In 2021, President Biden set forth an ambitious target: to increase the share of government contracts awarded to small disadvantaged businesses by 50%. The focus on increasing federal small disadvantaged business contracting comes at the same time that the government seeks to leverage its buying power to address the challenges of climate change.

The Executive Order on Climate-Related Financial Risks emphasized the government’s buying power, integrating climate disclosure and impact reduction efforts into the federal procurement process. As part of that EO, the Administration asked the Federal Acquisition Regulatory Council to consider an amendment to the Federal Acquisition Regulation that would require federal suppliers to disclose greenhouse gas (GHG) emissions and set science-based targets for carbon reduction.

In response, the Defense Department, the General Services Administration and NASA published an advance notice of proposed rulemaking regarding a potential Federal Acquisition Regulation (FAR) amendment for major federal procurements in October, 2021. This proposed rulemaking considers the implications of expanding the aperture of sustainable procurement to consider the “social cost of greenhouse gas emissions” in making procurement decisions and the concept of giving preference to offers from suppliers with a “lower social cost of greenhouse gas emissions.”

Requiring federal contractors to set reduction targets could have a material impact over time. In fact, GSA has stated that carbon emissions from federal contractors (supply chain emissions) are estimated to be four times greater than emissions from federal buildings and fleets.

While necessary to harness the federal government’s buying power in addressing the climate crisis, new acquisition regulations could inadvertently serve as a barrier to entry to the federal market. Small businesses who do not have resources focused on sustainability to help formulate carbon reduction plans and measure against science-based targets could be particularly impacted.

If new language is added to the FAR, the federal government will need to provide additional information on SBTs as well as user-friendly toolkits to enable small businesses to navigate the complexities.

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