Sustainability in government contracting: All companies great and small

Film and television often depict an idyllic view of the environment around us: the picturesque mountains from “The Sound of Music,” the cerulean seas from “The Life of Pi” or the rolling green hills of James Herriot’s “All Creatures Great and Small."

The latter came to mind when discussing sustainability priorities with my CGI colleague, Howard Gray, who leads CGI’s UK client engagements related to sustainability and climate change. In Howard’s recent blog, “Navigating to Net Zero – Together,” he examined how both “great and small” firms are critical to meeting today’s environmental challenges—large businesses like CGI, and small and medium-sized enterprises (SMEs).

According to the U.S. Small Business Administration (SBA), nearly 32 million small and medium-sized businesses operate within the United States. Together, these companies employ nearly half—47.1 percent—of American workers. In June of 2021, President Biden set forth his goal: By 2025, increase the share of government contracts going to small disadvantaged businesses to 50 percent. Six months later, they asked agencies to increase their small disadvantaged business spending from the current statutory goal of 5 percent to 11 percent of contracting dollars. (The SBA defines a small disadvantaged business as one that is at least 51 percent owned by one or more socially and economically disadvantaged individuals.)

At the same time as this focus on engaging small and disadvantaged business comes to the fore, the federal government seeks to leverage its buying power to increase sustainability. Each year, the U.S. federal government spends more than $500 billion purchasing goods and services to support its operations. The Executive Order (EO) on Climate-Related Financial Risks, signed in May of 2021, sought to emphasize that buying power by integrating climate disclosure and impact reduction efforts into the federal procurement process.

The EO proposed that the Federal Acquisition Regulatory Council, in consultation with the Council on Environmental Quality and other agencies, consider amending the Federal Acquisition Regulation (FAR) to require federal suppliers to disclose greenhouse gas (GHG) emissions and climate-related financial risks, as well as set science-based reduction targets. The Department of Defense, the General Services Administration and the National Aeronautics and Space Administration published an advance notice of proposed rulemaking regarding this potential FAR amendment for major federal procurements in October of 2021.

Advancing as a global company—lessons learned in the UK

The UK government has already started down a similar path. At the end of 2020, UK leaders set a bold target for reducing emissions by at least 68 percent by 2030. In September of 2021, on World Environment Day, the UK issued new rules requiring suppliers bidding for contracts above £5 million a year to commit to the government’s target of net zero by 2050 and to publish a carbon reduction plan. Failure to do so would exclude the company from bidding.

CGI provides consulting services and technology solutions to the UK government, so we are required to meet this new rule. As a global company, CGI has already committed to achieving net zero emissions by 2030. In September 2021, CGI announced that its UK team would support this global initiative, received validation from the Science Based Targets Initiative (SBTi) for its science-based targets (SBTs), and committed to achieve net zero by 2026 for its own operations (scope 1, scope 2 and scope 3 business travel GHG emissions).

This commitment means CGI UK will reduce GHG emissions—its carbon footprint, in absolute terms—by 46 percent for CGI operations and by 46 percent for business travel by 2026. Colleagues like Howard and Pippa Greenwood, who leads CGI UK’s Net Zero Program, work alongside sustainability and climate experts from across CGI’s global operations to share best practices to meet this ambitious objective.

Small and medium-sized companies, however, may lack the expertise and funding to determine a path to greener operations or carbon footprint reduction. Terms like “net zero” and “SBTs” are new to their vocabulary. A survey by the British Chambers of Commerce found that only one in 10 firms asked were currently measuring their carbon footprint. Even those larger firms surveyed (those with more than 50 employees) lacked the information to be able to begin to comply with the new UK rule, with only 26 percent of larger firms measuring their carbon footprint.
 

Small, disadvantaged businesses struggle to go green

Many businesses—especially small to medium-sized enterprises—find it difficult to do business with the federal government. Many smaller businesses are struggling to succeed in the US federal arena—developing business relationships with the government, qualifying for programs like HUBZone and 8(a), understanding the optimum contract vehicles for their goods and services, dealing with the Great Resignation, and attracting the skilled resources they need to deliver on government requirements.

With a renewed focus on sustainability across the federal landscape, companies that offer environmentally focused solutions can gain a competitive advantage. Programs exist to help small businesses and other entities that can bring green products to the market to benefit the government, and other programs provide visibility into those products for federal buyers. For example:

The EPA is one of 11 agencies that use the SBA’s Small Business Innovation Research program to fund research and development projects focused on environmental priorities.

AbilityOne’s Greening Project enables qualifying nonprofits to publicize their more sustainable products, such as biodegradable paper cups and disposable cutlery, 100% recycled products, environmental cleaning agents and services, to federal buyers.

The GSA Advantage! ® Environmental Aisle enables federal agencies to purchase green products available through GSA’s Multiple Award Schedules, Best-in-Class contracts.

But for firms whose services or products are not specifically focused on sustainability or environmental priorities—those which anticipate the potential need to demonstrate the sustainability of their supply chains and their commitments to reducing GHG emissions—getting started can be more challenging. 

The SBA’s Small Business Sustainability Toolkit provides an extensive library of resources—so extensive, it may be difficult for a small business to know where to start. Many links are related to overall business operations and launching a business, not specifically baselining and reducing GHG emissions across the enterprise. Should new language be added to the FAR, more specific information related to concepts such as SBTs will be necessary to help small businesses navigate the path forward. My colleague Howard and his team are seeing greater demand from SMEs for expertise to aid them in delivering more sustainable business value.

Greening the federal supply chain

The U.S. government can look to Europe for guidance on sustainability in government operations and supply chains as well as how to drive climate actions through governments’ buying power. The programs described above provide some help to small businesses, and more are promised to help increase small business participation in the government ecosystem.

However, none of these programs tie economic priorities to climate priorities. By contrast, in 2021, the UK launched the Together for our Planet "Business Climate Leaders" campaign, an effort to encourage small businesses to commit to cutting their emissions in half by 2030 and to achieve net zero by 2050. A key component of that campaign is the UK SME Climate Hub, a government-backed effort aimed at providing small and medium-sized businesses with access to resources to help them take the practical steps necessary to understand and reduce their emissions.

As the U.S. government considers how federal acquisition policy can help drive increased green buying across the federal landscape, we recommend a keen focus on easy-to-understand guides for small businesses in understanding and adopting practices for measuring sustainability of their business operations and supply chains; funding for green initiatives specifically targeted for small business; and innovative public-private partnerships including mentorship programs where experts from the federal government and large businesses can coach and guide small businesses on their sustainability journeys.