Continuing its leadership in the battle against climate change, California takes a big step forward by requiring transparency concerning the carbon footprints of the nation’s largest corporations doing business in the state.
On January 26, 2022, Sen. Scott Weiner’s Senate Bill 260, the Climate Corporate Accountability Act (CCAA), passed the Senate by a 23-7 vote. The purpose of SB260 is to ensure that information on corporate greenhouse gas (GHG) emissions is conveyed in a manner that is understandable and accessible to the general public, is consistent with existing international protocols for GHG emissions tracking and reporting, and is actionable by policymakers, investors and the people of California. “Corporate emissions are a huge contributor to climate change, but frankly, we don’t yet know the scope of the problem,” Sen. Weiner said. “That’s why we need to act quickly and decisively to ensure corporations are reporting their emissions. This is a landmark bill, and today’s vote is a big step forward for California’s fight against climate change.” SB260 is cosponsored by Carbon Accountable, Sunrise Bay Area, and the California Environmental Voters.
Under the CCAA, companies with total annual revenues of $1 billion and doing business in California (Reporting Entities) would be required to publicly disclose to the Secretary of State all:
- GHG emissions that stem from sources that the company owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities (scope 1 emissions);
- indirect GHG emissions from electricity purchased and used by the company, regardless of location (scope 2 emissions); and
- indirect GHG emissions, other than scope 2 emissions, from activities of the company that stem from sources that the company does not own or directly control and may include emissions associated with the company’s supply chain, business travel, employee commutes, procurement, waste and water usage, regardless of location.
The disclosures would be required to be consistent with the Greenhouse Gas Protocol standards and guidance developed by the World Resources Institute and the World Business Council for Sustainable Development.
Companies subject to SB260 would be required to use an independent third-party auditor approved by the California Air Resources Board (CARB) to conduct their carbon emissions inventory.
SB260 would also require CARB to prepare a report that:
- estimates the required annual aggregated GHG levels of reporting entities that would be necessary to maintain global temperatures within 1.5 degrees Celsius of preindustrial levels;
- estimates projected GHG emissions from reporting entities based on successful implementation of the state’s existing GHG emissions reduction, clean energy and other similar regulations to which reporting entities are subject; and
- makes recommendations that reporting entities may consider to effectively reduce their emissions in line with what is recommended by the Science Based Targets initiative (SBTi) to maintain global temperatures within 1.5 degrees Celsius of preindustrial levels.
SB260 will now proceed to the Assembly, before potentially advancing to the Governor, who may sign it into law.
Critics of SB260 have warned that expansive disclosure mandates could hurt supply chains and would add inconsistency for companies that operate in different states, and that carbon emission disclosures would be better handled at the federal level. The SEC is preparing a federal rulemaking for climate-related disclosures for public companies anticipated to be rolled out later this year. Scope 3 emissions are the biggest point of contention.
SB260 likely would affect some 5,200 public and private companies, including most of the nation’s biggest corporations, since the majority of them do business in California.