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CA Leads (again) in GHG Emissions Reporting Requirements

The state of California just passed a bill that requires large companies to report their annual direct as well as their indirect GHG emissions. With a 48-20 vote in the Assembly on Monday and a 27-8 vote on Tuesday in the Senate, the bill is now headed to the governor for its final signature.

Ahead of the SEC and more comprehensive in nature, CA is the first state in the US to pass GHG emissions reporting requirements. The bill would require all companies that do business in CA with >$1bn in revenue to report not only scope 1 and 2 emissions by 2026 but also all scope 3 emission categories i.e. value chain emissions by 2027. Transparency with regards to this data will help investors and other stakeholders to better estimate the impact of firms on people and the environment as well as the financial risks and opportunities related to climate change and other key sustainability issues.

This bill matters to all companies, regardless of size. Since CA is the fifth largest economy in the world, the passing of this bill will likely have a widespread ripple effect. While the bill will apply to an estimated 5,400 companies directly, these companies in turn will require emissions data from their suppliers thereby subjecting small- and medium sized companies to follow suit and measure their GHG emissions as well. And if that isn't enough of a push to start the work of measuring corporate GHG emissions, the European Corporate Sustainability Reporting Directive ("CSRD"), which applies to all large (rev >$150M) companies doing business in Europe, will come into effect even sooner: in January 2024.

Graphic Source: Marek Piwnicki, Unsplash


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