ESG Offers New Opportunities for Government Contractors to Work with the Department of Defense

At a glance

• Main takeaway: The Department of Defense is committed to implementing environmental, social and governance initiatives, however, they are also setting standards and regulations companies must adhere to if they hope to secure government contracts.
• Impact on your business: Companies that have already started their ESG journey by incorporating a sustainable framework into their business strategy have a major market advantage over their competition.
• Next steps: Aprio’s ESG Advisory team has experience helping government contractors meet ESG compliance so they can secure US government contracts.

Let Aprio get you started on your ESG journey? Contact our team for a complimentary consultation.

The full story:

Environmental, social and governance (ESG) factors are increasingly recognized by businesses as must-have initiatives to stay competitive in their industry. Investors, consumers and even employees are looking for companies with a proven commitment to well-defined environmental standards, advancement of social issues and ethical corporate governance. It’s not surprising that the same applies to US government agencies and their ESG goals.

The Department of Defense’s journey to decarbonization

The Department of Defense (DOD) understands the effects climate change has and will continue to have on our national defenses. The DOD revealed significant investments in sustainability in their Climate Adaption Plan that will combat climate change and help them advance their energy independence. Ongoing strategies the DOD have implemented, include:

• Establishing a Sustainable Product Purchasing Program to enhance the ability to operate in a cost-effective manner that reduces the consumption of resources and solid and hazardous waste generation.
• Installing micro-grids on all its Army bases by 2023, with a commitment to be carbon-free by 2030.
• Implementing a floating solar array at Fort Bragg will lead to increased energy resilience and cost savings on the base.
• Installing solar power grids at the Hawaii and Los Alamitos joint bases to increase energy resilience.
• Prototyping a hybrid Bradley fighting vehicle that is expected to reduce fuel consumption by at least 20%. 
• Partnering with the Energy Department to enhance the measuring of energy usage.
• Investing $20 million in 2023 for contingency preparedness in climate risk scenarios, including war games training, humanitarian and disaster relief, and the support of civil authorities.
• Investing in new technologies, such as a blended wing body aircraft to increase flight range and payload while consuming less fuel.
• Creating energy efficiency on some bases by using energy derived from landfills and solar power.
• Working on engine improvements for naval ships to consume less fuel.

New ESG opportunities for companies working with US government agencies

For the 2023 fiscal year, the DOD has devoted a significant portion of their defense budget towards environmental and social initiatives. These ESG investments translate into several new opportunities for US companies to work directly with the DOD. Here’s a breakdown of some of the key factors within the DOD’s 2023 defense budget:

• $3 billion to upgrade military installations to increase their resilience and adaptability to the effects of climate change. 
• $55.8 billion to improve healthcare for the federal workforce.
• $9.2 billion for family support, including youth programs, educational activities, recreational programs and supplying commissaries with family-related products.
• A 4.6% pay raise for service members and civilians, which is the most significant pay raise in 20 years.
• Increasing the minimum wage to at least $15 per hour for anyone employed in the federal workforce.
• Investing in childcare assistance and sustainment.
• $12.6 billion is dedicated to modernizing Army and Marine Corps combat equipment, including hybrid vehicles.
• $16.5 billion dedicated to science and technology advancements.
• $479 million to address diversity, equity and inclusion, and accessibility as well as implementing the recommendations of the Independent Commission on Sexual Assault in the Military. 

DOD is tracking their ESG performance, and so should you

The DOD is committed to sustainability, societal impact and carbon reduction across all departments and military branches. The Office of Management and Budget (OMB) ESG Scorecard highlights the efforts and success of the DOD’s commitment. The DOD and other US government agencies are not just following their own ESG journey but are also setting standards and regulations that companies must adhere to if they want to do business with them.

We’ve already seen requests for proposals include ESG requirements to gain additional points when bidding for contracts. In addition, new ESG regulations from the U.S. Securities and Exchange Commission (SEC), the proposed Federal Acquisition Regulations on Greenhouse Gas Emissions and Climate-Related Risks and individual government agencies’ ESG requirements will significantly influence the government contracting world.

The bottom line

Companies that have already started their ESG journey by incorporating a sustainable framework into their business strategy have a market advantage over companies that need to either re-evaluate their existing ESG strategies or have yet to start.  

Aprio’s ESG Advisory team has experience helping government contractors no matter what stage they are at in their ESG journey. To learn more, contact our team for a complimentary consultation.

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About Aprio’s Government Contracting Practice

About Aprio’s ESG Practice

Let Aprio get you started on your ESG journey? Contact our team for a complimentary consultation.