Responding to the Biden Administration’s Climate Agenda: What Public Companies and Federal Suppliers Need to Know

By: Zohra Tejani , David A. Bell , Joyce Tong Oelrich , Ron C. Llewellyn

Since the start of the Biden administration in January 2021, there has been an increased focus on combatting climate change, including regulatory actions and initiatives to increase disclosure by corporations regarding their carbon footprint and efforts to address climate issues.

In March 2022, the U.S. Securities and Exchange Commission, after soliciting public feedback, also proposed a sweeping set of regulations (the SEC Climate Proposal) that would mandate certain climate-related disclosures in public companies' SEC filings. We previously covered the SEC Climate Proposal here.

On November 14, the Biden administration proposed the Federal Supplier Climate Risks and Resilience Rule (CRR), which would amend the Federal Acquisition Regulation (FAR) to require businesses with significant federal contracts to disclose climate-related data and to set targets to reduce greenhouse gas (GHG) emissions. The CRR has been proposed to implement certain aspects of Executive Order 14030, Climate-Related Financial Risk, which outlines the administration’s core principles for addressing climate-related financial risk.

In this guide we will outline the key provisions of the CRR, how they compare with the SEC Climate Proposal and suggest takeaways for companies in complying with these climate-related disclosure requirements. The CRR, which is being proposed by the Department of Defense, General Services Administration and the National Aeronautics and Space Administration, could impact smaller private companies that contract with the U.S. federal government and are subject to the FAR.

Even if a company is not directly subject to the climate disclosure requirements under the CRR or the SEC Climate Proposal, it is likely to be indirectly impacted as its customers and other stakeholders may require similar disclosure for their own reporting and in support of their status as a “responsible contractor” or as a demonstration of their shared commitment to address climate change. Preparing for these disclosure requirements may place a company in a strong position to address regulatory requirements, meet commercial and stakeholder demands and show good stewardship of this planet’s limited natural resources.

Federal Supplier Climate Risks and Resilience Rule 

Under the CRR, companies that exceed certain dollar thresholds in contracts with the federal government would have climate-related reporting and compliance obligations. Specifically, companies that are federal contractors would be separated into two categories: significant contractors and major contractors.

Significant Contractors

Significant contractors include companies with between $7.5 million and $50 million in federal contract obligations in the prior federal fiscal year according to the System for Award Management (SAM). Significant contractors would be obligated to conduct a GHG inventory of, and publicly disclose, (themselves or through their immediate or highest level owners) Scope 1 and Scope 2 GHG emissions calculated according to the GHG Protocol Corporate Accounting and Reporting Standard (GHG Protocol) in SAM.

Major Contractors

Major contractors include companies with over $50 million in federal contract obligations in the prior federal fiscal year as indicated in SAM. Major contractors would also be required to conduct a GHG emissions inventory for Scopes 1 and 2 emissions and disclose the results in SAM. However, in addition, such contractors would also have to provide an annual climate disclosure that aligns with the recommendations of the Taskforce for Climate-related Financial Disclosure (TCFD) framework, includes a GHG inventory of Scope 1, Scope 2 and Scope 3 emissions, and describes their climate risk assessment processes and risks identified.

Annual Climate Disclosure

The annual climate disclosure would be provided through the completion of the portions of the CDP Client Change Questionnaire that align with the TCFD framework as identified by the CDP (formerly the Carbon Disclosure Project). The CDP, through its annual questionnaire, has developed a disclosure system for companies to disclose emissions and climate risk information sought by investors and other stakeholders. Major contractors would have to make the annual climate disclosure publicly available (either themselves or through their immediate or highest level owners) through their website or the CDP’s website.

In each case, the obligations described above can be satisfied by the contractor itself or through its immediate or highest-level owner, except the contractor itself must report the results of the inventory in SAM.

Science-Based Targets

Major contractors would also have to establish science-based targets and have the targets validated by the Science Based Targets Initiative, a partnership between CDP, the United Nations Global Compact and the World Wide Fund for Nature. A science-based target is defined as a target for reducing GHG emissions that is consistent with reductions necessary to meet the goals of the Paris Agreement to limit global warming to well below 2 °C above pre-industrial levels and pursue efforts to limit warming to 1.5 °C according to the latest climate science. These targets must be validated by the Science Based Target Initiative’s target validation process within the previous five calendar years. Companies would also have to make them publicly accessible via a website. Validated targets published by Science Based Target Initiative on its website satisfy this requirement. The Science Based Target Initiative’s certification process allows companies to develop and have their targets validated within two years of expressing a commitment to do so.

GHG Emissions Scopes

The GHG Protocol and the CRR define the different types of emissions that a company should consider in conducting its inventory. Such GHG emissions include:

  • Scope 1 emissions, which are GHG emissions generated from sources that a company owns or controls;
  • Scope 2 emissions, which are indirect GHG emissions that are associated with the generation of electricity, heating and cooling or steam, when these are purchased or acquired for a company’s own consumption but occur at sources owned or controlled by another entity; or
  • Scope 3 emissions, which are GHG emissions other than those that are Scope 2 emissions, that are a consequence of the company’s operations but occur at sources other than those owned or controlled by the company.

While both significant and major contractors must provide Scope 1 and 2 emissions, the CRR reserves the disclosure of Scope 3 emissions, which may be more difficult to calculate, for major contractors which have more government contracts and, presumably, have greater resources than significant contractors.

Exceptions and Variations

The CRR would not apply to certain federally recognized tribes or tribal native corporations, higher education institutions, nonprofit research entities, state or local governments or entities deriving 80% or more of their annual revenue from federal management and operating contracts that are subject to agency annual site sustainability reporting requirements. In addition, a major contractor that would be considered a small business for its North American Industry Classification System (NAICS) code or a nonprofit organization would only have to provide Scope 1 and 2 emissions disclosure in SAM.

Company Representations & Impact to Status as a Responsible Contractor

Once the CRR requirements are in effect, companies would be required to demonstrate compliance through annual representations in SAM. Specifically, a company would have to represent in SAM whether it:

  • Is a significant contractor or major contactor;
  • Meets one of the exceptions for disclosure;
  • Completed within its current or previous fiscal year a GHG inventory of its annual Scope 1 and 2 emissions (evidenced by a report in SAM of the total annual Scope 1 and Scope 2 emissions identified in its most recent inventory);
  • Makes available, on a publicly accessible website, the annual climate disclosure using the CDP Climate Change Questionnaire within its current or prior fiscal year (for a major contractor only); and
  • Has a science-based target that is publicly accessible and has been validated by the Science Based Targets Initiative within the previous five calendar years (for a major contractor only).

If a company is subject to CRR (and no exception or variation applies) and is unable to satisfy these representations, a contracting officer would determine whether the prospective contractor is “responsible” and request information from the company to determine its efforts in attempting to comply with the CRR requirements and the reason for its noncompliance. This responsibility determination by a contracting officer may impact whether a contract is awarded to that prospective contractor. An agency may award contracts only to responsible contractors and subcontractors.

Phase-in for Compliance

The proposal provides for a one-year implementation period from the publication of a final rule for significant and major contractors to complete their GHG inventories and report their annual Scope 1 and Scope 2 emissions in SAM. Major contractors would have two years after the publication of the final rule to report Scope 3 emissions, complete the relevant portions of the CDP Climate Change Questionnaire and obtain validation of science-based targets by the Science Based Targets Initiative.

Comments on the proposal must be made to the Regulatory Secretariat on or before January 13, 2023.

The SEC Climate Proposal

The SEC Climate Proposal would require SEC-reporting companies and companies filing registration statements with the SEC to provide information regarding climate-related risks and GHG emissions in their annual reports and registration statements, respectively. Key disclosure items for an affected company would include:

  • The oversight and governance of climate-related risks by its board and management;
  • How climate-related risks have had or are likely to have a material impact on its business and consolidated financial statements over the short, medium or long term;
  • How climate-related risks have affected or are likely to affect its strategy, business model and outlook;
  • Its processes for identifying, assessing and managing climate-related risks and whether any such processes are integrated into its overall risk management system or processes;
  • Scope 1 and 2 GHG emissions in absolute and intensity terms, irrespective of their materiality and subject to attestation;
  • Scope 3 GHG emissions and intensity, if material, or if the company has set a GHG emissions reduction target or goal that includes its Scope 3 emissions;
  • Climate-related targets or goals, and any transition plan; and
  • Climate-related financial statement metrics.

Large accelerated filers (companies with a public float of at least $700 million at the end of the most recent second fiscal quarter and that have been public for at least one year) would generally have to begin reporting their climate-related disclosures in fiscal year 2024 (with respect to the 2023 fiscal year). Accelerated filers (companies with between $75 million and $700 million in public float at the end of the most recent second fiscal quarter and that have been public for at least a year) and non-accelerated filers would generally have to begin reporting their climate-related disclosures in fiscal year 2025 (with respect to the 2024 fiscal year). Finally, smaller reporting companies would begin reporting in fiscal year 2025.

The comment period for the SEC Climate Proposal ended in June 2022, and it is likely that the SEC will adopt final climate disclosure rules in early 2023. For a more complete discussion of the SEC Climate Proposal, see our prior alert.

Different Approaches to Climate Disclosure

While both the proposed CRR and SEC Climate Proposal would require expanded disclosure regarding climate risks and GHG emissions, there are some key differences between the two proposals.

Third-Party Standards

First, the CRR adopts and codifies several third-party reporting frameworks and standards, including the TCFD, CDP Climate Change Questionnaire, the GHG Protocol and the Science Based Targets Initiative. In contrast, the SEC’s proposed disclosure requirements are generally modeled after the current TCFD framework, but they are not explicitly incorporated into the SEC’s proposed rules. In its Climate Proposal, the SEC acknowledges third-party standards and frameworks but does not go as far as the CRR in its support for them. In the event of evolution of TCFD, it is not clear that SEC rulemaking will similarly follow.

Scope 3 Emissions

The proposals also differ in their approach toward Scope 3 emissions reporting. Unlike the SEC Climate Proposal, there is no materiality qualifier for Scope 3 emissions disclosure for major contractors under the CRR. Provided a company exceeds the $50 million threshold in federal contract obligations in the prior federal fiscal year and does not meet one of the exceptions discussed above, it would have to conduct an inventory for and disclose Scope 3 emissions even if it did not consider such emissions to be material. Absent materiality, the SEC requires Scope 3 emissions disclosure only if a company has set a GHG emissions reduction target that includes Scope 3 emissions. The SEC Climate Proposal also provides a limited safe harbor from federal securities law liability for Scope 3 emissions disclosures that meet certain conditions. The CRR does not appear to offer similar protections for Scope 3 reporting.


Under the SEC Climate Proposal, companies are not required to set climate-related targets. However, if a company has publicly set such targets or goals, it would have to disclose them. The CRR, on the other hand, mandates that major contractors set science-based targets that are validated by the Science Based Targets Initiative and publicly disclosed. Accordingly, SEC-reporting companies that are also major contractors would likely have to disclose their science-based targets in their SEC filings. Under the Science Based Targets Initiative, this will include targets for a company’s Scope 3 emissions if they represent 40% or more of total Scope 1, 2 and 3 emissions or if the contractor is involved in the sale or distribution of fossil fuels. Such disclosure of Scope 3 targets would also result in an SEC-reporting major contractor also having to disclose its Scope 3 emissions in its SEC filings, even if not material (as noted above), subjecting it to potential liability under securities laws (albeit with a limited safe harbor).

GHG Emissions Data

The CRR and the SEC Climate Proposal also have different requirements regarding verification of GHG emissions data. The CRR does not provide for companies to procure third-party assurance for GHG emissions data. However, the SEC Climate Proposal would require large accelerated filers and accelerated filers to receive limited assurance from a GHG emissions attestation provider for their Scope 1 and Scope 2 emissions after a year of providing such disclosure and then reasonable assurance within two years of the provision of limited assurance (with Scope 3 assurance remaining optional).

The above represents just some of the differences between the disclosure requirements of the two proposals. While there is substantial overlap in the climate-related information that under both disclosure regimes, companies that would be subject to both regulations should understand the ways in which their disclosure may differ depending on the federal agency to which they are reporting. To avoid inconsistency in climate disclosure, companies should consider whether to standardize their disclosure across regulatory schemes.

Key Takeaways

If the CRR is adopted with the proposed timetable for compliance, companies will have a relatively short amount of time to prepare for its requirements. The compliance dates for the SEC Climate Proposal are similarly aggressive if they are adopted. Accordingly, companies should begin to plan for compliance now. Below are some measures that companies should consider:

  • Become familiar with the GHG Protocol and the CDP Climate Change Questionnaire to determine the resources needed to collect the relevant climate data.
  • Develop a GHG Inventory Management Plan to formalize data collection including from suppliers.
  • Form an internal working group with responsibility for collecting and verifying data and identifying climate risks.
  • Establish effective disclosure controls and procedures to gather and share climate-related data (see our prior alert on ESG disclosure controls).
  • Identify external consultants who may assist the company with GHG calculations and related review.
  • Determine an appropriate board and management oversight structure for climate-related issues.
  • For companies that would not be subject to the CRR or the SEC Climate Proposal, assess whether impacted customers and other stakeholders would require similar climate reporting in contractual and other arrangements to meet these proposed requirements and scale internal processes and governance accordingly.

We anticipate that we will see final regulations for these proposals in the first half of 2023, though court challenges to such adoption are likely. We will continue to monitor their status and provide updates as they become available.