California will require corporate emissions disclosures
California is forcing large corporations to go public with their contributions and financial exposure to climate change.
Driving the news: Gov. Gavin Newsom signed two bills last weekend — SB 253 and SB 261 — requiring large corporations to disclose their annual greenhouse gas emissions and climate-related financial risks.
Why it matters: The measures set the strictest corporate emissions disclosure requirements in the country, and exceed proposed nationwide rules released by the Securities and Exchange Commission in 2022.
What they're saying: Climate groups backed the bills, while industry and business groups opposed them; Newsom split the difference by signing the measures into law while voicing his concerns on their effect.
- "This important policy, once again, demonstrates California's continued leadership with bold responses to the climate crisis, turning information transparency into climate action," he wrote in a signing statement.
- "However, the implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure."
Zoom out: Other blue states are already eyeing similar measures, Politico reported Tuesday, but both backers and opponents of California's new laws are saying a patchwork of disclosure requirements across states is a bad idea.
Details: The California Air Resources Board needs to formalize the emissions disclosure regulations by the start of 2025, and U.S. companies with revenues of more than $1 billion will start disclosure in 2026.
- Companies with revenues over $500 million — not including insurance companies — need to announce their climate-related financial risk by the start of 2026, and then every two years.
The intrigue: Disclosure of "scope 3" emissions — emissions associated with all the companies up and down a company's value chain — encountered the most significant lobbying against the bills, and the California Chamber of Commerce said it will work with Newsom next year on "clean up" legislation to address its members' concerns.
- The San Diego Regional Chamber of Commerce declined to comment ahead of Newsom signing the legislation and referred questions to CalChamber.
Reality check: Some of San Diego's biggest corporations already report greenhouse gas emissions and risks.
- Qualcomm declined to comment on the bills before they were signed, but said it reports its progress on environmental goals as part of its plan to achieve net zero emissions by 2040.
- Sempra, the parent company of San Diego Gas & Electric that provides energy service to millions of residents, did not provide a formal comment.
- Yes, but: The company discloses environmental data, including estimated scope 1, 2 and 3 emissions, on its annual sustainability reports.
Zoom in: Illumina, a leading biotechnology company in DNA-sequencing, has voluntarily reported since 2020 on 2019 data as it works toward net zero emissions, according to a company official.
- Regarding SB 253, Illumina voluntarily discloses data on climate emissions for scope 1, 2 and 3 that is already externally verified to a limited assurance level.
- Regarding SB 261, Illumina already prepares its voluntary disclosure using the recommended framework and measures taken to reduce and adapt to climate-related financial risk. The reports are already verified by an independent third-party.
- The company plans to further assess compliance.
What they're saying: "We approach reducing the environmental footprint of our facilities by focusing on green building design, optimizing energy, reducing water and waste, and expanding the use of renewable electricity," Sharon Vidal, Illumina's head of corporate social responsibility, told Axios in an emailed statement.
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