A bill introducing mandatory climate disclosure requirements for large companies operating in California advanced through the state senate yesterday, laying the groundwork for new climate legislation which will be the first of its kind in the US.
Yesterday saw the Climate Corporate Accountability Act pass a vote in the California State Senate’s Judiciary Committee, having already cleared its Environmental Quality committee earlier this month. It will subsequently be voted on by senators before it can pass to California’s state assembly or lower house. Californian Democrats currently control both the state senate and assembly, and the governor’s office.
If the bill passes, companies with more than $1bn in revenue will be required to provide audited reports on their entire carbon footprint by 2024. Companies will have to report not only their direct emissions but also indirect emission – known as Scope 2 and 3 – which result from their energy use, supply chains, product use and travel.
By 2025, these companies will be asked to establish Paris-aligned Net Zero emissions targets based on a methodology developed by the Science Based Targets initiative (SBTi,) which does not consider avoided emissions and offsets as counting towards emissions reduction goals.
Technical disclosure requirements for reporting companies will be developed by the California Air Resources Board (CARB) in consultation with a “panel of experts”, in addition to a new “digital platform” which will house all disclosures made under the Act. The Board has also been tasked with assessing and approving third-party auditors with expertise in carbon emission accounting — only CARB-approved auditors will be able to provide assurance on climate disclosures.
An analysis by US law firm Akin Gump, suggests that the Act’s minimum requirements mean it will likely impact companies in “virtually every sector” in the state, estimated at more than 5,000 companies.
By contrast, existing climate disclosure requirements under the Securities and Exchange Commission gives companies the discretion to report only the issues deemed material according to a principles-based framework.
Senator Scott Weiner, who introduced the bill in January, described it to RI as “a groundbreaking piece of legislation that will make corporations more accountable”.
“It’s far past time for all large corporations to report the full scope of their climate emissions, and for Californians to experience full transparency from these companies. Transparency and accountability from corporations – who are some of the largest emitters of greenhouse gasses – is critical in our fight to stop the worst impacts of climate change,” he said.
This comes weeks after the California Governor Gavin Newsom announced plans to develop a state-wide climate reporting standard, in partnership with Stanford University’s Sustainable Finance Initiative. The standard will be overseen by the newly-created Climate-Related Risk Disclosure Advisory Group.
Earlier this year, RI reported on a growing controversy involving SBTi after NGOs, industry figures and a former advisor accused the initiative of having conflicts of interest and sidelining climate science in the development of its target-setting methodology. SBTi has denied the accusations.