California senators took a huge step toward corporate transparency by enacting Senate Bill 253, the Climate Corporate Data Accountability Act. This groundbreaking legislation establishes the nation’s first mandate for significant U.S.-based firms operating in California to publicly declare their annual greenhouse gas emissions. 

California: A forerunner in emissions transparency 

The measure, which aims to prevent corporate greenwashing, recently passed the Assembly by a vote of 48-20 and was approved by the Senate by a vote of 27-8. The final decision is now in the hands of Governor Gavin Newsom.

“We need strong transparency to create a level playing field among private and public companies. Once again, California is leading the nation on essential climate action,” said Sen. Scott Wiener (D-San Francisco), the bill’s author.

In the fight against climate change, the Climate Corporate Data Accountability Act provides a ray of hope. This legislation requires public and private firms with yearly revenues of more than $1 billion to declare their emissions across three critical “scopes” by 2026. Scope one includes direct greenhouse gas emissions from company branches. Scope two digs at indirect emissions, such as the company’s electricity purchase. Scope three, which accounts for emissions across the company’s supply chain, from trash and water usage to business travel and staff commutes, is the game changer here. Scope three accounts for 75 percent of a company’s carbon emissions in several industries.

Corporate powerhouses unite in the name of honesty

A slew of prominent firms have backed the initiative, including Ikea USA, Microsoft, Patagonia, REI Co-op, Dignity Health, and Sierra Nevada Brewing Co. These sector experts emphasized the importance of consistent, comparable, and trustworthy emissions data at scale in assessing global economic risks and steering toward a net-zero future in a joint letter to Congress.

“SB 253 would break new ground on ambitious climate policy and would allow the largest economic actors to fully understand and mitigate their harmful greenhouse gas emissions,” they proclaimed in a joint letter to lawmakers.

Apple, too, threw its weight behind the cause, affirming its unwavering support for climate disclosures as a means to enhance transparency and accelerate the fight against climate change.

Concerns and controversies

While the bill is widely supported by environmentalists, it has not been without criticism. Critics, notably the California Chamber of Commerce, claim that emissions reporting is more of an art than a science, and they are concerned that complexities would give out-of-state enterprises an unfair edge. There are also concerns about the California Air Resources Board’s jurisdiction to regulate out-of-state businesses. There are fears that the law will place a financial strain on small and medium-sized firms.

Senator Scott Wiener, however, quickly dispelled these fears, emphasizing that SB 253 only targets billion-dollar enterprises and will have no influence on the tiny businesses that supply them.

SoCalGas and San Diego Gas and Electric also expressed their disapproval, citing potential financial difficulties for a variety of businesses involved in their operations.

California’s trailblazing step toward corporate openness might establish a precedent for the rest of the country and, ultimately, the rest of the world. As the world’s fifth-largest economy, the acts of the state have far-reaching consequences. By requiring some of the world’s top firms to declare their emissions, California may encourage other states to pass similar climate legislation and encourage corporations worldwide to be more upfront about their environmental impact.

According to a 2021 survey, 87 percent of Americans believe it is critical for firms to be upfront about their climate consequences. Furthermore, in 2020, investors with about $39 trillion in assets under control urged governments throughout the world to establish laws encouraging large-scale zero-emissions investments, including obligatory reporting.

The Climate Corporate Data Accountability Act is a critical step toward a future in which transparency reigns supreme, greenwashing is exposed, and the battle against climate change is reenergized. 

We are highlighting this piece as part of our annual “Best Of” roundup of articles published at The Optimist Daily this year. Today’s focus is on the top Business solutions of 2023.