California Lawmakers Propose Law Requiring Companies to Disclose Full Value Chain Emissions
All large companies doing business in California – effectively most large U.S. corporations – may be required to disclose their full value chain greenhouse gas (GHG) emissions, if new proposed legislation introduced in the state Senate is passed.
The new bill, introduced by Senator Scott Wiener, would require companies with revenues greater than $1 billion to report annually on their emissions from all scopes, including direct emissions (Scope 1), emissions from purchase and use of electricity (Scope 2), and indirect emissions, including those associated with supply chains, business travel, employee commuting, procurement, waste, and water usage (Scope 3). Reporting obligations would begin in 2026.
The bill is similar to one introduced in California last year that passed in the state Senate, but was one vote short of passing on the Assembly, the final step before advancing to the Governor to sign into law. In a press conference announcing the proposed legislation, Wiener said that he was more confident of succeeding with the new bill:
“Our coalition is even bigger and stronger this year, and we know that we can get this important legislation passed.”
The proposal comes ahead of the release of the SEC’s anticipated climate disclosure rules, expected in April. The SEC’s proposals, released in March 2022, outlined requirements for companies to report on their Scopes 1 and 2 emissions, as well as on Scope 3 emissions if they are material, or if the company has a stated emissions reduction goal that includes Scope 3, in addition to providing information on information about the oversight and governance of climate-related risks by the company’s board and management, how identified climate related risks impact strategy, business model and outlook, and the process used by the company to identify, assess and manage these risks.
While the SEC’s new rules may face pushback from Republican lawmakers, Wiener pointed out that the California proposals would effectively apply most large U.S. companies. Wiener said:
“(Unless) they want to give up the entire California market, which I guarantee they’re not going to do, then they are covered by the bill. The whole issue of a California company vs not a California company is irrelevant.”
The new bill would also in some ways add to the SEC’s proposals, applying to all large companies, as opposed to only public companies, and including all Scope 3 emissions.
The new emissions disclosure bill was introduced as part of a package of climate-focused proposals, including a bill requiring state pension funds to divest from fossil fuel companies introduced by Senator Lena Gonzalez, and a bill requiring stronger corporate climate risk disclosure introduced by Senator Henry Stern.
In a social media post following the emissions disclosure bill’s introduction, Wiener said:
“California has long been a leader in many aspects of climate action & last year we took several big steps in partnership with the Governor. It’s time to take the next step — much stronger corporate accountability, transparency, and alignment with our climate goals.”