CA Gov Signs New Climate Law
CA's SB 253 Climate Corporate Data Accountability Act requires public and private companies to report their Greenhouse Gas Emissions
What is SB 253?
California's Senate Bill 253, Climate Corporate Data Accountability Act, has been signed by Governor Gavin Newsom on October 7, 2023. This is important legislation that will provide transparency into the carbon emissions of large companies, notably Public companies and Private companies.
Which Agency is Responsible?
The California State Air Resources Board, commonly referred to as CARB, will be responsible for implementing these regulations.
What Will Be Reported?
The carbon disclosure regulation will required companies to disclose all three scopes of emissions, commonly referred to as Scope 1 (Direct Emissions), Scope 2 (Electricity), and Scope 3 (Indirect Emissions or Supply Chain Emissions).
How will citizens have confidence that the data is reported accurately?
Starting in 2026, companies will be required to have third party assurance (an audit) of their Scope 1 and Scope 2 emissions. This external, independent review of the greenhouse gas emissions will boost confidence in the data and emission calculations submitted by each company.
What Comes Next?
CARB is required to develop and adopt regulations by January 1, 2025 to explain the GHG accounting and disclosure process.
What Should Companies Do?
Companies that have greater than $1B in annual revenue AND conduct business in California will be required to report their emissions.
These impacted companies should develop their Greenhouse Gas inventory (or more commonly called a Carbon Footprint) immediately. The Carbon Footprint report will provide visibility into major sources of emissions, and enable the company to develop a decarbonization strategy.
What if My Company has less than $1B in Revenue
For companies with annual revenue less than $1B, you may still be impacted. As larger companies are collecting data for Scope 3 supply chain emissions, you may receive an increase for requests for carbon emissions data. Companies will increasingly factor in Greenhouse Gas data of suppliers into their purchasing decisions. In order to protect future revenue and grow market share, it is important for small and medium size companies to generate a carbon footprint report and proactively reduce their emissions.
How Do Companies Get Started on Climate?
There are several approaches to developing a carbon footprint and sustainability strategy.
1 - Companies may assign an internal resource to take on this responsibility as part of broader job responsibilities.
2 - Companies may hire a new Full-Time employee who has expertise in climate and carbon accounting.
3 - Companies may hire a Fractional Sustainability expert like ESG OWL to support the development of their Carbon Footprint and Climate Strategy.
Impact on SEC's Carbon Disclosure Rules
The SEC's carbon disclosure rules are still pending, and there is great uncertainty as to whether the SEC rules will include Scope 3 emissions. California has now put pressure on the SEC to strengthen their reporting requirements due to CA Climate Corporate Data Accountability Act. The SEC carbon disclosure rules will only directly impact Public companies, whereas the California regulations impact both Private and Public companies.
