September 6, 2024
In a significant move for climate regulation, California lawmakers have rejected a proposal to delay the implementation of stringent greenhouse gas (GHG) emissions reporting requirements. This decision reinforces the state’s commitment to tackling climate change and has far-reaching implications for businesses operating in the U.S.’s largest economy.
The Push for Transparency
In 2022, Governor Gavin Newsom signed two pivotal laws, SB 253 and SB 261, which require large corporations—both public and private, with revenues exceeding $1 billion—to disclose their greenhouse gas emissions and climate-related risks. These laws are a cornerstone of California’s efforts to push corporations toward greater transparency and accountability in their environmental impacts. Initial disclosures are slated for 2026, but there was a recent attempt to extend that deadline.
This summer, Governor Newsom’s administration proposed a two-year delay, citing concerns about giving businesses more time to prepare. The California Chamber of Commerce, in favor of the delay, argued that companies needed more time to adapt to the rules, especially given the inclusion of Scope 3 emissions, which cover indirect emissions from sources like purchased goods and services, business travel, and the supply chain. This makes emissions tracking significantly more complex and data-intensive.
However, despite these arguments, the state legislature did not approve the two-year delay, and the emissions reporting deadline remains intact. While lawmakers did agree to push back the deadline for regulators to finalize emissions disclosure rules to mid-2025, the primary timeline for corporations to begin reporting remains unchanged.
SB 253 - Climate Corporate Data Accountability Act
This bill mandates that approximately 5,000 companies with annual revenues exceeding $1 billion disclose their Scope 1 and Scope 2 emissions beginning in 2026, with Scope 3 emissions disclosures required by 2027. Scope 1 emissions refer to direct emissions from company-owned and controlled resources, while Scope 2 includes indirect emissions from the generation of purchased energy. Scope 3 emissions, which encompass a company’s entire value chain, represent the most complex and challenging aspect of corporate carbon accounting.
SB 261 - Climate-Related Financial Risk Act
This bill requires around 10,000 companies with annual revenues exceeding $500 million to report on their climate-related financial risks starting in 2026. These reports must be updated biennially and are intended to provide stakeholders with insights into how climate change may impact a company’s financial health and operations.
Why This Matters
California’s leadership on climate policy often sets the standard for the rest of the country, and these emissions-reporting rules could become a model for other states. With an economy that ranks as the fifth-largest in the world, California’s corporate regulations are a significant influence on national and international business practices.
An analysis by Public Citizen estimates that at least 75% of Fortune 1000 companies will have to comply with these new reporting requirements. The rules are more comprehensive than the currently paused federal guidelines from the Securities and Exchange Commission (SEC), which also aim to require emissions disclosures. California’s demand for the inclusion of Scope 3 emissions adds layers of complexity for companies to calculate and report their indirect environmental impacts.
The Role of Carbon Capture and Climate Technology
For companies that fall under these reporting requirements, innovation in emissions-reduction technology will become essential. Fortunately, California’s regulatory framework aligns with recent federal initiatives that support clean energy investments and the growth of carbon capture technologies. This year, the state approved new tax credits to boost
carbon capture, helping industries offset their carbon footprints while continuing operations.
A Wake-Up Call for Corporations
For businesses, California’s decision to stay the course on emissions-reporting deadlines is a clear signal: transparency in climate impacts is no longer optional. Corporations that operate in the state must begin preparing for these requirements now, rather than waiting for future delays. With only a few years left before the 2026 deadline, companies need to develop robust strategies for tracking and reporting emissions across their entire supply chains.
This may include investments in emissions monitoring tools, improved supply chain management, and partnerships with sustainability-focused tech firms like Envana. The integration of climate analytics platforms is no longer just a competitive advantage; it’s becoming a necessity for regulatory compliance and reputation management in the era of corporate sustainability.
The Time To Act Is Now
California’s decision to uphold its emissions-reporting requirements reflects its ongoing commitment to environmental stewardship and corporate accountability. Businesses must now rise to the challenge, leveraging technology and innovation to meet these regulatory demands while also contributing to global climate goals.
As the deadline approaches, companies need to act swiftly, ensuring they have the tools, data, and strategies in place to comply with California’s ambitious emissions-reporting laws.
Envana, a leader in oil and gas carbon emissions data, can provide invaluable support for businesses navigating this complex landscape. By utilizing empirical emissions-tracking technologies and leveraging data analytics, companies can streamline their reporting processes, ensuring compliance with state regulations while also setting themselves up for long-term sustainability.
At Envana, we work with a range of global companies in the oil and gas sector on GHG accounting, automating data collection and improving structures for data collection, making carbon reporting auditable, transparent, measurable, and manageable. We invite you to continue to monitor this regulatory development and start assessing climate reporting now. Make informed decisions with a better understanding of your oil and gas emissions.
Envana's expert team of industry professionals provides bespoke emissions management software solutions to a range of companies in the oil and gas sector. Contact Envana today to see how we can help your company define your climate disclosure strategy.
