The US Federal Acquisition Regulation (FAR) Climate Rule, finalized in September 2023, represents a landmark development in the federal government’s efforts to integrate climate risk and sustainability into its procurement practices. The rule mandates that major federal contractors—defined as entities with more than $50 million in annual federal obligations—disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions. For defense contractors and suppliers across the federal supply chain, the requirement to report Scope 3 emissions in particular introduces a new level of complexity, as it necessitates visibility into indirect emissions arising from upstream and downstream activities. The regulation aims to ensure that federal spending aligns with national climate goals and to drive decarbonization across critical industries serving the public sector.
A central challenge for defense contractors is building a robust, defensible Scope 3 emissions inventory that satisfies the FAR Climate Rule’s requirements while minimizing administrative burden. Open data resources, such as the Environmental Protection Agency’s Greenhouse Gas Reporting Program (GHGRP), provide a valuable foundation for this task. The GHGRP dataset includes facility-level GHG emissions reports from thousands of US industrial facilities across multiple sectors, including power generation, chemicals, metals, and transportation. By leveraging this data, contractors can identify the emissions profiles of key suppliers and material inputs, helping to quantify upstream emissions with greater precision. For example, a contractor sourcing specialty alloys or electronics components can use GHGRP data to estimate emissions from smelters, refiners, or fabrication facilities that produce these inputs. This data-driven approach improves the credibility of Scope 3 estimates and provides a solid basis for third-party validation or audit.
Integrating open EPA data into the emissions inventory process begins with supplier mapping. Contractors should first identify the most emissions-intensive suppliers and materials in their value chains, prioritizing those that contribute most significantly to Scope 3 categories such as purchased goods, capital goods, upstream transportation, and waste. Once these suppliers are identified, contractors can cross-reference supplier facility locations and industry classifications against GHGRP records. This enables the creation of supplier-specific emissions factors or intensity benchmarks, which can then be applied to procurement data to calculate embodied emissions. Where supplier-specific GHGRP data is unavailable, contractors can supplement their analysis using EPA sector averages or published life-cycle inventory datasets to ensure completeness.
The FAR Climate Rule requires contractors to submit their emissions disclosures through the System for Award Management (SAM.gov), which launched a dedicated climate module in late 2023 to support compliance reporting. The climate module is designed to accept both summary-level emissions data and supporting documentation, including inventory methodologies, data sources, and assumptions. Contractors should ensure that their emissions reporting aligns with recognized standards such as the Greenhouse Gas Protocol Corporate Standard or ISO 14064. Prior to submission, emissions data should undergo internal review and validation to confirm accuracy and consistency with other ESG or sustainability reporting obligations. The SAM.gov climate module also includes optional fields for contractors to describe their emissions reduction targets, strategies, and progress, enabling firms to showcase their climate leadership to federal agencies and the public.
Establishing an internal process for Scope 3 reporting under the FAR Climate Rule requires coordination across procurement, sustainability, compliance, and IT teams. Procurement staff play a critical role in collecting supplier data and ensuring that new contracts include climate-related information requirements. Sustainability teams are responsible for inventory design, data analysis, and alignment with corporate climate commitments. IT teams support the integration of supplier and emissions data within enterprise resource planning systems and reporting tools. By fostering collaboration across these functions, contractors can streamline data collection, enhance reporting accuracy, and reduce the risk of non-compliance.
In addition to meeting regulatory requirements, proactive Scope 3 emissions reporting offers contractors strategic benefits. It positions firms to respond to growing customer and investor expectations for climate transparency and demonstrates alignment with federal sustainability goals. Contractors that build strong emissions inventories are better equipped to identify carbon hotspots in their supply chains, engage suppliers in decarbonization initiatives, and design low-carbon products and services. Furthermore, public disclosure of Scope 3 data through SAM.gov enhances accountability and can strengthen a contractor’s reputation as a responsible, forward-thinking partner to federal agencies.
The FAR Climate Rule signals a significant shift in federal procurement policy, embedding climate risk considerations into supplier selection and contract management. For defense contractors and other federal suppliers, success under the new rule depends on the ability to harness open data, integrate climate reporting into core business processes, and demonstrate meaningful progress toward emissions reduction. By using EPA GHGRP data to build comprehensive Scope 3 inventories and leveraging SAM.gov’s climate module for transparent reporting, contractors can not only achieve compliance but also help drive the federal supply chain’s transition to a low-carbon future.