President’s Executive Order Announces New Sustainability Goals Across Federal Supply Chain
Executive Order 13693 (the “Order”), issued by President Obama on March 15, 2015, aims to reduce the federal government’s greenhouse gas (“GHG”) emissions while increasing clean energy consumption. The Order applies to all federal agencies by definition and details a three-tiered scope of applicability to encourage parallel changes “across the Federal supply chain.” A summary of the Order’s key provisions and definitions is provided below.
The Order enumerates 12 goals for promoting GHG emissions reductions and alternative energy solutions, which are as follows:
- Promoting building energy conservation and efficiency by reducing “building energy intensity” by 2.5% per year through the end of 2025.
- Ensuring that “clean energy,” including “renewable or alternative energy,” accounts for not less than 25% of building energy by the 2025.
- Ensuring that “renewable energy” accounts for at least 30% of the total amount of building electric energy consumption by 2025.
- Installing, contracting for and purchasing agency-funded “renewable energy” for federal facilities.
- Installing, contracting for and purchasing agency-funded “alternative energy” for federal facilities.
- Improving agency water use efficiency and management.
- Improving agency fleet and vehicle efficiency and management for fleets with 20 or more vehicles.
- Improving building efficiency, performance and management through the use of sustainable construction and design best practices.
- Promoting sustainable acquisition and procurement by including “environmental performance and sustainability factors” to the greatest extent possible for all applicable procurements in the planning, award and execution phases of the acquisition.
- Advancing waste and pollution prevention.
- Implementing performance contracts for federal buildings.
- Promoting electronic stewardship, measuring and reporting.
- “Agency”: an executive agency as defined in section 105 of title 5, United States Code, excluding the Government Accountability Office.
- “Alternative energy”: energy generated from technologies and approaches that advance renewable heat sources, including biomass, solar thermal, geothermal, waste heat and renewable combined heat and power processes; combined heat and power; small modular nuclear reactor technologies; fuel cell energy systems; and energy generation, where active capture and storage of carbon dioxide emissions associated with that energy generation is verified.
- “Clean energy”: renewable electric energy and alternative energy.
- “Federal facility”: any building or collection of buildings, grounds or structures, as well as any fixture or part thereof, that is owned by the United States or any federal agency or that is held by the United States or any federal agency under a lease-acquisition agreement under which the United States or a federal agency will receive fee simple title under the terms of such agreement without further negotiation.
- “Renewable electric energy”: energy produced by solar, wind, biomass, landfill gas, ocean (including tidal, wave, current and thermal), geothermal, geothermal heat pumps, microturbines, municipal solid waste or new hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an existing hydroelectric project.
Definitions of Scope
- “Scope 1”: direct greenhouse gas emissions from sources that are owned or controlled by the agency.
- “Scope 2”: direct greenhouse gas emissions resulting from the generation of electricity, heat or steam purchased by an agency.
- “Scope 3”: greenhouse gas emissions from sources not owned or directly controlled by an agency but related to agency activities, such as vendor supply chains, delivery and transportation services, and employee travel and commuting. (Emphasis added.)
Key Supply Chain Provisions
As noted above, the Order’s goal is to reduce federal agency GHGs and to encourage similar reductions across the federal supply chain. Section 15 of the Order, titled “Supply Chain Greenhouse Gas Management,” provides important language for federal suppliers to consider. For instance, the chair of the Council on Environmental Quality will be required to annually identify and publicly release an inventory of major federal suppliers using publicly-available information regarding: (1) whether the supplier has accounted for and publicly disclosed scope 1 and scope 2 GHG emission data; and (2) whether the supplier publicly disclosed a GHG emissions reductions target or targets for 2015 and beyond.
The seven largest federal procuring agencies will submit a plan to implement at least five new procurements annually that may include contract requirements for vendors or evaluation criteria that consider contractor emissions and GHG emissions management practices. The plans submitted for consideration may include proposed evaluation criteria, performance period criteria and contract clauses that will encourage suppliers to manage and reduce GHG emissions.
Although the Order only directly applies to federal agencies, the definitions of the Order’s three-tiered scope demonstrate that the Order’s reach extends beyond federal agencies. For example, Section 2 of the Order, titled “Agency Greenhouse Gas Emission Reductions,” states that “the head of each agency shall, within 90 days of the date of this [O]rder, propose … percentage reduction targets for agency-wide reductions of scope 1 and 2 and scope 3 greenhouse gas emissions in absolute terms by the end of fiscal 2025 relative to a fiscal year 2008 baseline.” (Emphasis added.) Currently, the only provision that expressly references obligations under scope 3 is found in Section 3(h)(v). That section governs improvement of building efficiency, performance and management and requires the reporting of building energy beginning in fiscal year 2016. Specifically, this section applies to “newly solicited leases over 10,000 square feet.” Section 3(h)(v) is also consistent with Section 7(d), which requires principal agencies to ensure that “leases and contracts entered into after the date of [the Order] for lessor or contractor operation of government-owned buildings or vehicles facilitate the agency’s compliance” with the Order.
Perhaps more importantly, the federal government has engaged more than a dozen of the largest federal suppliers to encourage them to adopt similar GHG reduction and sustainability practices. IBM, GE, HP and AECOM are among the suppliers that have made specific commitments that are consistent with the Order. Because federal agencies are “encouraging” major suppliers to adopt similar sustainability models, other suppliers should anticipate having their sustainability practices examined. Additionally, the provisions discussed above indicate that even privately-owned operations may come within the Order’s reach if those operations are “related to agency activities such as vendor supply chains.”
For more information regarding this Order or Environmentally Preferred Purchasing, contact Brad Sugarman at email@example.com.
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