.
Persefoni's Chief Executive Officer and Co-Founder Kentaro Kawamori said: "The Biden proposal is a reasonable first step, but even it is late. We've seen this before, for example, with GDPR / Data Privacy: the world's business community moves forward, the US buries its head in the sand, and the tail wags the dog. However, in this case, it's considerably worse, as the US misses out on a seat at the table for the trillion-dollar energy transition engine that's already started. Just like in the private sector, other nations have begun demanding US companies disclose climate data because climate risk is financial risk. US businesses are compelled to react, and they do so with limited support from their own government.
"There is fear about how companies will comply, which is at best misplaced and at worst, manipulated. We know that companies can comply because Persefoni helps companies do exactly this every day, across virtually every NAICS sector and in more than a dozen countries."
Under the current proposal, 1,394 "major" contractors with more than $50 million in annual federal contracts will be required to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions, and in so doing, report climate-related financial risks and set science-based emissions reduction targets.
"Significant" contractors with between $7.5 and $50 million in contract obligations will also need to report, but merely their Scope 1 and 2 emissions, not from their supply chain. It is not possible to accurately determine the total number of significant contractors, given there remain more than a dozen exemptions in the proposed rule for a wide variety of contracting organizations, such as public bodies.
This comes as consultation for the rule, part of President Biden's Executive Orders on Climate-Related Financial Risk and Catalyzing Clean Energy Industries and Jobs Through Federal Sustainability, closed in February, with a final conclusion likely to be reached this summer.
Under the current proposal, small to medium businesses (SMBs) are not required to meet the "major" contractor disclosures, even if their contracts total surpasses the $50 million threshold. SMBs would only need to meet the disclosure requirement for "significant" contractors.
Additionally, and as noted by the Biden Administration, more than half of the contractors impacted by this proposal already share this climate data via CDP and other vehicles. The proposal makes the disclosure mandatory, matching the global market shift towards required reporting of GHG emissions.
Persefoni, a leading software provider for carbon management and accounting, calculated the number of companies affected by the proposed rule using the US Government's Federal Procurement Data System for those contracts awarded and active during the last fiscal year, along with other sources. Contractors who share the same parent company - that is, responsible for reporting climate data - were counted as one entity, where it was possible to identify.
Persefoni's Chief Decarbonization Officer Mike Wallace said: "The proposed rules, along with similar rules around the world, continue a snowball effect globally, as governments demand standardized carbon emissions data from their own suppliers. For example, we currently see the UK Government's own supplier requirements for GHG data drive a number of US-based Persefoni customers to disclose. The proposed changes to the US FAR rule both reflect and will add to this snowball effect."
"Persefoni supports all efforts to measure, manage, report, and reduce carbon emissions and applauds the US government's commitment to reduce its emissions by 65% by 2030. The software to manage and report on this is already available in the market; companies can adopt it to reduce complexity and cost, improve efficiencies, and solve what is essentially a data problem. There will soon be even less room for greenwashing."
Persefoni's Climate Management & Accounting Platform (CMAP) provides businesses, financial institutions, and governmental agencies the software fabric for managing their organization's climate-related data, disclosures, and performance with the same level of rigor and confidence as their financial reporting systems. The company's software enables users to simplify the calculation of their carbon footprint, identify decarbonization strategies and perform climate trajectory modeling aligned to temperature rise scenarios set forth by the Paris agreement, and benchmark their impact by region, sector, and/or peer groups.