Corporate Greenhouse Gas Emissions Reporting in California
In an era marked by the pressing need to address climate change, legislation plays a pivotal role in holding corporations accountable for their contributions to greenhouse gas emissions. The Climate Corporate Data Accountability Act, also known as SB-253, is a critical piece of legislation in California aimed at fostering transparency and responsibility among large businesses operating within the state. This article explores the key provisions and implications of SB-253.
Background Context to SB-253
The California Global Warming Solutions Act of 2006 laid the foundation for the state’s commitment to combating climate change. It mandated the State Air Resources Board (CARB) to establish regulations for the reporting and verification of statewide greenhouse gas emissions. Moreover, CARB was tasked with monitoring and enforcing compliance with this act.
Scope and Requirements
The Climate Corporate Data Accountability Act, SB-253, builds upon the framework established in 2006. Under SB-253, CARB is directed to develop and adopt regulations that mandate business entities with annual revenues exceeding $1 billion and conducting operations in California to publicly disclose and obtain an assurance engagement for their greenhouse gas emissions. The following key points summarize the scope and requirements of the legislation:
- Reporting Categories: SB-253 classifies greenhouse gas emissions into three categories: Scope 1, Scope 2, and Scope 3 emissions. Businesses will be required to report on all three categories.
- Timeline: Reporting entities are obligated to begin disclosing their Scope 1 and Scope 2 emissions from 2026 onwards, with annual reporting thereafter. Scope 3 emissions reporting commences in 2027 and continues annually. The legislation also empowers CARB to review and update these deadlines by 2030 to accommodate changes in reporting trends.
- Assurance Engagement: Reporting entities must undergo an assurance engagement conducted by an independent third-party provider to ensure the accuracy and reliability of their emissions data.
- Emissions Reporting Organization: CARB is tasked with contracting an emissions reporting organization that will receive, verify, and publicly share the emissions disclosures. This organization plays a crucial role in facilitating transparency.
- Use of Standards: SB-253 mandates that reporting entities use the Greenhouse Gas Protocol standards and guidance developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) for their emissions reporting. These standards are globally recognized and widely accepted.
- Accessibility and Comprehensibility: To maximize transparency, reporting entities are required to make their emissions data easily accessible and understandable to consumers, investors, and other stakeholders.
- Flexibility: The legislation allows reporting entities to submit reports that meet other national and international reporting requirements, provided they satisfy the requirements outlined in SB-253.
- Acquisitions and Structural Changes: Reporting entities must account for acquisitions, divestments, mergers, and other structural changes that may impact their emissions reporting, ensuring consistency with the Greenhouse Gas Protocol standards.
Penalties and Enforcement
SB-253 also includes provisions for penalties and enforcement to ensure compliance with the reporting requirements. Reporting entities that fail to meet the legislation’s obligations may face administrative penalties, with a maximum cap of $500,000 per reporting year. However, penalties will consider factors such as past compliance and good-faith efforts to comply. Importantly, misstatements in Scope 3 emissions disclosures made in good faith with a reasonable basis will not be penalized.
The Climate Corporate Data Accountability Act, SB-253, represents a significant step forward in addressing climate change at the corporate level in California. By requiring large businesses to disclose and verify their greenhouse gas emissions, the state is setting the stage to combat climate change and hold corporations accountable for their environmental impact. Through standardized reporting, transparency, and assurance engagements, SB-253 paves the way for greater corporate responsibility and a more sustainable future for California and the rest of the world.