California Enacts Pioneering Emissions Reporting Law

In a groundbreaking move, California is set to require major companies to disclose greenhouse gas emissions not only from their own operations but also throughout their supply chains. This comes as Senate Bill 253, the Climate Corporate Leadership and Accountability Act, receives a nod from Governor Gavin Newsom.

The legislation, a first-of-its-kind in the nation, necessitates businesses with over $1 billion in gross annual revenue to report emissions linked to their vendors and customers. Additionally, it also obliges financial institutions to report emissions from companies within their portfolios.

California, boasting the world’s fifth-largest economy, continues its lead in environmental initiatives. Previous measures include stringent vehicle pollution rules and a ban on natural gas in new constructions. Governor Newsom expressed his intention for the state to be at the forefront of combating climate change. “We need to exercise not just our formal authority, but we need to share our moral authority more abundantly,” he emphasized.

Human-induced carbon-dioxide and other greenhouse gas emissions have been scientifically linked to accelerated climate change, which contributes to severe heatwaves, rising food costs, and threatening oceanic changes.

The California Air Resources Board has been tasked to develop regulations by 2025. Companies will then have one year to begin disclosing emissions across three defined “scopes”. The most intricate, Scope 3, which pertains to customer-related emissions, is slated for full implementation by 2027.

Supporters believe SB 253 will empower California’s communities with essential data, allowing them to hold polluters accountable and make informed business decisions. The bill is expected to impact approximately 5,400 companies, including major players like Walmart, Apple, Google, and ExxonMobil.

State Sen. Scott Wiener, the bill’s author, lauded the transparency the legislation brings. “California is leading the nation on essential climate action,” he noted.

However, concerns have been raised regarding the legislation’s broad application. Critics argue that such a sweeping rule could be burdensome, particularly for diverse industries, and might drive businesses out of the state. The California Chamber of Commerce voiced concerns about the bill’s jurisdiction over out-of-state businesses selling goods and services in California.

Support for the bill is widespread, with endorsements from corporate giants like Ikea USA, Microsoft, and Patagonia. They emphasized the importance of consistent and reliable emissions data for a sustainable future.

Climate-policy advocate, Sierra Club, has expressed optimism that California’s decision will set a precedent for federal regulations on emissions reporting for publicly traded companies.

In a related move, Governor Newsom’s office announced a lawsuit against major oil and gas companies, seeking accountability for climate change-related damages.