California lawmakers pass groundbreaking greenhouse gas emissions disclosure bill
California lawmakers have passed a bill that would require large U.S.-based companies doing business in the Golden State to publicly disclose their annual greenhouse gas emissions — the first such requirement in the nation.
Supporters of Senate Bill 253, the Climate Corporate Data Accountability Act, say the legislation is aimed at discouraging corporate greenwashing, or marketing that falsely portrays a company’s efforts to reduce climate-warming emissions.
The measure passed in a 48-20 Assembly vote on Monday before the Senate signed off on it in a 27-8 concurrence vote on Tuesday. It now heads to Gov. Gavin Newsom for a final decision.
The bill would require the California Air Resources Board to adopt regulations by 2025 mandating public and private companies with more than $1 billion in annual revenues to begin publicly disclosing their emissions across three “scopes” in 2026. Scope three emissions reporting would start in 2027.
The requirements would apply to an estimated 5,400 companies, including Walmart, Apple, ExxonMobil and Chevron.
State legislators do not have the luxury of taking a year off from fighting the climate crisis and should muster the votes to pass what remains of a three-bill climate accountability package before the end of the session.
“We need the full picture to make the deep emissions cuts that scientists tell us are necessary to avert the worst impacts of climate change,” said the bill’s author Sen. Scott Wiener (D-San Francisco) in a news release.
“These disclosures are simple but transformational, which is why companies like Apple are already reporting their emissions and calling them essential to their corporate climate goals,” he said. “We need strong transparency to create a level playing field among private and public companies. Once again, California is leading the nation on essential climate action.”
The bill is a revival of Wiener’s SB 260, which passed the Senate last year but was killed in the Assembly by one vote.
The decision comes as a victory to environmental advocates, who have urged greater transparency from corporations about the integrity of their climate pledges to consumers and investors. Without a standardized means of evaluating those pledges, they argue that it is impossible to discern whether a company is making sincere efforts to cut carbon emissions.
With California being the fifth largest economy in the world, advocates are hopeful the legislation could reach beyond the state’s borders by forcing some of the world’s biggest companies to disclose their emissions and incentivizing other states to adopt similar climate laws.
Under the proposed law, scope 1 emissions are defined as direct greenhouse gas emissions from a company and its branches. Scope 2 includes indirect emissions, such as electricity bought by the company. Scope 3 are emissions from the company’s supply chain, including waste, water usage, business travel and employee commutes; it accounts for about 75% of a company’s greenhouse emissions for many industries.
A bill would require companies with more than $1 billion in annual revenue to disclose their carbon emissions if they do business in California.
The measure was backed by more than a dozen major corporations, including Ikea U.S.A., Microsoft, Patagonia, REI Co-op, Dignity Health and Sierra Nevada Brewing Co. “We know that consistent, comparable, and reliable emissions data at scale is necessary to fully assess the global economy’s risk exposure and to navigate the path to a net-zero future,” they said in a joint letter to lawmakers. “SB 253 would break new ground on ambitious climate policy and would allow the largest economic actors to fully understand and mitigate their harmful greenhouse gas emissions.”
Apple recently joined in support, writing in a letter to Wiener that it is “strongly supportive of climate disclosures to improve transparency and drive progress in the fight against climate change.”
But opponents of the bill, including the California Chamber of Commerce, said that emissions reporting was more of an art than a science, and worried that complications would give out-of-state businesses an unfair advantage over California-based corporations. They also questioned whether the California Air Resources Board has the authority to regulate out-of-state companies bringing goods to California, and worried that small and medium-size businesses could bear the financial burden of the bill.
The bill’s author has disputed the last concern, emphasizing that SB 253 only applies to billion-dollar corporations and would have no impact on the small businesses that supply them.
SoCalGas and San Diego Gas and Electric also opposed the bill, saying it would “impose a new, and potentially insurmountable, cost on the hundreds of Diverse Business Enterprises” they work with by requiring them to report on scope three emissions to support the gas companies’ compliance with the law.
The state bill could be a first step in the nation toward satiating the public’s appetite for corporate climate disclosures. A 2021 survey of 1,115 Americans found that 87% believe it’s important for corporations to be transparent about their climate impacts. And last year, some 530 investors representing almost $39 trillion in assets under management urged governments around the world to implement policies that support large-scale zero-emissions investments, such as requiring mandatory reporting.
