Today, the California Legislature has granted approval to a highly anticipated and pioneering climate bill that would compel large corporations to disclose their annual emissions of greenhouse gases that contribute to climate change.
The destiny of Senate Bill 253 now rests in the hands of Governor Gavin Newsom. His spokesperson, Daniel Villasenor, refrained from commenting on whether he intends to sign the climate bill.
Impractical and likely to result in inaccurate emissions reports
In the final stages of California’s legislative session, various stakeholders, including business groups, agricultural entities, and oil companies, engaged in vigorous lobbying efforts to dissuade lawmakers from endorsing the legislation. They argued that it was impractical and likely to result in inaccurate emissions reports. On the opposing side, environmental organizations found support from major tech giants like Apple, Google, Microsoft, and Salesforce, as well as several global corporations with a strong emphasis on sustainability, such as IKEA.
Should the climate bill become law, it would necessitate roughly 5,300 U.S. corporations with revenues exceeding $1 billion, conducting business in California, to annually disclose their global emissions of carbon dioxide and other gases that contribute to global warming. This requirement would apply to any company meeting the revenue threshold and engaged in selling or producing goods or services within California, encompassing a diverse range of large global corporations such as Amazon, Chevron, McDonald’s, Kroger, and Walmart.
Imposing substantial burdens on companies
These businesses would be obligated to report not only the quantities of gases they emit globally from their own operations and energy consumption but also emissions originating from less direct sources, including their supply chains, contractors, and even consumers’ use of their products.
These less direct emissions sources referred to as “Scope 3” emissions, have raised concerns among business groups. They argue that the estimates may be unreliable, potentially leading to misguided public policies and imposing substantial burdens on companies.
In response to these concerns, Senator Wiener amended the climate bill last week to provide companies with an extended timeline until 2030 before fines for inaccurately reporting emissions from these less direct sources would be imposed. However, companies would still be required to report emissions from their operations and energy use starting in 2026. Reporting of emissions from suppliers and consumers would commence in 2027, with a grace period for companies not to face penalties for inaccurate reports during the initial years.
Under the provisions of the climate bill, the disclosed emissions would need to undergo independent verification by an external consultant, referred to as an “independent third-party assurance provider.”
