California Moves First on Mandating Corporate GHG Emissions Disclosure

G&A's Sustainability Highlights ( 09.15.2023 )
Oct 10, 2023 12:00 PM ET

Critics have often called it “the Californication of America” when CA lawmakers move to address an important issue head-on. The good news is that across the land progressive thinkers celebrate many such developments in the “Golden State” – and quite often copy the California legislative or administrative approach for their own state. This is now what we can expect to see very soon in other jurisdictions with passage of the new CA law on climate change disclosure.

The action in CA, as highlighted in our Top Stories: Governor Gavin Newsom signed the first-in-the-nation law making corporate disclosure on carbon dioxide emissions mandatory for companies operating or headquartered in the state. California policymakers are often first movers and in this case did not wait for the Securities and Exchange Commission to move forward on its draft “Final Rule” for corporate GHG emissions disclosure (pending for well more than a year now).

California’s new “Climate Corporate Data Accountability Act” will affect about 5,000 companies that will now be required to publicly disclose the amount of GHG pollution directly caused by their operations – and the indirect emissions resulting from their waste disposal practices, employees’ travel, and their supply chain operations and partners.

Required: All enterprises with revenues of US$1 billion annually operating in California must disclose all GHG emissions beginning in 2026 with Scopes 1 and 2 and then in 2027 with Scope 3. Covered by the law: corporations, LLCs, partnerships, and others.

Some lawmakers in debating the bill noted that many companies have been announcing their GHG emissions reduction goals and this law will provide transparency in how firms are actually accomplishing reductions.

The foundation of this legislation dates back to creation of the powerful California Air Resource Board (CARB) in 1967. CARB will now create the rules-of-the-road for publicly-traded and privately-owned enterprises to report across Scopes 1, 2, and 3.

Think about the California companies that are affected: Wells Fargo, Chevron, Apple, HP, The Walt Disney Company, Gap, and Kaiser Permanente (these are among the 50+ Fortune 500® companies headquartered in CA) and companies doing business there (WalMart Stores, Amazon, ExxonMobil, and many more).

Companies with revenues of $500 million and more (under separate legislation) will be required to begin reporting all climate risks but not specific emissions.

The legislation has found support in the corporate community, with the Los Angeles Times reporting that companies endorsing the legislation included Ikea, Microsoft, Patagonia, and REI Co-Op.

The G&A Institute team will continue to monitor the rollout of new GHG and climate-related corporate disclosure requirements and share perspectives in this newsletter.

NOTE: If you are not familiar with CARB and its actions, here is more information:

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