Competing Climate Rules Worry Federal Contractors

In the past, we've looked at it from the perspective of what activists want, when investors want, what the government wants. But today we're taking a different angle and we're going to focus on what all this means for the corporations themselves, and specifically corporations that do business with the federal government. Earlier this month, the White House ordered its General Services Administration to start collecting more climate changing info from federal contractors. Now,

this in itself is relatively straightforward. It just means they'll have to gather up some data on their greenhouse gas emissions and report that to the FEDS. The issue is, however, another federal agency, the Securities and Exchange Commission, is about to release its own climate reporting requirements, and it's not clear whether the SEC's rules will be mutually compatible with

the GSA's Bloomberg laws. Andrew Ramonas has been reporting on these potentially competing climate reporting rules, and I brought them on the podcast to sort through all of this. The SEC's rules aren't actually out yet, so Andrew started off by explaining the rules that we have actually seen. The order directs the General Service Administration to track major contractors disclosure of greenhouse gas emissions, carbon reduction goals, and financial

risk from climate change. It's kind of what some companies might already be doing to some degree and their voluntary sustainability reports that they post on their websites. So I want to make note of one key modifier that you used there. You said major, What does that mean? I guess that means that there are going to be some smaller federal contractors that don't need to do this. Yeah, yes, you're right about that what it appears to be. But there's still a lot to be seen exactly who and

what will be affected. But definitely big contractors like Boeing and North or Grumman are going to have to be complying with this right. And that's something that you pointed out in your story that you know, Boeing North Grumman, the really big ones are already kind of reporting this information to other federal agencies like the EPA. So it seems like this is going to really fall on the medium size contractors because the smaller ones will be exempt,

the bigger ones are already doing it. Is that really that that donut hole? Is that where it'll hurt the most, you think possibly? And you know, it also kind of depends on what they might already be doing in voluntarily.

You know, some of these medium firms might be putting stuff up on their websites about their sustainability, they might be releasing greenhouse gas emissions, but there also are most likely a big chunk that aren't doing that, and that will have to kind of beef up and try to figure this out and see what they need to do. But I think the real heart of your story, and this is why I wanted to talk to you, is that it's not just the GSA that is doing this

with this new executive order. The SEC is also coming out with new rules about greenhouse gas emissions reporting very soon and based on the folks that you talk to, it sounds like they might not be the same rules.

They might be sort of duplicative or slightly different. That seems like it'd be a big headache for these contractors, right, Yeah, there could be with that, There could be conflicting reporting standards that could elevate litigation risks if the disclosures a company makes to compete for a government contract exceed or deemed inconsistent with what they say in SEC filings. That's

what so what source told me. But you know, another source told me the name of the game is consistency because investors and other stakeholders will look to these disclosures to see if they tell the same story. Yeah, I mean that makes me think that there could be some companies that are performing pretty well on the greenhouse gas emission side, but they have file one filing that says one thing and another finally says another thing, and now

their investors are saying, what's going on. Climate activists are saying, what's going on? Is that a possibility? Could we see that kind of litigation happen? Yees, So it's very possible, And you know, with government contractors, things like the false Claims Act can come into play where you know, you can't lie to the government in order to get a contract.

So there's there's a lot of play, and you know, there could be a lot of a lot of legal scrutiny depending on what the GSA does, right, And let's just sort of really quickly explain what that is. I mean, you've already sort of alluded to it, but the False Claims Act is a lot that could expose some of these companies to uh, you know, some serious liability if they mislead the government in some ways. Do I have that right? Yes, that's right, that's right, And you know

it could come into play here, you know. And then there's the other the other side of the coin. Let's say the GSA is requiring more detailed disclosures in the SEC. If investors think something's not quite right between what the story they're telling and the SEC disclosures versus the GSA, they you know, there could be an SEC related case out there that investors could be bringing. So there's there's

a lot to keep in mind. But you know, as as I said before, what my source has told me is consistency is very important, and there's ways that you know, companies can think this through if the agencies aren't you know, aren't on the same page necessarily. Do you think that it'll be sort of a highest common denominator situation where like the companies will just default to whoever whichever rule has the most reporting requirements and kind of issue those reports.

Is that something we could see or is it? Is it not quite like that? Well? I think that's what. You know, the lawyers would be advising these companies to do report whatever the highest common denominator is, so there is not you can't be accused of saying too little, even though companies might not like to do that. But

I think that's that's where we go. I have to ask, why do you know or have you talked to any folks who have explained why there are these two different federal agencies moving along different but sort of parallel pads, Like is this just a situation of the federal bureaucracy is very big and it doesn't you know, the right hand doesn't always know what the left hand is doing.

Or is there is there more going on here? Is there a reason why the SEC and the and you know, the GSA and maybe even the EPA are acting on their own. Well, there could be a little bit of the right hand not talking to the left hand or knowing what the other ones doing. Part of the problem is the SEC operates as an independent agency that's sort of in its own little world from the GSA. Yes, they're all you know. Biden of points that the chair of the SEC, and the points the head of the GSA.

But the SEC kind of does its own thing. But the hope, at least among some of the lawyers I talked to, is that that they are coordinating, they are taught walking with each other, and that the GSA might be like, look, we see you're making these filings and your annual reports with the SEC. You're you're in the notes of you know, you're talking about your greenhouse gas emissions and other climate information that could satisfy what we want,

and you're you're good to go. But uh, you know, there's always the possibility that the GSA, you know, like I could just be no, we want our own, our own thing at our own time, and this is just the way it is, and you'll have to deal with it.

And then you have the EPA in there, which already requires some disclosures about greenhouse gas emissions, and they're not necessarily as detailed as the SEC might be looking for, but they have their own requirements and I know already that at least between the SEC and the EPA, there have been discussions to try to, you know, hopefully find some common ground there there may be and there almost certainly are federal contractors that are not public companies, so

they wouldn't have to comply with the SEC's rules, but they will have to comply with the GSA rules. That would seem like it would put them in a really tough position because these companies may not have the ability or the infrastructure to get this information and reported out in a way that public companies are probably already used to do. Yeah, there there is definitely that that possibility and that these companies would kind of be forced to become at least public and how they do do this.

But look, you know, if we're talking about major contractors, whether they're private or public, they're they're probably they're mostly big companies. They should have the resources and the funds to do it. Whether they would like to be spending their money on these things, and that's another another question. Yeah, that's a good but we're not talking about like mom and pop, you know companies here. Yeah, okay, so what

are the next steps here? As you reported on, the proposal from the GSA came out and the SEC proposal has yet to come out, but it could be pretty soon. What kind of timeline are we talking about here? When

when will these be in effect? So it's sort of unclear when the GSA rules will take effect, but they have been you know, the GSA has been seeking common on how they should look and you know, as far as the SEC, SEC chair Gary Gensler said this month that he's hoping his agency's proposal will come out in early twenty twenty two, So, uh, we'll see early twenty Okay,

that's uh, that's bureau bureaucrat TSE for. We're not really sure when this is coming out, but we hope it will be soon's Yeah, it was actually you know, on his agenda to come out to this year, but it does not appear to be happening as we're quickly approaching at the end of the year. Oh well, I guess that's there will be something to look for in the winter and spring. But finally, where do you see like the sort of future of climate reporting or corporate climate

reporting heading. This is something you cover a lot. Do you see you know, eventually maybe one agency that will be responsible for collecting this and make the reporting and collecting information burden a little bit easier on these companies or do you see the number of agencies just continue to grow and there will be you know, twenty seven different reports that each company will have to file. What

direction do you see this heading in? Well, every agency may want its own thing, but its own its own disclosures, its own reporting. But you know, the GSA could as I as I said before, they could they could look to the SEC and say, uh, what you do for the SEC is good for us. Then again they could

say something different, you know, stay tuned. Yeah, but I just have to you know, it seems like we've talked about this before, but the demand for climate data and for environmental data in general is just going only in one direction. It's going up, you know, from investors, from

the government, from activists. It just seems like companies are going to have to eventually figure out a way to really get this out all out there in a you know, easy and efficient manner instead of you know, it almost seems like they're pulling teeth in some sense, you know, the way it is now to get climate data out of these companies. Right, Yeah, it can be. It can

be like pulling teeth. But you know it's one of my sources said it said to me, you know, regardless whether some companies want to do this or not, industry generally we're moving in this direction. We're industries trying to you know, be more environmentally friendly, trying to at least say they are so. Uh, you know, yes, it might be they might not like the way that the SEC or the GSA requires them to say they're environmentally friendly,

if you will. But sooner or later, you know, all big companies at least are going to have to make something that some sort of disclosure like that to the government. All right, Well, that was Andrews with the Bloomberg Law speaking to us. Andrew, thank you so much for a time, Thank you for having me. And that's it for today's episode of Parts for Avillion. If you want more environmental news, check us out on Twitter. We use the handle at environment.

Just that at environment, I'm at David B. Schultz. That's b Bye bye. Twenty twenty one, Today's episode of Parts for Billion was produced by myself, David Schultz. Parts for Billion was created by Jessica Coombs and Rachel Dagle and is edited by Rebecca Baker and Chuck McCutcheon. Executive producer

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