California Assembly Approves Bill Mandating Strict Emissions Disclosures From Big Businesses

The California State Capitol building in Sacramento on April 18, 2022. John Fredricks/The Epoch Times

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.

The legislation, Senate Bill 253, or the Climate Corporate Data Accountability Act, was introduced earlier this year by Senate Democrats and passed the California Assembly in a 49–20 vote.

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.

Vehicles pass the Phillips 66 Los Angeles Refinery Wilmington Plant in Wilmington, California, on Nov. 28, 2022. Mario Tama/Getty Images

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 legislation, introduced by state Sen. Scott Wiener, is expected to impact more than 5,300 companies, according to Ceres, a non-profit sustainability advocacy organization supporting the bill.

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.

The California Department of Finance released its analysis (pdf) of SB 253 in August stating its opposition to the measure, estimating the fiscal impact of the bill to be approximately $3 million.

Officials said the high cost of implementing the measure would also require additional permanent staffing at the California Air Resources Board, which would also require extra funding.

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.”

Separately, the Democrat told The Associated Press that the measure will allow California to “once again lead the nation with this ambitious step to tackle the climate crisis and ensure corporate transparency.”

Ceres also welcomed the approval of the measure in a statement Monday, adding that the bill will put the state in the position to “implement the U.S.’s first-ever economy-wide mandatory climate disclosure policy, helping the state and the nation keep pace as regulators in the E.U. and around the globe implement similar policies.”

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.