What’s Your Greenhouse Gas Emissions Strategy?

Chris Cheatham
Authored by: Chris Cheatham, Managing Partner, Cheatham Consulting, LLC

July 12, 2010

The long, painful death of cap-and-trade legislation in 2010 finally came to an end in July when Senator Harry Reid announced that the Senate would not be pursuing a comprehensive energy bill. But the Obama Administration has quietly been implementing other policies that will phase in greenhouse gas (GHG) emissions reporting requirements, drastically reshape the federal procurement system, and ultimately create a market for emissions reductions. Contractors and vendors that are prepared to report GHG emissions could benefit tremendously from the shift in procurement.

In October 2009, President Barack Obama signed Executive Order 13514, which included a number of stringent sustainability requirements for the federal government. Among the various requirements, Section 13 asked the GSA to make recommendations regarding “requiring contractors . . . to develop and make available its greenhouse gas inventory and description of efforts to mitigate greenhouse gas emissions.” The GSA responded with its report “Executive Order 13514 Section 13: Recommendations for Vendor and Contractor Emissions,” which is currently being reviewed by the Administration. Importantly, the GSA report concludes that it is feasible to implement a “phased approach, for the Federal Government to track and reduce its … supply chain emissions through coordination with suppliers and other stakeholders.” The report goes on to propose the implementation of a voluntary GHG emissions reporting mechanism for contractors and vendors over the next two years starting in 2011.

The proposed implementation of greenhouse gas emissions reporting requirements mirrors the GSA’s previous implementation of green building requirements that began nearly ten years ago. A few years after the United States Green Building Council (USGBC) launched the Leadership in Energy and Environmental Design (LEED) rating system, the GSA and other federal agencies adopted this third-party rating system to demonstrate the construction of green buildings. Similarly, the GSA report recognizes the need to rely on a third-party GHG emissions reporting system.

The contractors and vendors that were early adopters of green building design and construction techniques and the LEED rating system benefited from project experiences and were able to demonstrate specific experience in order to win federal green building contracts. The same will be true of early adopters of greenhouse gas emission reporting. While GHG emissions accounting will be burdensome, particularly for construction contractors that are dependent on hundreds of suppliers and subcontractors, early adoption may be the key to differentiating bids and winning contracts in an industry that has experienced increased competition and narrower profit margins. As the country’s largest buyer of goods and services – $425 billion spent last year – the federal government can quickly force companies to incorporate greenhouse gas emissions accounting in every sector of the economy.

For federal contractors – and eventually state and local contractors – tracking, reporting, and reducing emissions will become an important strategy for winning government contracts. Is your business accounting for its greenhouse gas emissions?

Chris Cheatham is the managing partner of Cheatham Consulting, LLC. Chris works with the construction industry to identify new market trends and opportunities – like green building and greenhouse gas emissions reporting – and create business opportunities. Please visit his blog, Green Building Law Update, to learn more about these and other topics or contact Chris at chris@cheathamconsulting.com.