California lawmakers approved new legislation on Sept. 11 requiring thousands of public and private businesses that operate in the state to report their direct and indirect greenhouse gas emissions.
Under the measure, the State Air Resources Board would be required to develop and adopt, on or before Jan. 1, 2025, regulations requiring “specified partnerships, corporations, limited liability companies, and other business entities” in California earning at least $1 billion annually to publicly disclose their direct and indirect emissions across their supply and value chains.
Companies must publicly disclose scope 1 and 2 emissions beginning in 2026, according to the bill, while scope 3 emissions—indirect emissions produced from sources that the corporation doesn’t directly control, such as delivering products from warehouses to stores—must be disclosed beginning in 2027.
Third-party auditors would be required to verify the reports “to obtain an assurance engagement,” the bill states.
“This bill would require the state board, on or before July 1, 2027, to contract with the University of California, the California State University, a national laboratory, or another equivalent academic institution to prepare a report on the public disclosures made by reporting entities to the emissions reporting organization,” the measure states.
“The bill would require, in preparing the report, consideration to be given to, at a minimum, greenhouse gas emissions from reporting entities in the context of state greenhouse gas emissions reduction and climate goals,” it adds.
Concerns Over Costs
Additionally, the bill requires reporting entities to pay an annual fee, with the proceeds going to a newly created Climate Accountability and Emissions Disclosure Fund. That fund would then be used to cover the costs of administering and implementing the disclosure program.Violators of the bill risk a fine of up to $500,000.
The measure, which has received support from a string of high-profile companies including Patagonia, Apple, and Microsoft, must still be approved by the state Senate and Democratic Gov. Gavin Newsom, who has not yet signaled if he will support the bill.
However, it has long-faced opposition from business lobbyists and groups who are concerned it will be too costly and burdensome, given that companies will have to accurately account for all their direct and indirect emissions.
Bill Will ‘Ensure Corporate Transparency’
On X, formerly known as Twitter, Mr. Wiener praised the assembly’s approval of the Climate Corporate Data Accountability Act, calling it a “massive team effort.”The non-profit noted the bill is “designed to give investors better insight into how companies are managing the financial risks of climate change.”
“Investors, consumers, and other stakeholders have always deserved transparency about how companies are managing the greatest risks facing their businesses and the economy, and climate change should be no different,” said Steven Rothstein, managing director of Ceres Accelerator for Sustainable Capital Markets.
“Leading companies that already voluntarily disclose efforts to manage climate risk also deserve a standardized and consistent reporting framework that allows them to be fairly compared across companies and sectors. These bills are a smart response to the growing global momentum for corporate climate disclosure, and Ceres urges Gov. Newsom to sign them into law as soon as possible,” Mr. Rothstein added.
The California Assembly is expected to vote later this week on a second climate-focused bill, SB 261, which would require companies with total annual revenues over $500 million to report on their climate-related financial risks.
