USWCC Comments: Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk

Comments provided by The American Small Business Chamber of Commerce (ASBCC) in conjunction with the Small Business Alliance of Government Contractors (SBAGC) - a joint supplier council of The American Small Business Chamber of Commerce and the U.S. Women's Chamber of Commerce (USWCC).

Dear Small Business Administration:
 

Thank you for this opportunity to comment on the proposed regulations as stated in RIN 9000-AO32, Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk.

DoD, GSA, and NASA are proposing to amend the Federal Acquisition Regulation (FAR) to implement section 5(b)(i) of Executive Order 14030, Climate-Related Financial Risk. Section 5(b)(i) directs the FAR Council to consider amending the FAR to require major Federal suppliers to publicly disclose greenhouse gas emissions and climate-related financial risk and to set science-based reduction targets.
 
Greenhouse emissions are relevant to mitigation efforts. The proposed rule would expound on the data needed to combat greenhouse gas emissions and give footing to research on climate related financial risk while helping to support the placement of science based precautions and regulations utilized to address climate related needs.

Impact on Small Business
 
Since the proposed rule divides the contractors into groups, the impact on many small businesses would be minimal to none as contractors with less the $7.5 million in total contract obligations, calculated from the previous fiscal year are not subject to the rule. The resource and financial impact for businesses under the $7.5 million threshold would be an undue burden and likely result in slowed business, slowed focus, and slowed productivity for the small business contractor. 
 
Contractors above the $7.5 million threshold are categorized into two groups: Significant Contractor (contract obligation between $7.5 million to $50 million) and Major Contractor (contract obligation over $50 million). Contactors classified as significant may experience additional expense and burden, the data collected may be beneficial towards reducing Greenhouse Gas (GHG) emissions and will have a greater amount of resources available to meet the reporting obligations.

Additionally, the following provision provides adequate protection for small businesses from the cost and burdens of the rule: 23.XX04 Exceptions – (b) the requirements in paragraph (b) of section 23.xx03 do not apply to a major contractor who is -- (1) Considered a small business for the North American Industry Classification System (NAICS) code identified in its SAM registration as its primary NAICS code;
 

Reasoning for Implementation of the Rule

According to the Environmental Protection Agency (EPA), 27% of 2020 greenhouse gas emissions were derived from the transportation sector, 25% from Electric Power, and another 24% were derived from the industry sector, together these sectors contributed to 76% of the greenhouse gas emissions. The largest source of greenhouse gas emissions from human activities in the United States is from burning fossil fuels for electricity, heat, and transportation. Clearly, America’s small businesses have impact in the creation of greenhouse gas emissions.

The Risk of Inaction is Greater

Our view is that the greater risk to small business would be to ignore the threat of greenhouse gas emissions and climate-related financial risk. As reported by Deloitte in the “2021 Climate Check: Business’ Views on Environmental Sustainability, “Climate change is no longer a distant threat; it is already impacting daily life in many parts of the world, and businesses are beginning to feel the impact. Over 30% of executives say their organizations are starting to feel the operational impact of climate -related disasters and more than a quarter are facing a scarcity of resources. Most executives are concerned about climate change, but a gap exists between sentiments and action.” Also, “the operational impacts of climate events are affecting more than one in four organizations.” [i]

Additional Criteria to Reduce the Impact on Small Business

To reduce the impact on contractors, perhaps additional criteria should be considered when determining who will be required to report. These criteria should be focused on industries producing the bulk of the greenhouse gas emissions including production facilities utilizing fossil fuel. By adjusting criteria to target industry specific contributors, the rule would eliminate undue buren on small business contractors and provide rich data that would net in accountability standards. 

Additionally the implementation of regulations must include the following: 

·       Education on the issue and the requirements they must now fulfill (including funding to provide this education)

·       A lead time to allow small businesses to prepare to for the change

·       Financial incentives that reduce the costs to small businesses

·       Financial assistance to support those businesses that need it

[i] Deloitte.com, (2021). Climate Check: Business' views on environmental sustainability. https://www.deloitte.com/global/en/services/risk-advisory/research/2021-climate-check-business-views-on-environmental-sustainability.html


Sincerely,

Margot Dorfman, President
The American Small Business Chamber of Commerce