California lawmakers are poised to pass two bills that would require any company that does business in the state and has total annual revenue of $1 billion or more to publicly report all scopes of greenhouse gas emissions and that would mandate that thousands of companies disclose climate-related financial risks.
State legislators are expected to consider the bills, bundled as the Climate Accountability Package, when they reconvene Aug. 14.
Senate bill 253 would go further than the proposed rule the SEC is working on because it would also cover privately held companies and require all entities to report indirect Scope 3 emissions.
A bill analysis estimated that 5,344 companies would be covered under S.B. 253, the emissions reporting bill sponsored by Sen. Scott Wiener, a Democrat representing the San Francisco area. Scope 1 and 2 reporting would begin in 2026, and Scope 3 reporting would start a year later.
The second bill, S.B. 261, would require companies with annual revenue of $500 million or above to begin disclosing by the end of 2024 climate-related financial risks in reports published on their corporate websites. Some 10,000 companies are expected to fall under that rule, according to an analysis by the bill's sponsor, Sen. Henry Stern, a Democrat representing a district northwest of Los Angeles.
Momentum for the bills has grown since similar legislation failed to pass with one vote in 2022, proponents said. More than a dozen business brands — including Microsoft Corp., Adobe Inc. and IKEA — on Aug. 14 sent letters to state legislative leaders voicing their support for the bills.
"It's still a tough fight," Wiener said in an interview. "But I think we have a real shot at getting this over the top. We have more business support this time."
Stern's office did not respond to a request for comment.
The California Chamber of Commerce came out against S.B. 253 earlier this year, saying it will expose businesses to legal risks and will hurt small companies across the covered companies' supply chains that lack resources to track Scope 3 emissions. Under S.B. 253, a covered company that does not meet the requirements of the law could face a civil penalty of up to $500,000, although this does not apply to inaccurately reported Scope 3 emissions "disclosed in good faith."
Companies that operate under California's ambitious greenhouse gas rules may already be meeting the requirements under the proposed bills.
A spokesperson for PG&E Corp., the state's largest energy provider, said the company has not taken a position on the legislation but "appreciate[s] the objectives" of the bills.
"We believe it is essential that stakeholders have access to information that allows them to assess and understand the risks and adaptation strategies associated with climate change," the utility said in an emailed statement. "PG&E has a long history of both reducing our carbon emissions and publicly reporting our Scope 1, 2, and 3 greenhouse gas emissions, along with information related to climate change risks and impacts."
While most large companies already voluntarily disclose climate information, the bills "would provide a standardized and consistent template that would apply to companies operating in California, across the economy," the investor advocacy network Ceres said in a news release. "If passed, the bills would create the first broad-based climate disclosure policy in the US."
Asked about the timing of the bills, Wiener said the state cannot depend on the federal government to pass rules or legislation meeting California's needs. The SEC initially planned to release its final climate risk disclosure rule in April but delayed the publication finalizing the rule after the proposal came under intense scrutiny. Republican state attorneys general have indicated they will sue to try to halt the implementation of the rule, and the SEC's plan to regulate such disclosures came under fire during congressional hearings in June.
"California has never and should not be relying on the federal government to lead the way on progressive issues," Wiener said. "If the federal government gets it done, that's fantastic and I support that. But in California, we're going to lead as we always have."
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