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Discover the impact of California's proposed new climate bill, as major companies like Apple, Patagonia, and Microsoft endorse the initiative.
Last week at a New York Climate Week (NYCW) Event, Governor Gavin Newsom of California announced that he would sign an historic climate bill that will require major companies to publicly disclose their greenhouse gas emissions. The proposed bill, which was passed by the Senate on September 12th, will not only affect California, but will have a significant impact on businesses in the rest of the US and the world. With an economy valued at $3.7 trillion, California's influence has grown exponentially in recent years, making it an important player in policy making and governance. This climate bill is not only testament to California's progressive stance on climate change, but the important role that businesses must play in reducing global emissions. Governor Gavi Newsom has until October 14th to sign the bill which will then pass it into law. We've done some digging to find out exactly what the climate bill means for US businesses, when it will come into effect and how the business community has reacted to the news.
What is the new climate bill?
The California climate bill, also referred to as “SB 253” is a proposed climate law that will require all large US companies doing business in California, with an annual revenue of more than $1 billion, to report on the greenhouse gas (GHG) emissions from their entire value chain - that means everything within Scopes 1, 2 and 3.
Who will be affected by the bill?
This proposed climate law won’t just affect Californian businesses making more than $1 billion in annual revenue - it will affect any business that works with or supplies a company making in excess of $1 billion. Why? Because suppliers are part of a bigger supply chain, and their emissions need to be counted by the businesses they report to.
When will it be passed into law?If the bill is passed into law in October, companies will need to start reporting their Scope 1 and 2 emissions (both direct and indirect) by the beginning of 2026. By 2027, companies will need to account for their full value chain, which means Scope 3 emissions as well. What happens if businesses don't report their carbon emissions?Businesses that don’t file their emissions by the set dates will face fines of up to $500,000 for the reporting year. |
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How does the Californian climate bill compare to EU climate laws?The main difference between the proposed Californian climate bill and European climate laws is that the revenue threshold is lower in Europe, and the timeframes are more agressive - the first set of laws in Europe will take hold on January 1st, 2024. If you're unfamiliar with the CSRD (Corporate Social Responsibility Directive), here’s a breakdown of the different stages and how and when they will affect different businesses. Companies with 250+ employeesThe first stage of the CSRD will come into effect on the 1st January 2024, and will affect over 49,000 businesses (up from 11,000 businesses that were affected by the NFRD - Non Financial Reporting Directive). During this stage, all listed companies, as well as companies that fulfil two of the following criteria will have to report on their CO2e emissions:
The second stage will come into effect on the 1st January 2026, and will affect small to medium businesses with:
The third stage will come into effect on the 1st January 2028, and will mean that any company based outside the EU will have to provide CSR (Corporate Social Responsibility) information for the whole group if they:
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How have companies reacted to the climate bill?
Companies like Apple, who recently launched their "Mother Nature" ad underlining their sustainability efforts, have welcomed the news in a letter to Senator Wiener. Mike Foulkes, Apple's Director of State and Local Government Affairs said in the letter: “To ensure accuracy and transparency, we strongly believe that companies’ carbon emissions disclosures should include their Scope 3 emissions.” We at Goodwings totally agree! Other companies such as IKEA, Patagonia, Microsoft have submitted a joint letter to the governor supporting the bill, which you can read here.
Why is there controversy over including Scope 3 reporting?
Scope 3 reporting is often seen as the most complex Scope to report on because it looks at emissions from across a company's supply chain, many of which are not in their direct control. However these emissions are often responsible for the majority of a company’s total emissions and are therefore an important part of the overall effort to account for and reduce GHG emissions.