Big Task Awaits Federal Agencies in Tracking Carbon Footprints

Federal agencies will have to find ways of tracking and reporting their downstream carbon emissions, down to the level of their employees’ commuting and business travel, under a new set of White House instructions.

The rules from the Council on Environmental Quality, issued Aug. 31, will be especially tricky for large agencies, according to reporting specialists. Broadly, the instructions require agencies to set annual targets for lowering the greenhouse gas emissions that come from sources they don’t directly control, known as Scope 3 emissions.

Included in that category are transmission and distribution losses from purchased electricity, solid waste disposal, wastewater treatment, and many other activities.

Leah Dundon, an environmental attorney at Beveridge & Diamond PC, said indirect emissions will be difficult to measure accurately. That same concern has been raised by critics of the Securities and Exchange Commission’s recent proposed climate rule.

“It’s potentially a complex and huge undertaking, and will be more so for larger organizations, including federal agencies,” Dundon said.

Pentagon at Work

Andrew Mayock, the White House’s federal chief sustainability officer, said the emissions cuts are important because the federal government is “the world’s largest buyer of goods and services and the nation’s largest employer.”

To Corinne Dougherty, ESG government leader at KPMG, the new instructions are a necessary step if the Biden administration wants to achieve net zero emissions from federal operations by 2050.

Once agencies have developed their tracking systems, CEQ will work with them to set target dates as part of their 2023 sustainability reporting and planning cycles.

“It is imperative for the federal government to be transparent in their plans to achieve decarbonization targets, while also measuring and disclosing progress in the future,” Dougherty said.

The instructions stem from a December 2021 executive order that sets broad sustainability goals for the federal government.

But the data needed to make a Scope 3 emissions assessment often isn’t under an agency’s control, and the data that is available can be hard to verify, according to Dundon.

At the Defense Department—by far the government’s biggest employer with more than 1.3 million active duty service members and 750,000 civilian employees—compliance with the CEQ rules “will be a challenge,” said Richard Kidd, deputy assistant secretary of defense for environment and energy resilience.

Nevertheless, the Pentagon is “working to be proactive” about compliance, and is especially focused on cutting Scope 3 emissions in its supply chain, rather than on its employees’ activities, Kidd said.

“This is where the largest amounts of greenhouse gases can be found, as well as fugitive emissions, and where we get the greatest return for the level of investment,” he said.

Making the task slightly easier is the fact that many Pentagon employees will remain on telework, which will reduce their commuting and eventually shrink the military’s floor space, according to Kidd.

HHS, USPS Report Gains

Meanwhile, the Department of Health and Human Services is mapping its data sources to develop an algorithm to track carbon emissions from employee commuting and business travel, and “does not foresee any accounting and reporting issues to meet the requirement,” according to an agency spokeswoman.

HHS has already dropped its Scope 3 emissions from 2008 levels thanks to efforts like a new space planning policy under a hybrid work environment, the spokeswoman said.

The US Postal Service, another of the federal bureaucracy’s biggest employers, isn’t bound by the new rules because it’s an independent agency, said a USPS spokesman.

But the Postal Service is already tracking its Scope 3 emissions, saying in its most recent sustainability report that it’s cutting down on business travel by allowing for more remote work and reducing the waste it sends to landfills.

A CEQ spokeswoman said the White House is “confident agencies are up to the challenge” and will be providing guidance and support to help agencies report and reduce their Scope 3 emissions.

To simplify some of the reporting work, the Environmental Protection Agency has provided emissions estimates that organizations can use. Even so, agency reports are bound to be at least partially inaccurate, Dundon said.

“For example, if an employee and her spouse commute to work from home and detour to drop a child off at school and add another detour to drop the spouse off, and then the employee arrives at the office, how much of that trip from home to work should the organization count as just its Scope 3?” she said. “Knowing the vehicle mile or passenger miles in that case will not be accurate.”

Even if a reliable number comes out of that exercise, it’s not clear whether the data is useful in informing emissions reduction strategies, Dundon said.

Model for Private Sector

But to Margaret Peloso, a partner at Vinson & Elkins LLP who specializes in environmental disclosures, merely getting agencies to think about their Scope 3 emissions is a good way of nudging them toward making reductions.

“When I think of organizations as large and complex as the federal government, it’s not about whether the Pentagon needs to know exactly what kind of car I drive and whether I go on the freeways or backroads, but more that they need to know what kinds of things they could do to induce employees to take public transportation,” Peloso said. “Or when I sign contracts, what are some of the things I need to see?”

Agencies following the new CEQ instructions could also provide working models for public companies if and when they have to comply with the SEC’s proposed rule, which also lays out Scope 3 requirements, Peloso said.

“I might say to the SEC, ‘Well, when I thought about how to do this, I thought this segment by this federal activity kind of looks like my operations,’” she said. “It might lend credibility that my approach is an objectively reasonable one.”