“California Mandates Major Companies to Track and Report Greenhouse Gas Emissions – What You Need to Know”

California Governor Gavin Newsom signed two new laws on October 7, 2023, that will require large companies to track and report almost all of their greenhouse gas emissions if they do business in California. This includes emissions from their supply chains, business travel, employees’ commutes, and the way customers use their products. The new rules, known as the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, will apply to U.S. companies with annual revenues of $1 billion or more and companies generating $500 million or more, respectively.

Under the Climate Corporate Data Accountability Act, companies will have to report both their direct and indirect greenhouse gas emissions starting in 2026 and 2027. This represents a significant expansion from current federal and state reporting requirements, which only cover certain emissions from companies’ direct operations. The California Chamber of Commerce opposed the regulation, citing increased costs for companies, but more than a dozen major corporations, including Microsoft, Apple, Salesforce, and Patagonia, endorsed the rule.

The second law, the Climate-Related Financial Risk Act, will require companies to report their financial risks related to climate change and their plans for risk mitigation. Many multinational corporations, such as Apple, Google, Microsoft, Walmart, Costco, ExxonMobil, and Chevron, are already voluntarily reporting their emissions to organizations like CDP (Carbon Disclosure Project) and facing reporting requirements in other regions like the European Union, the United Kingdom, New Zealand, Singapore, and Hong Kong.

California’s new rules are expected to have global ramifications due to the state’s economic influence and history of being a test bed for future federal U.S. policies. While the disclosure laws do not currently require companies to reduce their emissions, they highlight areas where companies can pressure suppliers to make changes. Research suggests that well-designed disclosure programs focusing on consistency, comparability, and accountability can drive real climate actions and prevent greenwashing.

Overall, California’s new climate disclosure laws represent a significant step toward mainstreaming corporate climate disclosures and potentially meaningful corporate climate actions. The state’s regulations are poised to influence global corporate behavior and set a standard for emissions reporting in the U.S. and beyond.