Federal Policies on Sustainability for Government Contractors: Part 2

At a glance

• Main takeaway: The federal government continues to emphasize that sustainability reporting is the present and future of government contracting.
• Impact on your business: Government contractors must take proactive steps to assess their climate-related risk readiness, explore the different reporting frameworks, and prioritize data-driven outcomes to demonstrate their commitment to sustainability if they want to remain competitive and secure government contracts. 
• Aprio’s Sustainability Advisory Practice can help your company calculate GHG emissions across Scopes 1, 2, and 3.

Let Aprio get you started on your sustainability journey. Contact our team for a complimentary consultation.

The full story:

The regulatory landscape around sustainability continues to evolve. Many government agencies are actively integrating sustainability into their procurement processes, which means government contractors should expect more solicitations with conditions that will require not just reporting on greenhouse gas (GHG) emissions and their reduction plans, but also assessing and reporting on climate-related risk disclosures, environmental reporting frameworks, and data-driven compliance and verification.

Sustainable climate-related risk disclosures

Through the adoption of climate-related risk disclosures, the government is seeking to gain a deeper understanding of how government contractors are approaching climate-related risks. Thus, climate-related disclosures are rapidly becoming mandatory requirements for government contractors to remain compliant and competitive. While these types of disclosures may appear complex at first, most climate risks fall into two main categories:

1. Physical Risks – Acute events driven by extreme weather, such as floods, wildfires, or droughts. Physical risks can disrupt your operations, damage infrastructure, and negatively impact your supply chain. These types of climate-related risks can also be chronic, resulting from rising sea levels or long-term temperature changes. 
2. Transition Risks – Business events resulting from the shift to climate-related policies and regulations. Is your company prepared to comply with new sustainable regulations and agile enough to adapt to rapidly changing technologies?

The data collected around climate-related risks helps to assess the potential impact and trends of climate change. It includes data derived from models that predict future changes in the climate based on GHG emissions scenarios that describe the sensitivity of a particular location, asset, or project.

The government is encouraging contractors to align themselves with two key standards to develop their climate-related disclosures — International Sustainability Standards Board (ISSB) and GHG Protocol.

• ISSB standards fall under the IFRS and are designed to provide a consistent, global baseline for companies’ sustainability reporting. This will make it easier for investors to compare the sustainability performance of different companies.

• GHG Protocol offers a comprehensive approach to calculating, managing, and reporting your GHG emissions, which is essential for mitigating climate-related financial risks.

The good news is most organizations already possess a robust risk management and reporting structure. So, the key then lies in optimizing your existing framework to seamlessly integrate climate-related risks. The two standards, ISSB and GHG Protocol, will provide invaluable guidance to achieving this integration. You can effectively assess, manage, and report on your climate-related risks within your already established processes.

Reporting framework – CDP & SBTi

Another prerequisite impacting government contractors is the growing significance of environmental sustainability disclosures. These disclosures report your overall environmental impact and there are two key GHG reporting frameworks leading the charge:

1. Carbon Disclosure Project (CDP) is a global platform for companies to disclose their environmental impacts, such as GHG emissions, water usage, and deforestation. CDP offers a standardization framework for reporting sustainability data and a scoring system that measures a company’s data. Government agencies as well as investors use the CDP scorecard to compare the environmental performance of different reporting contractors.
2. Science-Based Target Initiatives (SBTi) guides companies in setting ambitious, science-based reduction targets for their GHG emissions. These targets go beyond the simple business as usual reductions, and instead push companies to make significant progress towards decarbonization.

While neither of these frameworks are mandatory yet, they are becoming increasingly valuable tools and crucial differentiators in the bidding process, as agencies such as the Department of Energy and GSA are prioritizing working with government contractors who are proactive and committed to sustainability.  

Data-driven compliance and verification

It’s not a surprise that the federal government is prioritizing transparency and accountability when it comes to sustainability. However, there is now an emphasis on policies requiring quantifiable data and verification to demonstration your commitment. To put it simply, the government wants contractors to back their claims with real data that focuses on outcomes.

While the most requested data revolves around GHG emissions, which includes Scopes 1, 2, and 3, contractors are also expected to track and provide data on waste, i.e., resources, water, energy, building, etc.

To effectively manage this data, contractors are encouraged to leverage technology specifically designed for sustainability data management. While the lack of standardized metrics and reporting, and the time and resources it takes to implement data into these systems is an ongoing challenge, the key to success lies in producing accurate and verifiable data. Integrating data-driven compliance and verification into daily operations is a crucial step for government contractors to demonstrate their commitment to sustainability and secure lucrative contracts.

The bottom line

By now, the federal government has made it clear that sustainability reporting is not a passing fad, it’s the present and future of government contracting. Take proactive steps to assess your readiness by taking stock of your company’s current sustainable practices and preparedness for climate-related risks, explore the different environmental reporting frameworks, and prioritize data-driven outcomes that demonstrate your commitment to sustainability.

Remember, you don’t have to go at it alone. Discover how Aprio’s Sustainability Advisory Practice helps government contractors calculate GHG emissions across Scopes 1, 2, and 3.

Related Resources/Assets/Aprio.com articles/pages

The Road to Sustainability – Episode 5 – Sustainability in Government Contracting
Federal Policies on Sustainability for Government Contractors: Part 1
The Road to Sustainability – Episode 1 – Greenhouse Gas Emissions
About Aprio’s Sustainability Practice

Let Aprio get you started on your sustainability journey. Contact our team for a complimentary consultation.