September 12, 2023
Updated September 14, 2023 Source: CAL Matters
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California’s Legislature today approved a closely-watched, first-in-the-nation bill that would force large companies to disclose their annual emissions of greenhouse gases that contribute to climate change.
Gov. Gavin Newsom will now decide the fate of Senate Bill 253.
Newsom spokesperson Daniel Villasenor declined to comment today on whether he will sign it.
In the final weeks of California’s legislative session, business groups, growers and oil companies intensely lobbied lawmakers to reject the legislation, calling it unworkable and likely to lead to inaccurate reports of emissions. Environmental groups, big tech companies Apple, Google, Microsoft and Salesforce, and some global corporations that emphasize sustainability, including IKEA, support it.
If the bill becomes law, about 5,300 U.S. corporations earning more than $1 billion and doing business in California would be required to annually report their global emissions of carbon dioxide and other planet-warming gases.
Any company that meets the revenue threshold and sells or produces goods or services in California would have to comply, including such large, global corporations as varied as Amazon, Chevron, McDonalds, Kroger and Walmart.
Businesses would have to report not only the tons of gases they emit globally from all of their own global operations and energy use, but also from less-direct sources, such as their supply chains, contractors and even consumers’ use of their products.
These indirect sources, called “Scope 3” emissions, have raised the concerns of business groups. Business groups said the estimates could be inaccurate, resulting in misguided public policy, while putting an onerous burden on companies.
In response last week, Wiener amended the bill to give the companies until 2030 before fines for inaccurately reporting emissions from those less-direct sources would kick in. The companies will still have to report emissions from their operations and their energy use beginning in 2026. But the reports of emissions from suppliers and consumers wouldn’t begin until 2027 — and the companies won’t be penalized for inaccurate reports for the first few years.
Under the bill, the emissions disclosures would have to be independently verified by an outside consultant, “an independent third-party assurance provider.”
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The aim of the legislation is to hold large companies accountable for the role they play in climate change. For years, many businesses have marketed themselves as environmental stewards while failing to fully disclose their emissions.
Increased corporate transparency on emissions could lead to highly publicized “top polluters” lists that make major corporations more accountable — and uncomfortable — since their full role in causing climate change would be exposed.
The bill passed off the Assembly floor on Monday with an initial vote of 41-20, then cleared the Senate in a final, 27-8 vote today. Last year, a similar bill failed in the state Assembly on the last night of the legislative session.
“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,” state Sen. Scott Wiener, a Democrat from San Francisco who authored the bill, said in a statement Tuesday. “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.”
Economic activity has long been the principal driver of the world’s changing climate, and for the last two decades, organizations have sought uniform standards for reporting corporations’ greenhouse gas emissions.
The United Kingdom already requires companies to report emissions, and the European Union will begin requiring the reports in 2025.
Meanwhile the Biden administration’s U.S. Securities and Exchange Commission has proposed a rule that would require publicly traded companies to report verified greenhouse gas emissions and climate-related financial risks.
But the federal efforts — which do not include private companies — have met fierce opposition from business groups. Of the 5,300 U.S. corporations that would have to report their emissions under California’s bill, about 73% are privately held companies, according to sustainability group Ceres.
“In California, we would be leading the way with a gold standard that in a lot of ways would do the work that can’t happen for all kinds of reasons in D.C. right now,” said Catherine Atkin, a climate attorney who formed the group Carbon Accountable to advocate for the bill.
“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.” ASSEMBLYMEMBER SCOTT WIENER
Opposition came from the California Chamber of Commerce and consortiums of large and powerful industry groups: the Western States Petroleum Association, which represents oil companies, the Western Growers Association and and the Securities Industry and Financial Markets Association, which represents stockbrokers and investment bankers.
CalChamber lobbyist Brady Van Engelen declined to comment on the lawmakers’ vote today.
“Companies are going to have to start communicating not on the fact that they are carbon neutral — which usually didn’t mean anything — but that they are on the path to reduction,” said Alexis Normand, chief executive of Greenly, a carbon accounting start-up.
“You’re going to start being judged on the pathway,” he said, “so that’s a big change.”
Another corporate responsibility bill was approved by the Legislature Wednesday night and sent to Newsom’s desk. It would require more than 10,000 companies with revenues exceeding $500 million to detail how climate change poses financial risks to their operations, not just in California, but around the world.
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