US Federal Executive Order on GHG Disclosure reaches into Supply Chains: How will your organization be impacted?
Planning for Federal Sustainability in the Next Decade
You may not be familiar with 13693, but this new Executive Order establishes greenhouse gas (GHG) emissions goals for the U.S. Government and regulates supply chains of federal agencies with increasing disclosure requirements year over year. The Executive Branch released EO 13693 in order to increase America’s efforts in mitigating climate change and creating a clean energy economy through planning and innovation. Even if your organization is not a direct supplier to a federal agency, EO 13693, as well as other emerging regulations and industrial pressures, may be establishing GHG measurement, disclosure, and abatement requirements for your organization.
What is at the heart of EO 13693?
This Executive Order includes an in-depth federal sustainability plan for the upcoming decade with GHG emission reductions and sustainability goals for federal agencies through fiscal year 2025. The goals regarding GHG emissions reductions listed below target the government’s direct operations as well as the supply chain that supports these agencies.
EO 13693 GHG Emission Reduction Goals:
- Reduce GHG emissions from U.S. Federal Agencies by 41.8% from 2008 levels by 2025
- Increase the proportion of energy consumed to be from at least 30% renewable sources
EO 13693 Goal Definition by Scope:
- Scope 1- reduce direct GHG emissions by 40 percent from sources controlled by these agencies
- Scope 2- reduce direct GHG emissions resulting from generation of electricity, steam and heat
- Scope 3- reduce indirect GHG emissions, not directly controlled by the agency, including the monitoring and improvement of emission standards from top suppliers
The Scope 3 requirements for EO 13693 expand the impact of this regulation beyond the public sector and into the private sector for at least five suppliers of each agency per year.
How will this EO affect the suppliers of goods and services to government agencies?
For its first year, Section 15(b) of Executive Order 13693 requires the 7 Federal Agencies with the largest procurement spend to extend these GHG emission reductions goals into their supply chain. The seven Federal Agencies included in these requirements are:
- The General Services Administration (GSA)
- the Department of Homeland Security
- the Department of Energy
- the Department of the Interior
- the Department of Defense, and
- the Department of Veterans Affairs
Specifically, these agencies are expected to include contractual requirements or evaluation criteria related to GHG management and mitigation for at least five suppliers each year. IBM, GE, HP and other major suppliers for the federal agencies have already committed to similar requirements, developing a strategy to measure and ultimately reduce their GHG emissions. Ultimately, many organizations independently push for reduced GHGs in their supply chain because the improved efficiency can help remove unnecessary costs. Many international organizations are publicly demanding for their suppliers to measure and report their emissions with the aim to reduce over time, including Walmart and Dell.
In total, U.S Federal Agencies have an annual spend in excess of $445 billion, giving the Scope 3 requirements of this EO the potential to have a significant impact on GHG emissions from a range of suppliers. Although the first few years of the program will likely focus on each agency’s top five largest spend suppliers, as the number of included agencies and the annual procurement requirements increase, the scope of the EO applies to more and more organizations.
Additional Pressures for GHG Management Besides EO 13693
The demand for greater GHG mitigation is not only coming from the US Federal Government, but also at the international level with both the United States and China ratifying the Paris Agreement in the last week.
Also, at the US local level, investors and companies themselves are demanding an increase in the requirements of the Northeast Regional Greenhouse Gas Initiative as well as hundreds of companies backing one of the most aggressive GHG reduction targets in California. Institutional investors also recently targeted the SEC, demanding for greater reporting requirements on issues like water scarcity, global deforestation, and climate change from publicly traded companies. The Carbon Disclosure Project has also become the largest institutional disclosure platform where investors continuously promote the measurement and reporting of emissions across supply chains. With pressure coming from multiple angles, including investors via CDP, retailers and purchasers like Walmart and Dell, as well as international and local regulators, many suppliers are wondering how they can begin to address these demands of GHG measurement and disclosure.
How can Suppliers of all sizes and scopes establish GHG Management Systems? Simplified Measurements and Disclosure is Key
Understanding and reporting your GHG emissions might not be as difficult as it at first appears. While larger companies may have a resource advantage, the breadth of their operations and variation in output on a global scale may offset the benefit of additional resources. On the other hand, many of the smaller suppliers whose scope appears more manageable, often lack the capacity to have in-house staff dedicated to greenhouse gas emissions. Additionally, most of the examples of GHG management come from Fortune 500 companies, which can make the process intimidating or seem infeasible to smaller organizations. The key to simplifying the burden that GHG management requirements can place on suppliers of all sizes is to simplify the process for calculating GHG emissions and to improve the disclosure of data with interested buyers and investors.
The General Services Administration (GSA) Section 13 Working Group was tasked with understanding how to most successfully implement GHG reporting requirements as they relate to the precursor of EO 13693, EO 13514. After careful research showed that GHG emissions data should be a phased approach, the GSA Working Group developed the guidance figure below.
We at Verego, global leaders in CSR standards, have developed a tool that helps to both simplify and disclose GHG emissions data. Additionally, the tool aligns with the GSA Working Group’s phased approach for GHG management because it satisfies the need for encouraging participation with communication tools and tracking supplier disclosure within a data storage system. By simplifying and structuring the process for disclosure in a phased approach, suppliers of all sizes will be enabled to best comply to the GHG reporting requirements established by the government, federal agencies, customers, and even investors. We have a unique solution that cannot only apply to both buyers and suppliers, but will promote efficiency and accuracy in the ever-expanding field GHG management.
Introduction to Verego
In 2010, Verego was founded by a group of over a dozen supply chain and sustainability experts, who are in charge of developing Verego’s suite of standards and systems to improve the sustainability of global supply chains. Verego’s Supplier Assurance Program software suite enables supplier evaluation while promoting transparent reporting in multiple areas, including Ethics, Human Rights, Environment, and Green House Gases. Verego’s SRS Standard Certification process validates the CR practices of suppliers to reduce operational and reputational risks, minimize duplicate auditing efforts, and encourage best practices that drive continuous improvement of the global supply chain.
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