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California’s Historic Climate Disclosure Legislation Targets Big Corporations

One bill will force nearly every major company that does business in the state to report its emissions.

California Gov. Gavin Newsom tours World Energy, a low-carbon solutions provider, in Paramount, California, on May 1, 2023.

Climate advocates expressed hope Monday that California Gov. Gavin Newsom would help usher in a new era of accountability for corporate polluters nationwide after he confirmed plans to sign legislation forcing companies to publicly disclose their climate-related risks and more complete accounting of their total emissions.

At a Climate Week event in New York on Sunday, Newsom said he wants to maintain California’s status as a state leading the way to confront the climate crisis and that signing Senate Bill 253 is part of that effort.

The bill would require companies operating in California and earning at least $1 billion per year to disclose the climate risks at every stage of their supply chains and disclose all greenhouse gas emissions, including investments, attributable to their business practices.

“Would I cede that leadership by having a response that is anything but, ‘Of course I will sign that bill?'” the Democratic governor said to a reporter at a panel discussion. “No, I will not.”

Newsom said he also plans to sign S.B. 261, which would require companies in California to submit climate-related risk reports, detailing costs for increased compliance and insurance.

The governor noted that his office plans to do “some cleanup on some little language” in the bills but did not say what changes would be made.

S.B. 253 would be the first measure in the U.S. to require companies to disclose their fossil fuel emissions in scopes 1, 2, and 3 in their supply chains.

Scope 1 emissions refer to those caused directly by a company as it runs machinery to make its products, while scope 2 emissions are those created by products or equipment that a company purchases, such as fossil fuel-generated energy for its facilities.

Advocates say scope 3 emissions, which are produced by customers who use the company’s products, are often overlooked by big polluters when they make climate pledges, but make up the bulk of corporate emissions.

Requiring the accounting of all emissions in a company’s supply chain, said California Environmental Voters, “is nothing short of historic.”

THIS IS HUGE! Thank you @GavinNewsom

Signing #SB253 into law is nothing short of historic. This piece of legislation is integral to our lowering our emissions and fighting the climate crisis

Thank you @Scott_Wiener @SenHenryStern @SenGonzalez33 and the entire coalition! 🙌🏽

— California Environmental Voters (@envirovoters) September 17, 2023

Around 5,000 companies will be required to comply with the law, illustrating where the majority of emissions are coming from in their supply chains.

In contrast, federal rules proposed by the Securities and Exchange Commission would apply only to publicly traded companies and wouldn’t require them to disclose scope 3 emissions.

Mindy Lubber, president and CEO of sustainability advocacy group Ceres, expressed hope that California’s new laws will “set another leading standard to increase corporate transparency and help to mitigate financial and climate risk.”

“These two first-in-the-nation bills will provide unprecedented insight into corporate climate emissions and financial climate risk,” said Lubber. “This is exactly the kind of policy framework that investors have long sought to better understand how companies are working to manage and mitigate the immense financial impacts of the climate crisis.”

Lubber noted that the legislation has “support from dozens of leading businesses that recognize the massive opportunity of the shift to a low-carbon economy and deserve a standardized and consistent platform to showcase their efforts.”

The Greenlining Institute, which is based in Oakland, California and advocates for communities of color that are disproportionately impacted by fossil fuel emissions, called Newsom’s commitment to signing the bills “a huge win.”

CALIFORNIA IS ABOUT TO MAKE HISTORY!@CAgovernor announced he will sign #SB253 into law. This is a huge win in the fight against climate change and for the #BIPOC and low-income communities most impacted by the #climateemergency we face today.

— Greenlining (@Greenlining) September 17, 2023

Last year, the Biden administration proposed strict limits on vehicle pollution based on standards set by California.

Lynn LoPucki, a law professor at the University of Florida, told Capital & Main last week that S.B. 253 “is really a national bill” that will force nearly every major company that does business in California to report its emissions.

If he does sign #SB253, and Newsom’s past record suggests that he will, California will essentially establish a national policy that compels big business to be transparent about its emissions, according to at least one analyst.


— Capital & Main (@capitalandmain) September 18, 2023

“The idea is that companies will make a greater effort to reduce their greenhouse gas emissions once they’re reporting them. They know investors care, and they also, I think, know that consumers and the public care,” LoPucki told the outlet. “Virtually every company is doing corporate social responsibility reporting, or webpages in which they profess concern about corporate social responsibility. And today, that means reducing greenhouse gases.”

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