It could become the first law in the US to force companies to publicly report their greenhouse gas emissions, and more mandated disclosures could be on the way.
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California legislators passed a bill Monday night that would force big companies doing business in the state to disclose how much planet-heating carbon dioxide pollution they create. It will be the first mandate of its kind in the nation if it’s signed into law and comes as the SEC drags its heels on a similar federal mandate.
The bill, SB 253, requires the California Air Resources Board to develop rules by 2025 for companies with annual revenues over $1 billion. By 2026, the companies would have to publicly report greenhouse gas emissions that come from their operations and electricity use. Crucially, they’ll also be required to disclose how much pollution is generated by their supply chains and customers by 2027.
“Huge climate win in California: Despite a massive misinformation campaign by opponents … SB 253 will make California a global leader in corporate carbon transparency,” California Senator and bill author Scott Wiener (D) said in a post on X, formerly Twitter.
The requirement that companies disclose emissions from their supply chains and consumer use of their products and services, called “Scope 3” emissions in industry speak, has gotten the most pushback from industry. It pushes them to design products that pollute less and encourage suppliers to slash their own emissions. Scope 3 emissions typically make up the biggest chunk of a company’s carbon footprint, which is why environmental advocates have fought to include them in new rules.
The SEC proposed federal rules in 2022 that would mandate similar disclosures by publicly traded companies. Those rules were expected to be finalized earlier this year but have faced delays along with stiff opposition by companies that have been particularly reluctant to share their Scope 3 emissions.
“We do not believe the purpose of Scope 3 disclosure requirements should be to push publicly traded companies into the role of enforcing emission reduction targets outside of their control,” BlackRock said in a June 2022 statement.
Apple, on the other hand, just endorsed California’s bill last week. “While these emissions can be challenging to measure, they are essential to understanding the full range of a company’s climate impacts,” Apple director for state and local government affairs Michael Foulkes wrote in a letter to Wiener last week.
After sailing through the state Assembly and Senate, the bill heads to Governor Gavin Newsom’s desk to sign into law. It’s still too early to know how California might enforce this law, which would depend on how the Air Resources Board crafts regulations. California has a goal of reaching net-zero emissions statewide by 2045.