Three good reasons to be cheered by California carbon reporting law
Tech giants among others will have to disclose carbon emissions under new California law
A first of its kind Californian law will soon require companies with annual revenues above $1bn to disclose carbon emissions - both direct and indirect.
The law was signed last weekend by Governor Gavin Newsom and is catchily known as Senate Bill 253 (SB253.) It doesn't sound at first like a wildly exciting development, but SB253 is a radical piece of legislation and if enacted as intended it is likely to have a significant and positive impact on global emissions.
The law was signed alongside companion bill SB261 which will require businesses with more than $500m in annual revenue to disclose their climate-related financial risks. A third piece of legislation - Assembly Bill 1305 which is known as the Voluntary Carbon Market Disclosures Act aims to illuminate the carbon credits market in California.
There are three reasons why these legislative developments in one US state are so significant.
- If California was a country, it would be the 5 th largest economy on the planet - ahead of France, India and and the UK. It looks poised to overtake Germany if indeed it hasn't already. The state is also way ahead in terms of its contribution per capita to the overall US economy and is home to more than 5000 organisations (and the legislation applies to both private and public sector organisations) meeting the $1bn revenue threshold. The laws will apply to all US companies doing business in California, not just those headquartered there. California has serious economic heft.
- The timeline is short. Disclosures of carbon emitted directly by operations and electricity use must be made by 2026, and by 2027 indirect (scope 3) emissions will be mandated. This was the most controversial part of the bill but also the most important, given that indirect emissions constitute around 80% of overall emissions.
- These bills will compel the relevant companies to make their emissions data publicly available, and the bill on carbon markets will do likewise. This adds up to a legally mandated level of transparency on carbon reporting which will impose limits on the extent of corporate greenwashing. The shining of light onto the murkier aspects of carbon trading and accounting is long overdue.
These new and far more robust carbon reporting requirements in California should act as pilot for reporting across other states and at the federal level. The news laws mirror recent EU regulation on climate disclosure for large companies trading with the bloc.
California is Big Tech central
California is home to lots of heavily emitting fossil fuel companies but it's also home to Silicon Valley. Apple, Google's parent company Alphabet and Meta are all headquartered in California along with Adobe, Oracle and VMware (to name but a few.) Microsoft, Amazon, Salesforce all have a sizeable presence in The Golden State.
The state hosts more than 250 datacentres in which a great deal of embodied carbon is bound up and which are power (and water) intensive to run and cool. Tech carbon emissions have been growing steadily for years and remain on a worryingly steep growth trajectory.
However, the Californian tech sector has greeted this legislation far more positively than other industries. Indeed, some of these companies arguably played a key role in enabling the legislation to pass.
It is perhaps unsurprising that the biggest opposition to the concept of having to report carbon emissions publicly came from the powerful fossil fuel industry, which channelled billions of dollars of its record profits into lobbying against the legislation. The state's chamber of commerce also set itself in opposition to the bills.
However, Apple, Google. Salesforce, Microsoft, Disney and Adobe all joined environmental advocates rowing in behind the bill.
What difference does it make?
The extent to which reporting emissions leads companies to actually reduce them is debatable.
Many of the companies listed above already report emissions through Carbon Disclosure Project (CDP) and in their own ESG reporting, although the quality and transparency of emissions reporting in the latter varies. Microsoft in particular has made considerable efforts to quantify scope 3 emissions and also consider embodied emissions when assessing GHG footprint. The company has been advocating for greater transparency and a more even playing field for emissions reporting for some time now - even though its own emissions are (as per their 2022 report) still increasing.
That said, global carbon emissions are not going to reduce if companies don't have to report them properly and aren't held accountable if they fail to do so. It's a tough call to reduce what you can't measure. Even the process of trying to quantify scope 3 emissions can be enormously valuable because even if the end result is imperfect ( and it will be ) companies gain insight into suppliers and supply chains. Companies like Amazon and Microsoft have immense leverage and they can use it positively to reduce emissions the length of the supply chain.
These mandates also give companies opportunity to stand up their sustainability claims, turn pledges into action and counter accusations of greenwashing.
Whilst greenwashing should undoubtedly be called out, those doing so need to stay alert to the possibility of cynicism about sustainability claims being weaponised by those who have an interest in eroding public support for decarbonisation. With temperature records being smashed through at an alarming rate and summers bringing continual cycles of fire and flood, climate denial has become a difficult look to pull off. Delay with a side order of distraction seems to be the next stage of the cycle, with governments and the most polluting industries both claiming that hard working individuals and companies are being ordered to do too much, too soon by powerful elites in thrall to "luxury" beliefs.
Greeting legislation such as this positively and drawing attention to the burgeoning number of similar mandates globally, is important because it strengthens us in the collective endeavour necessary to stabilise global temperatures. The alternative is despair, and in the UK where we aren't at the sharp end of global heating, that really is a luxury belief.
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