Rising sea levels, devastating wildfires, and prolonged drought: the impact of climate change in California is noticeable. One way to mitigate the effects of climate change is to decrease greenhouse gas (GHG) emissions, particularly carbon dioxide, which accounts for most of the nation’s emissions according to the Environmental Protection Agency.

Consumers are often encouraged to decrease their carbon footprint by driving less (or driving hybrid or electric vehicles), taking public transportation, or reducing energy use at home. But individual actions alone may not make enough of an impact in decreasing overall emissions.

Companies also engage in activities that increase GHG emissions, such as general “company operations, employee and consumer transportation, goods production and movement, construction, land use, and natural resource extraction.” While voluntary reporting is useful, enacting meaningful change to global emissions levels requires stronger actions. And, as the world’s fifth largest economy, California may be in the perfect position to promote stronger corporate actions.

The California legislature is hoping that increased transparency and accountability will help mitigate climate change with Senate Bill 260, the Climate Corporate Accountability Act (CCAA). An effort to increase transparency by requiring U.S.-based companies to publicly share their GHG emissions, the bill was passed by the Senate and recently referred to the Assembly Appropriations Committee.

If implemented, the CCAA will require all reporting entities — partnerships, corporations, limited liability companies, and other business entities doing business in California and reporting over $1 billion in annual gross revenue — to submit annual reports of their overall GHG emissions based on the Greenhouse Gas Protocol. The protocol recognizes three different “scopes” of emissions, which are defined in SB 260:

  • “Scope 1 emissions” means all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.
  • “Scope 2 emissions” means indirect greenhouse gas emissions from electricity purchased and used by a reporting entity, regardless of location.
  • “Scope 3 emissions” means indirect greenhouse gas emissions, other than scope 2 emissions, from activities of a reporting entity that stem from sources that the reporting entity does not own or directly control and may include, but are not limited to, emissions associated with the reporting entity’s supply chain, business travel, employee commutes, procurement, waste, and water usage, regardless of location.

In addition to annual reporting scopes 1, 2, and 3 emissions, reporting entities will also need to verify their reports with third-party auditors approved by the California Air Resources Board (CARB).

CARB, which is already responsible for the State’s greenhouse gas emissions inventory program, will also be responsible for developing regulations on disclosing and verifying GHG emissions under the CCAA and publishing its findings on the Secretary of State’s website.

A company that repeatedly or intentionally violates the regulations adopted by CARB will be subject to an administrative penalty, which the Attorney General could recover in a civil action.

If passed, reporting under the CCAA would begin in 2025.

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