California legislators have granted their approval to the most comprehensive regulations in the country regarding the disclosure of emissions by large corporations.

SACRAMENTO, Calif. — Major corporations from oil and gas companies to retail giants would have to disclose their direct greenhouse gas emissions as well as those that come from activities like employee business travel under legislation passed Monday by California lawmakers, 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 report their direct and indirect emissions. The goal IS/WAS to increase transparency and nudge companies to evaluate how they can cut their emissions.

“I cannot reword”

This year, the legislation gained significant attention in California as one of the most prominent climate bills. It received support from notable companies like Patagonia and Apple, as well as Christiana Figueres, the former executive secretary of the United Nations convention responsible for the 2015 Paris climate agreement.

Supporters of the bill argue that numerous companies in the state already reveal certain emissions on their own. However, the bill is a contentious proposition that faces opposition from various businesses and organizations in the state who claim it will impose excessive burdens.

If the Senate approves the legislation, it will go to Democratic Gov. Gavin Newsom, who did not reveal his stance on the bill when questioned last month. The Department of Finance in his administration opposed the bill in July, stating that it would probably result in additional expenses for the state, which were not accounted for in the latest budget. Newsom has been at the forefront of California’s efforts to lead in climate policies by transitioning away from gas-powered vehicles and expanding renewable energy sources like wind and solar power. The state aims to reduce its greenhouse gas emissions by 40% below 1990 levels by 2030.

California has a lot of big companies that export everything from electronics to transportation equipment to food, and most every major company in the country does business in the state, which is home to about one in nine Americans. Newsom often boasts about the state’s status as one of the world’s largest economies.

According to Ceres, a nonprofit policy group advocating for the bill, more than 5,300 companies would be mandated to disclose their emissions under the proposed policy.

According to the National Conference of State Legislatures, approximately 17 states, including California, have regulations that mandate significant polluters to reveal their emission levels. However, California’s climate disclosure legislation stands out due to its inclusion of indirect emissions that companies must report. Moreover, unlike other states, companies in California would be required to disclose their emissions based on their financial earnings rather than solely on the amount they emit.

The U.S. Securities and Exchange Commission has suggested regulations that require public companies to reveal their emissions throughout the supply chain. However, the California bill takes it a step further by making it mandatory for both public and private companies to disclose both their direct and indirect emissions.

The legislation would make large companies disclose their own greenhouse gas emissions and emissions released indirectly from sources including employee business travel, the transport of products and waste disposal. 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.

Critics of the bill argue that it is not possible to accurately measure and include all the required emissions from sources that go beyond the direct responsibility of companies.

“I am unable to reword”

The chamber, which supports businesses throughout the state, is spearheading a coalition that comprises the Western States Petroleum Association, the California Hospital Association, and agricultural groups. They are against the bill, arguing that numerous companies lack the necessary resources and expertise to report emissions accurately. Additionally, they claim that this legislation may result in increased prices for consumers purchasing their products.

Danny Cullenward, a climate economist and fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy, stated that numerous companies in California are currently required to reveal their direct emissions under the state’s cap and trade initiative. This program, which has been in existence for a decade, permits major emitters to purchase pollution allowances from the state and engage in trading with other companies. It is worth noting that this program is among the largest globally.

Cullenward mentioned that the bill on disclosure might prompt other states to propose similar measures. He added that federal regulators, who may face lawsuits regarding disclosure requirements in the future, will likely feel compelled to exercise caution and avoid excessive actions.

Advocates of the disclosure bill recognize that it is not a flawless solution to ensure perfect emissions reports. However, they view it as a stepping stone. California Environmental Voters, a supporter of the bill, argues that this legislation would compel companies to expedite their efforts in reducing emissions.

Mary Creasman, the chief executive officer of the group, stated that our state cannot simply skip taking action on climate in 2023.

The bill’s requirements would need to be authorized by the California Air Resources Board before 2025. Starting in 2026, companies will be obligated to publicly disclose their direct emissions on a yearly basis, and from 2027 onwards, they will also need to report their indirect emissions annually. Independent auditors will be required to verify the accuracy of the reported emissions releases.

Laura Deehan, the state director of Environment California, an advocacy group that backs the bill, emphasized the importance of companies being conscious of their emissions and the potential consequences they may have.

Deehan stated that the pollution is currently causing harm to the health of individuals residing in California. This situation poses a significant risk to the future well-being of all Californians.

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

Earlier this year, a crucial committee in the state Assembly rejected a proposed law that aimed to accelerate the state’s efforts in reducing greenhouse gas emissions. Additionally, legislators are currently considering a bill that would mandate companies with earnings exceeding $500 million to disclose potential financial risks associated with climate change.

Sophie Austin works as a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit organization that aims to address the lack of coverage on important topics by deploying journalists to local newsrooms.