A pair of California bills requiring large companies to report emissions from their entire supply chain and create stricter reporting of climate-related impacts could have nationwide implications.
Two Golden State legislators this week introduced Senate Bill 253 (the Business Climate Data Accountability Act) and Senate Bill 261 (the Climate-Related Risk Disclosure Act).
D-San Francisco State Senator Scott Wiener introduced SB 253 last year, a repetition of a near-failed piece of legislation. One of the state law changes called for in the bill is a requirement for the State Air Resources Board to pass regulations requiring companies with more than $1 billion in annual revenues doing business in California to reduce greenhouse gas emissions. to be made public – to be categorized as Scope 1, 2 and 3 emissions – by 2025.
Scope 1 includes direct emissions from a company and its subsidiaries. Scope 2 includes indirect emissions from electricity purchased by the company. Scope 3 includes emissions from the company’s supply chain.
The bill would also authorize the state’s attorney general to bring a civil suit against a reporting entity on behalf of the people of the state and seek civil penalties for violations of the provisions.
The bill’s impact extends beyond California-headquartered companies, and applies to any company doing business in the state that meets the criteria outlined in the bill.
“So it’s going to affect companies across the country,” said Steven Rothstein, general manager at Ceres, a nonprofit that focuses on the economic and financial risks surrounding climate and sustainability. The group is one of the largest funders of the bill.
SB 261, a companion bill introduced by Senator Henry Stern, D-Calabasas, would require companies to prepare a climate-related financial risk report for the public starting next year, disclosing the risks and actions taken to mitigate that risk. reduce. The bill also calls for the Climate-Related Risk Disclosure Advisory Group to collect and review reports on climate-related financial risks.
Proponents of the bills say they are designed to complement the U.S. Securities and Exchange Commission’s proposed rule requiring climate disclosure for publicly traded companies, as well as the proposed global standards of the International Financial Reporting Standards Board’s Sustainability Standards Board.
Rothstein with Ceres, who has long pushed for climate disclosure, believes there’s another reason SB 253 will have a national impact beyond every company doing business in California.
“If California passes this legislation, it will be very important,” he said. “California is a leader, and this bill can be another example. It will send a clear signal that people want this.”
Most Americans support the federal government requiring companies to disclose their impact on the climate, a recent poll by an advocacy group shows. A poll by Just Capital, a non-profit organization focused on issues such as more social justice in the workplace, found that 87% of those polled support mandatory climate disclosure.
Despite the apparent support and growing number of climate-disclosure movements around the world, Wiener’s bill is likely to have some detractors.
SB 253 is a revival of Wiener’s Senate Bill 260, which only authorized the Senate to kill in the General Assembly last year.
That bill was opposed by a coalition led by the California Chamber of Commerce, which included insurance companies. Opponents believed the bill was too strict and broad, making it harmful to businesses, especially since it included emissions from a company’s supply chain — a broad scope that could encompass countless companies. The chamber is expected to lead the coalition in opposing the current bill.
Stern’s SB 261 follows suit with numerous climate reporting guidelines, which have proliferated both nationally and internationally.
These rules have received a mixed reception. For example, some experts argue that new rules proposed by the US Securities and Exchange Commission on climate impact disclosures could lead to more lawsuits and claims against policies from directors and officers.
International climate disclosure rules have continued to evolve to encompass more industries and have raised the bar on what needs to be disclosed for businesses and government agencies. The Glasgow Financial Alliance for Net Zero, a coalition of financial firms led by former Bank of England governor Mark Carney, called on G20 governments late last year to raise their climate ambitions and draw up more detailed plans to decarbonise their economies.
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