BP, Verizon Cite Disparities in Federal Climate Reporting Plans

BP, Verizon and other companies are urging the Biden administration to be more flexible with climate disclosures planned for government contractors, letting them align with reporting that the SEC has proposed for public companies.

The Securities and Exchange Commission, General Services Administration and other agencies are finalizing two rules that would require companies to report their greenhouse gas emissions and make other disclosures about climate change. BP America Inc., Verizon Communications Inc. and other public companies that are government contractors would have to follow both sets of regulations.

But the plan from the GSA and other agencies lacks an explicit safe harbor letting companies provide the same emissions estimates they’d give the SEC. It also would require a third-party organization to validate reduction targets for reporting, among other differences from the SEC’s proposal.

The GSA plan would create confusing data for investors and others, if companies can’t use emissions estimates they send to the SEC, which has a different reporting time line, Verizon said. The proposal also would bar companies from contracts, if an outside organization tapped by the government fails to validate their emissions targets for disclosure, limiting competition among those looking for contracting opportunities, according to BP.

“We believe it is important to strive for consistency in climate-related disclosures across jurisdictions and programs to the extent possible, and to properly consider cost-effectiveness as it relates to implementation,” Downey Magallanes, BP’s head of US advocacy and federal government affairs, said in a Feb. 13 letter to the GSA.

A GSA representative didn’t immediately comment.

Different Objectives

Concerns arose after the GSA released its climate proposal in November in conjunction with NASA and the Defense Department. The agencies proposed requiring major contractors to disclose their climate-related financial risks and set science-based reduction targets, as well as report their Scope 1 emissions from their direct operations and indirect Scopes 2 and 3 emissions. Scope 2 emissions result from a company’s power usage, while Scope 3 emissions come from its supply chain.

The comment period on the proposal ended Feb. 13. The agencies have yet to announce when they expect to finalize rules.

Biden in December 2021 ordered the GSA to track major contractors’ emissions, reduction goals and climate risks. He directed the federal government to reach a net-zero carbon footprint by 2050.

The directive preceded the release of the SEC’s March 2022 climate reporting proposal. The SEC is looking to finish its rules by April as it seeks to meet investor demands for climate disclosures.

The GSA should keep in contact with the SEC as it works on climate disclosures, even though the agencies’ objectives differ, said Alexandra Thornton, senior director of tax policy at the Center for American Progress, a left-leaning think tank that supports the contractor proposal.

“The direction of travel is the same,” Thornton said. “The difference is that the federal government is actually finalizing or talking about making a contract with a company to put in place products or services that could last for decades.”

Reporting Concerns

The GSA said in its proposal the two plans are aligned because they both leverage the GHG Protocol Corporate Accounting and Reporting Standard and the Task Force on Climate-Related Financial Disclosures, which provide disclosure frameworks to companies. (Michael Bloomberg, founder of Bloomberg LP, is the chairman of the TCFD. Bloomberg Law is operated by entities controlled by Michael Bloomberg.)

But the GSA said in its plan that the two proposals handle reduction target disclosures differently, with the SEC only requiring the disclosure for companies which have adopted emissions goals. Only the GSA plan would require the Science Based Targets Initiative to validate the targets. The initiative is a partnership between the United Nations Global Compact, World Wildlife Fund and other organizations.

The contractor proposal also made no reference to potential conflicts between emissions data disclosed under one plan versus another.

“Requiring a company to publicly report one amount of GHG emissions for a given period in one filing and another amount for the same period in another filing would seem to invite confusion,” William L. Horton Jr., a Verizon senior vice president, said in a Feb. 7 letter to the GSA.

Thornton disputed Verizon’s concerns. The numbers that a company reports to the SEC and to the government to get contracts are unlikely to be much different, even if one is an estimate, she said.

The government has the right to be stringent with its climate disclosure rules for contractors, Thornton said.

“They’re protecting taxpayer revenues,” she said. “They’re trying to make sure they spend them efficiently and effectively.”