California Senate Bill 253 (SB 253), known as the Climate Corporate Data Accountability Act, took a significant stride toward becoming law as it passed the state's Assembly on Monday evening in a 49-20 vote. This development marks a pivotal moment in the establishment of mandatory emissions reporting legislation.
A Second Shot at Success
This is not the first time the California Assembly has voted on climate disclosure. Last year, the previous iteration of this bill, SB 260, faced a close call in the Assembly, falling short by just one vote. This time around, the bill passed in resounding fashion. The bill secured the needed support of a large and diverse coalition of businesses, financial institutions, nonprofit institutions, and others, reflecting a growing recognition of the urgency to address the physical, human, and financial risks associated with climate change.
“Up against the most powerful and resourced interests in our state, the Assembly stood strong and advanced world-changing policy,” declared Mary Creasman, CEO of California Environmental Voters, which co-sponsored the bill. She continued, “As the 4th largest economy in the world, California will move the world forward on climate action and accountability.”
In a celebratory social media post, bill author Senator Scott Wiener hailed the bill’s passage as a "huge climate win" and emphasized how it positions California as a global leader in corporate carbon transparency.
The bill garnered unprecedented backing, with major corporations like Apple, Microsoft, Patagonia, Ikea USA, and Levi’s publicly expressing their support. Apple, in particular, advocated for comprehensive disclosures, including emissions from value chains (scope 3), which are a critical part of most companies’ total emissions profiles. This widespread corporate support underscores the growing consensus on the need for greater transparency in emissions reporting, including the full picture of companies’ emissions through their value chains.
In a letter of support for the bill, Amalgamated Bank’s Chief Sustainability Officer emphasized, “We cannot underscore the importance of measurement and of having a full supply chain of emissions data that runs throughout [the] economy..”
What SB 253 Will Require
The Climate Corporate Data Accountability Act applies to both public and private US businesses with revenues exceeding $1 billion that operate in California. After rounds of amendments to SB 253 during the legislative process, the final bill states that applicable entities will be required to annually report emissions from all scopes: direct emissions (scope 1), the emissions associated with the generation of electricity that companies purchase (scope 2), and indirect emissions related to companies’ value chains (scope 3).
Starting in 2026 for scope 1 and 2 emissions, and in 2027 for scope 3 emissions, companies will need to adhere to the Greenhouse Gas Protocol standards for measurement and reporting on the prior fiscal year. The bill also mandates third-party assurance for emissions reporting, with limited assurance beginning in 2026 for scope 1 and 2, increasing to reasonable assurance in 2030, and limited assurance over scope 3 starting in 2030.
What Comes Next for SB 253
With its passage in the Assembly and Senate, SB 253 now will be placed on Governor Newsom's desk to sign into law. The Governor has until October 14th to either sign, veto, or let this bill be enacted without signing.
This development aligns with ongoing efforts at the federal level as the SEC prepares to finalize climate-related disclosure rules for companies trading in the US markets. Notably, California's legislation surpasses the proposed SEC rules in comprehensiveness, extending its scope to cover all large companies, not just public ones.
SB 253 represents a significant leap toward comprehensive emissions reporting with far-reaching implications for corporate accountability in the fight against climate change. As the world grapples with the urgency of climate action, California's pioneering step could set a precedent for similar initiatives in other states.
Climate & ESG News Roundup
Victory in climate youth case Held v. Montana
A group of young people recently won a significant legal victory against the state of Montana, arguing that the state was falling short in safeguarding the environment. The court sided with them, acknowledging that these young people have suffered due to Montana's insufficient action on climate change. This harm encompasses physical and mental health, property, cultural traditions, and overall well-being. Montana's constitution ensures its residents a clean and healthy environment, and the plaintiffs contended that a provision in the Montana Environmental Policy Act was undermining this commitment. This provision prevented officials from considering climate change impacts when granting approvals for new energy projects. As a result of this ruling, the state may now have to revisit this provision.
This case, known as Held v. Montana, involved 16 young plaintiffs ranging from ages 5 to 22. The lead plaintiff, Rikki Held, who comes from a long line of ranchers, vividly described how her family's ranch was severely affected by wildfires exacerbated by climate change. While this legal triumph is significant, it is anticipated to face further legal challenges, potentially even reaching the highest court in Montana. This means it may take some time before we witness tangible policy changes. However, if successful, this case could serve as a precedent for similar lawsuits filed by young plaintiffs across the nation. Currently, four other cases of this nature are still awaiting resolution, including one against Hawaii’s Department of Transportation scheduled for trial next year.
2022 sets the record for billion-dollar weather disasters
If it wasn’t clear already, climate risk is financial risk. The United States has experienced a record-breaking number of weather disasters costing $1 billion or more this year, according to the National Oceanic and Atmospheric Administration (NOAA). As of August, there have been 23 extreme weather events, surpassing the previous annual record set in 2020. These disasters, including the devastating fires in Hawaii and the destructive Hurricane Idalia, have already incurred over $57.6 billion in damages and claimed at least 253 lives.
NOAA experts attribute this surge in costly weather events to a combination of increased exposure, heightened vulnerability, and the impacts of climate change. The trend underscores the urgent need for the U.S. to better adapt to these escalating disasters, with experts emphasizing the necessity of both mitigating climate change and enhancing resilience measures. Despite the previous record being set just two years ago, NOAA climatologists now anticipate that new records may be more frequent in the face of a changing climate.
Events You Can't Miss
- Save the date for Climate Week NYC, set to take place from September 17-24th, 2023. This annual event is a collaboration between the United Nations General Assembly, the United Nations, and the City of New York. By uniting global leaders, changemakers, and concerned citizens, Climate Week NYC strives to tackle the urgent climate challenges we face today. Expect a week filled with impactful discussions, innovative solutions, and collective efforts toward a more sustainable and resilient future. Find more information at www.climateweeknyc.org.
- Join us for the Workiva Amplify North America conference in Nashville from September 19–22nd, 2023. This event brings together accounting, finance, ESG, audit, and risk professionals, offering thought-provoking sessions, peer networking, and an exclusive look at the latest developments from Workiva and partners. Gain insights into ESG reporting trends, learn from world-class organizations, and earn CPE credits. Register now.
- Mark your calendars for the NACD Summit in Washington D.C. from October 8-11th, 2023. We hope to see you at this event, where the most influential minds in governance gather to advance board effectiveness. This will be a unique opportunity to engage in exclusive networking opportunities and learn from industry thought leaders on the most important topics for boards. Persefoni is a proud partner of NACD. Register now.
