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ASCM Insights

The Effect of Environmental Transparency Rules on Supply Chains

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On November 14, 2022, a new rule was proposed by the Department of Defense, the General Services Administration and NASA, which would require federal contractors and suppliers to participate in an enhanced level of environmental transparency. The mandate requires contractors to divulge their greenhouse gas (GHG) emissions as well as climate-related financial risk. In addition, contractors and suppliers must develop science-based targets to reduce their GHG emissions in an effort to operate in a more sustainable fashion.

Federal contractors and suppliers would be labeled as either "significant contractors" or "major contractors," both of which would be required to submit annual disclosure documents pertaining to their GHG emissions. Significant contractors include those that have received more than $7.5 million in federal contract obligations but did not exceed $50 million in the prior fiscal year. They would have to submit a GHG inventory of their scope 1 and scope 2 emissions. Major contractors include those that have exceeded $50 million in federal contract obligations within the prior fiscal year. They would have to submit scope 1, 2 and 3 emissions, as well as an annual climate disclosure.

Extreme weather brought on by climate change has the potential to disrupt supply chains considerably and put countless organizations in disarray. Impacts and risks to infrastructure, investments and businesses are high, but moving toward more sustainable practices can help to align GHG emissions with science-based environmental targets in an effort to reduce emissions and thereby contribute to a more stable future. This mandate would limit GHG-heavy processes leading to fewer supply chain disruptions down the line while providing much-needed transparency for organizations, suppliers and partners 

Organizations that wish to reduce their emissions and achieve prospective science-based targets can look to ASCM for support in developing sustainability standards. ASCM's Enterprise Certification for Sustainability Standards focus on the three pillars of social responsibility, economic sustainability and ecological stewardship. Through the program, organizations can develop methods for holding their operations to a higher and more environmentally responsible standard and measure current business practices in comparison to leading industry benchmarks.

Petrobras is a Brazilian oil and gas company that runs a highly complex maintenance repair and overhaul (MRO) supply chain with hundreds of thousands of stockkeeping units (SKUs), thousands of suppliers and hundreds of business units. In 2019, the company joined ASCM in 2019 to develop a pilot project for the Enterprise Certification for Sustainability Standards. It was able to quickly identify high-emission and low-efficiency areas within its operation, develop a set of objectives to reduce its carbon footprint, and advance daily activities for a more sustainable future. In just the first 18 months, Petrobras saved close to $800 million — all while protecting the planet and significantly lowering its GHG emissions.

ASCM's Enterprise Certification for Sustainability Standards are available for free to all supply chain organizations wishing to reduce costs, improve efficiency and pursue more sustainable practices. And for any business that is required to disclose GHG emissions, the standards are a proven way to follow evolving guidelines while safeguarding a more sustainable future.

About the Author

Elizabeth Rennie Editor-in-Chief, SCM Now magazine, ASCM

Elizabeth Rennie is Editor-in-Chief at ASCM. She may be contacted at editorial@ascm.org.

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