Regulatory and Legal Reform

A draft rule to force federal contractors to make specific and detailed climate disclosures is burdensome, unrealistic and costly to manufacturers. It should be rescinded completely, the NAM told the Federal Acquisition Regulatory Council this week. 

The background: In November, the FAR Council—which is composed of the Defense Department, the General Services Administration and NASA—proposed a rule to require climate disclosures from federal contractors, many of whom are manufacturers. The proposed rule would require contractors with more than $50 million in annual federal contract obligations to:

• Disclose their greenhouse gas emissions, including so-called Scope 3 emissions (those attributable to the suppliers and customers throughout a company’s value chain);
• Set targets to reduce their greenhouse gas emissions within a decade (including Scope 3 emissions) based on standards set forth by a third-party nonprofit organization, the Science-Based Targets initiative, and get the targets validated by SBTi; and
• Disclose their climate-related financial risks pursuant to a framework written by a second nonprofit group, the Task Force on Climate-Related Financial Disclosures, and submit those risk disclosures to yet another nonprofit (CDP, formerly the Carbon Disclosure Project).

Why it’s a problem: Compliance with the proposed rule would be difficult, if not wholly unfeasible, prohibitively expensive and time-consuming, NAM Managing Vice President of Tax and Domestic Economic Policy Chris Netram told the FAR Council. It would also impact small businesses within federal contractors’ supply chains given the rule’s focus on Scope 3 disclosures and target setting.

• “The proposed rule would impose significant costs on manufacturers as they work to meet the complex—and in many cases impractical or impossible—requirements of the rule,” Netram said.
• “As a result, manufacturers providing critical goods and services to the federal government, as well as the businesses throughout their supply chains, will be directly and adversely impacted … The national security of the United States could likewise be harmed, as critical contractors could be disqualified from supplying the military, and the required disclosures could expose sensitive information to America’s adversaries.”

 What can be done: The FAR Council should rescind the proposed rule in its entirety, Netram said, but if it is intent on making changes, “it must re-propose a rule with substantial revisions to make its requirements more cost-effective and workable for federal contractors and more narrowly tailored to the actual climate-related risks to which the federal government is exposed.”