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Pushing Back Against California’s New Climate Disclosure Law

Feb. 14, 2024
The U.S. Chamber of Commerce and several business groups file a lawsuit to block California’s new Climate Corporate Data Accountability Act.

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In October, California Governor Gavin Newsom signed a new law requiring large companies operating in the state to disclose a wide range of emissions. According to the Associated Press, the Climate Corporate Data Accountability Act (SB 253) requires more than 5,300 companies that operate in California and make more than $1 billion in annual revenues to report both their direct and indirect emissions. 

Some of the key points from the bill include: 

  • The law applies to companies with over $1 billion in annual revenues that do business in California.
  • Beginning in 2026, the companies must publicly disclose to the emissions reporting organization.
  • At that point, the company must also obtain an assurance engagement for their scope 1 and scope 2 greenhouse gas emissions (GHGs). 
  • Starting in 2027, the company must also disclose their scope 3 GHGs.

When the bill was signed into law last year, large companies like Apple and Patagonia voiced their support of the bill, saying they already disclose much of their emissions. And a key United Nations official behind the 2015 Paris climate agreement, said the bill would be a “crucial catalyst in mobilizing the private sector to solve climate change.”

Pushing Back

Last month, the U.S. Chamber of Commerce and a host of other business groups sued the state of California over the new climate disclosure laws. The other groups that are part of the lawsuit include the American Farm Bureau Federation, California Chamber of Commerce, Central Valley Business Federation, Los Angeles County Business Federation and Western Growers Association.

“We are proud of the leadership and innovation shown by America’s businesses in tackling climate change. Businesses and government need to work together to address the problem and that requires policies that are practical, flexible, predictable, and durable,” Tom Quaadman, U.S. Chamber of Commerce Center for Capital Markets Competitiveness executive director, said in a  press release. “California’s corporate disclosure laws are the opposite of that and violate the First Amendment by forcing businesses to engage in subjective speech.”

Quaadman also says the new law demands that both public and private businesses with even minimal operations in the state calculate their GHG emissions no matter where those emissions take place. Then, they must subjectively measure and report their worldwide climate-related financial risks and proposed mitigation strategies to California. “The costs and compliance issues of this law will be felt by businesses of all sizes, but especially small, Main Street businesses,” he added. 

Bigger Focus on ESG

In response to the lawsuit filed by the U.S. Chamber, the California State Senator who drafted the law calls the suit “baseless” in a recent WSJ article. “While corporate lobby groups continue to wage an unhinged misinformation campaign against these laws, investors and consumers are being deprived of vital information to navigate our rapidly warming planet,” he told the publication. 

 The WSJ also says that the Securities and Exchange Commission (SEC) is developing a proposed rule that would require publicly-traded companies to disclose their emissions in securities filings, along with other climate-related information. 

“A recent European Union law on corporate sustainability would require thousands of U.S. companies—public and private—to report their greenhouse-gas outputs,” it says, noting that most large U.S. companies already publish some emissions estimates.

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.