California Big Businesses Would Have to Report Emissions Under Sweeping New Rules Approved by State Lawmakers

Updated 1 p.m. Wednesday

Major corporations in California, from oil and gas companies to retail giants, would have to disclose their greenhouse gas emissions under legislation passed in both houses of the state Legislature this week, the most sweeping mandate of its kind in the nation.

The legislation would require thousands of public and private businesses that operate in California and make more than $1 billion annually to report both their direct and indirect emissions, including those generated from activities like business travel.

“We are out of time on addressing the climate crisis,” San Diego Democratic Assemblymember Chris Ward said. “This will absolutely help us take a leap forward to be able to hold ourselves accountable.”

An effort to increase transparency and nudge companies to reduce  emissions, the legislation was one of the highest profile climate bills in the state this year, racking up support from a number of major companies based in California, including Patagonia and Apple.  Christiana Figueres, former executive secretary of the United Nations convention behind the 2015 Paris climate agreement, also endorsed the bill.

But the bill, which now heads to Gov. Gavin Newsom’s desk for approval, is a controversial proposal that many other businesses and groups in the state staunchly oppose and argue will be too burdensome.

Newsom declined to share his position on the bill when asked last month, even as he has worked to advance California’s role as a trendsetter on climate policies by transitioning the state away from gas-powered vehicles and expanding wind and solar power.

His administration’s Department of Finance opposed the legislation in July, saying it would likely cost the state money that isn’t included in the latest budget.

State Sen. Scott Wiener, a San Francisco Democrat who introduced the disclosure bill, said in a statement that it would allow California to “once again lead the nation with this ambitious step to tackle the climate crisis and ensure corporate transparency.”

California is home to scores of large companies that manufacture, export and sell everything from electronics and transportation equipment to food, and almost every major company in the country does business in the state, which is home to about one in nine Americans and is one of the the world’s largest economies.

The policy would require more than 5,300 companies to report their emissions, according to Ceres, a nonprofit policy group supporting the bill.

About 17 states, including California, require certain large polluters to disclose how much they directly emit, according to the National Conference of State Legislatures. But California’s new climate disclosure bill stands out as the first that would mandate companies, both public and private, to also report their indirect emissions, including those released by transporting products and disposing waste. For example, a major retailer would have to report emissions from powering its own buildings, as well as those that come from delivering products from warehouses to stores.

Opponents of the bill say it is not feasible to accurately account for all of the mandated emissions from sources beyond what companies are directly responsible for.

“We’re dealing with information that’s either unreliable or unattainable,” said Brady Van Engelen, a policy advocate at the California Chamber of Commerce.

The chamber, which advocates for businesses across the state, is leading a coalition of influential groups, including the Western States Petroleum Association, the California Hospital Association and agricultural organizations, in opposing the bill. They argue many companies don’t have enough resources or expertise to accurately report emissions and say the legislation could lead to higher prices for people buying their products.

Hundreds of companies in California already have to disclose their direct emissions through the state’s cap and trade program, said Danny Cullenward, a climate economist and fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy. The decade-old program, which allows large emitters to buy allowances from the state to pollute, and to trade them with other companies, is one of the largest in the world.

Cullenward said the disclosure bill could lead to similar proposals in other states.

Supporters of the disclosure bill acknowledge it’s not a “perfect” solution that would guarantee flawless emissions reports. But they say it’s a starting point.

California Environmental Voters, which supports the bill, says the legislation would put pressure on companies to move faster in lowering their emissions.

“Our state can’t just take 2023 off in terms of climate action,” said Mary Creasman, the group’s CEO.

If the bill becomes law, the California Air Resources Board would have to approve regulations by 2025 to implement the requirements. Companies would then have to begin publicly disclosing their direct emissions in 2026 and start annually reporting their direct and indirect emissions in 2027. They would also have to hire independent auditors to verify their reported emissions releases, although the state would not penalize them for unintentional mistakes in some indirect emissions’ reporting.

A similar proposal introduced last year passed the state Senate but failed in the Assembly. State Sen. Wiener, who introduced the legislation both years, has said proponents of the bill built a stronger coalition this year to ensure a better outcome.

Lawmakers are also weighing a bill that would require companies making more than $500 million annually to disclose how climate change could hurt them financially.