Canadian government institutes new rule after the US federal government proposed taking a similar action last year.
Canada’s recent announcement that it will require its major government suppliers to disclose their greenhouse gas emissions and set reduction targets from 1 April 20231 is a big step towards greening its operations and supporting Canada’s transition to a cleaner economy.
It follows on the heels of a similar move by the US government when it proposed its new Federal Suppliers Climate Risks and Resilience Rule during last year’s COP27 event in November2, and for which public comment has already closed in January this year.
The US rule is designed to protect the federal government’s supply chains from significant climate-related financial risks. Under its imposed requirements, “major” contractors with greater than $50 million in annual federal obligations will need to disclose greenhouse gas (GHG) Scope 1, Scope 2, and relevant Scope 3 emissions via the CDP.
In addition, they will need to assess climate-related financial risks via the Task Force on Climate-Related Financial Disclosures (TCFD), and set emission reduction targets that have been validated by the Science Based Targets Initiative (SBTi).
Smaller “significant” contractors with between $7.5 million to $50 million in annual federal obligations will be required to disclose only their Scope 1 and Scope 2 emissions, whilst those with less than $7.5 million in annual federal obligations would be exempt.
For Canada’s new initiative, federal government procurements over $25 million will require the suppliers to disclose their GHG emissions and set reduction targets. Suppliers can fulfil this requirement via participation in Canada’s Net-Zero Challenge or another approved internationally recognized and functionally equivalent standard or initiative.
Furthermore, Canada will now require the reporting and reduction of the embodied carbon footprint of all new major government construction projects, whilst mandating that these projects must use lower carbon concrete where available.
Actions like these by two of the wealthiest and most developed nations in the world sends a signal to the rest of the globe that sustainability is being taken seriously by these two countries at the highest levels.
With the U.S. government being the largest single purchaser of goods and services in the world and awarding more than $500 billion in contracts every year3, the ramifications of such a rule would be huge, not only within the governmental sector, but on the private sector as well. It also further boosts the credibility of climate-related institutions like the CDP, TCFD, and STBi.
Not only are such actions ‘signs of the times’ regarding environmental sustainability, but we can expect to them to have a ‘trickle-down effect’ too. Many of the world’s biggest companies are already subject to such regulations and have signed up to various emissions initiatives and net zero pledges.
We can now expect increasing numbers of mid-market companies to begin to do the same, particularly if they are suppliers to bigger companies who may soon be falling under regulations concerning their supply chain sustainability.