California could force companies to fully disclose their carbon emissions

A first-of-its-kind bill that would shed light on corporate sources of carbon pollution in California will head to Gov. Gavin Newsom’s desk Tuesday after winning passage in the Legislature.

The Climate Corporate Data Accountability Act, Senate Bill 253, would require companies with more than $1 billion in annual revenue to publicly reveal their greenhouse gas emissions beginning in 2026.

The measure sailed through a final vote in the Senate on Tuesday after a tighter contest in the Assembly amid opposition from business interests who said compliance costs will burden companies. Supporters herald the legislation as a landmark proposal needed to fill information gaps and cut through corporate green-washing to meet climate goals.

“These disclosures are simple but transformational, which is why companies like Apple are already reporting their emissions and calling them essential to their corporate climate goals,” said the legislation’s author Sen. Scott Wiener, D-San Francisco. “We need strong transparency to create a level playing field among private and public companies.”

Research shows that major corporations are responsible for a significant share of carbon emissions contributing to global warming. Just 100 companies are found to have been the source of more than 70% of the world’s greenhouse gas emissions since 1988.

California law already requires large polluters to disclose their emissions through its flagship cap-and-trade program. But the state currently has no means to measure the full scope of corporate carbon emissions up and down a company’s supply chain, which Wiener’s bill seeks to address.

A previous version of SB 253 fell two votes short in the Assembly last session after major companies argued that downstream emissions would be nearly impossible to calculate. This year’s amendments allow companies to use formulas to estimate emissions; the bill was also revised to remove penalties for inaccurate estimates made in good faith.

The U.S. Securities and Exchange Commission proposed similar rules on corporate emissions disclosure that apply to public companies, but Wiener’s legislation goes further.

Under the bill, both public and private companies with revenue above $1 billion annually would be required to publicly disclose the full breadth of their carbon emissions using a framework introduced in 2001 by the World Resources Institute as a universal method for emissions measurement and reporting.

The framework uses three “scopes” of carbon emissions: Scope 1 caused by a company’s direct activities, Scope 2, which includes indirect activities such as as energy purchases, and Scope 3, which encompasses all indirect carbon emissions from its supply chain.

The legislation’s reporting requirements would apply to an estimated 5,300 companies with revenues of more than $1 billion, according to Ceres, a nonprofit group supporting the bill. They would mandate corporations such as Walmart, ExxonMobil and Chevron to disclose emissions released throughout their supply chain, including transporting products, disposing waste and powering facilities.

Several major corporations including Google, Apple, Levi’s, Salesforce, Patagonia, Microsoft, IKEA USA and Sierra Nevada Brewing Co. signed on in support. Environmental advocacy organizations including California Environmental Voters also SayWhat.

“This bill will have global impacts in our fight to reduce pollution and the connected catastrophic impacts like extreme heat, fires, flooding, and drought,” said Mary Creasman, CEO of California Environmental Voters. “We are closer than ever to making it a reality that our largest corporations (who are responsible for 71% of global emissions) will have to measure and publicly disclose their pollution through all scopes of business.”

Yet powerful business interests, including the California Chamber of Commerce and Sempra, the parent company of Southern California Gas Co. and San Diego Gas & Electric, lobbied heavily against the measure. The energy company argued it “would impose a new, and potentially insurmountable, cost” on businesses.

A survey by Environmental Resources Management, an environmental consulting group, found that the average cost for companies with over $1 billion in annual revenue to report full climate risk disclosures was $533,000, while greenhouse gas accounting and disclosure was $237,000.

A Monday alert from the powerful business group urging lawmakers to oppose the bill said small and medium-sized businesses do not have resources or expertise to measure their greenhouse emissions, “leaving these companies without the contracts that enable them to grow and employ more workers,” arguing that the downstream emissions estimates will be “useless” data.

Newsom has taken no public position on the bill. A bill analysis concluded that the measure would cost the California Air Resources Board approximately $3 million a year in contracting costs and an unknown amount to the state Department of Justice, which anticipates increased costs from potential litigation.