New green procurement standard for federal suppliers

The Treasury Board of Canada’s Standard on the Disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets (the Standard) took effect on April 1, 2023. The Standard was released under the Policy on Green Procurement and requires major suppliers of the federal government to disclose their greenhouse gas (GHG) emissions and set GHG emission reduction targets in order to be eligible for large procurements.

What you need to know

• The Standard requires all federal departments to ensure that suppliers for any procurements over $25 million (including taxes): (i) measure and disclose their GHG emissions, and (ii) adopt a science-based target to reduce their GHG emissions to net zero by 2050.
• The requirements of the Standard may be built into the instructions and evaluation criteria for applicable procurements conducted by federal departments going forward. Federal suppliers subject to the Standard may also be required or requested to join the Net-Zero Challenge, or an equivalent initiative or standard, in order to submit a bid or upon contract award.
• The requirements set out in the Standard do not apply to contractual arrangements, procurements using emergency contracting authorities or procurements established through foreign military sales.

The green procurement standard

GHG emissions disclosure

The Standard does not prescribe a methodology with which suppliers must comply in respect of their GHG emissions disclosure. Rather, the Standard provides that suppliers may meet the requirements through participation in the Net-Zero Challenge or through an equivalent initiative or standard. The Net-Zero Challenge is a voluntary initiative implemented by the Government of Canada to encourage and hold businesses accountable for disclosing their GHG emissions and achieving targets aligned with those in the Paris Agreement.

To meet the minimum requirements of the Net-Zero Challenge, a federal supplier’s disclosure must:

• Disclose scope 1 emissions (direct emissions principally resulting from activities undertaken by the federal supplier) and scope 2 emissions (indirect emissions from electricity, heating, cooling or steam purchased by the federal supplier for its own use) in absolute terms—i.e., in kilotonnes (kt) or megatonnes (Mt) of carbon dioxide equivalent (CO2e)—not in terms of emissions intensity. Such disclosure must be disaggregated from scope 3 emissions (if scope 3 emissions are being disclosed by the federal supplier).
• If the federal supplier is a financial institution, disclose scope 3 emissions (indirect emissions not included in scope 1 or 2) in respect of investments covered by the Greenhouse Gas Protocol (the GHG Protocol) and, if applicable, emissions from the supplier’s lending portfolio.
• If the federal supplier is a large industrial emitter, disclose the single most relevant scope 3 emissions category covered by the GHG Protocol.
• Disclose a baseline GHG inventory (a GHG Inventory) measured within the previous five years, as well as annual updates to such inventory (showing annual changes in kt CO2e or Mt CO2e).
• Use a widely accepted methodology of GHG accounting such as the GHG Protocol.
• If the federal supplier has facilities that report to the federal government’s Greenhouse Gas Reporting Program (the GHGRP, which requires reporting by facilities that emit 10 kt of CO2e per year), the federal supplier must either submit the aggregate total scope 1 emissions reported to the GHGRP, in absolute terms, from all Canadian facilities or submit the total scope 1 emissions for their Canadian facilities and operations (i.e., excluding emissions from international facilities and operations). This reporting must be for the same base year as the GHG Inventory and updated annually thereafter.

Reduction targets

The Standard requires that suppliers in federal procurements set GHG emission reduction targets “in line with the Paris Agreement”. Similar to the requirements for GHG emissions disclosure, this can be done through participation in the Net-Zero Challenge or an equivalent initiative or standard.

To set a GHG emissions reduction target consistent with the Paris Agreement and the Net-Zero Challenge, a federal supplier must:

• set a net-zero GHG emissions target for 2050 or earlier (the Net-Zero Target); and
• set two interim reduction targets for no later than 2035 and 2045, respectively (the Interim Targets), unless a participant’s Net-Zero target is set for 2040 or earlier (where the Net-Zero target is in 2040 or earlier, only one interim target is necessary; where the Net-Zero target is for 2030 or earlier, no interim targets are necessary).

The Net-Zero Target:

• Must include all GHG emissions included in the GHG Inventory.
• May be expressed as an absolute emissions reduction target or an emissions intensity target (although it is strongly recommended that participants set an absolute reduction net-zero target for all of their emissions).
• May be expressed as a single target for all emissions or a set of targets for each emissions scope.
• May include the use of offset credits. Any use of offset credits must be explicitly stated (including for which scope of emissions they are being used).

The Interim Targets:

• Must be anchored to specific years. The first Interim Target must be at least five years from the date of joining the Net-Zero Challenge (if applicable).
• Must include all GHG emissions included in the GHG Inventory.
• May aggregate scope 1 and 2 emission reduction targets. Scope 3 Interim Targets (if applicable) must be stated separately.
• May be expressed as absolute emissions reduction targets or emissions intensity targets.

In addition, the first Interim Target must meet or exceed a minimum ambition threshold that is equal to a 40% deviation from the straight-line reduction path to net zero.

Documentation for Net-Zero Challenge participants

A participant in the Net-Zero Challenge must certify within 12 months of joining that the requirements in respect of the GHG Inventory, the Net-Zero Target and the Interim Targets are met. 

Within 24 months of a participant joining the Net-Zero Challenge, a participant must prepare a comprehensive plan that includes, in addition to the GHG Inventory, Net-Zero Target and Interim Targets, a description of the scenario analysis that the participant used to identify net-zero pathways for its organization, as well as information regarding GHG mitigation strategies and certain other disclosures in line with the Task Force on Climate-Related Financial Disclosures.