California's climate disclosure bills need funding!
A letter from Climate Action California and its allies explains why.
Soon after two key climate disclosure bills signed into law by California’s governor last October, Lily Hsueh, a professor at Arizona State University explained their significance on The Conversation:
Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.
That means oil and gas companies like Chevron will likely have to account for emissions from vehicles that use their gasoline, and Apple will have to account for materials that go into iPhones.
It’s a huge leap from current federal and state reporting requirements, which require reporting of only certain emissions from companies’ direct operations. And it will have global ramifications.
She went onto explain the key provisions of the law:
Under the new Climate Corporate Data Accountability Act [SB 253], U.S. companies with annual revenues of US$1 billion or more will have to report both their direct and indirect greenhouse gas emissions starting in 2026 and 2027. The California Chamber of Commerce opposed the regulation, arguing it would increase companies’ costs. But more than a dozen major corporations endorsed the rule, including Microsoft, Apple, Salesforce and Patagonia.
The second law, the Climate-Related Financial Risk Act [SB 261], requires companies generating $500 million or more to report their financial risks related to climate change and their plans for risk mitigation.
Governor Gavin Newsom’s recently published Proposed 2024-2025 Budget failed to allocated any funding to the implementation of these laws. This is enormously worrying, because without funding, it will be next to impossible for the laws to have any teeth.
In late February 2024, dozens of groups—led by Climate Action California, and representing over two million Californians—wrote to leaders in the California legislature who are involved in the budgeting process to express their concern about this.
The organizations’ letter stated:
We urge you to include in the 2024-25 budget the funding needed to enable CARB to begin the staffing and regulatory processes required, without delay. As required by law, SB 253 needs to be implemented by January 1, 2025 and SB 261 by January 1, 2026.
We question some of the assumptions behind the price tag CARB apparently assigns to the total estimated cost of implementation for both bills: $8M in 2023-2024, $14.7M in 2024-2025, and $13.6M ongoing. Those numbers were first noted in the Department of Finance July 2023 estimate, which put the number of CARB staff required to implement each of the bills at 26 full-time employees, potentially 52 new positions. We believe the assumptions behind these estimates require close review.
As SB 253 is expected to generate $5M of annual revenue from the Climate Accountability and Emissions Disclosure Fund starting in 2025; the net cost will be reduced accordingly. The $5M estimate was based on the assumption that the fee charged to reporting entities would be set at $1,000 but the language in the final bill allows CARB to rightsize it in order to fully cover its costs. Similar provisions exist in SB 261. A bridge loan can be provided to CARB from general reserves and repaid using the fees collected from filers.
While requiring only a small fraction of the Governor’s proposed total climate budget of $48.3B, these bills will have an outsized effect as they hold companies accountable for their impact on the planet.
We also wish to address comments made by the Governor in his signing statements.
Governor Newsom suggested that Implementation deadlines are not feasible. In fact, the infrastructure enabling companies to report emissions is already in place. The Greenhouse Gas Protocol (GHGP) is a long-established standard for measuring greenhouse gas emissions; CARB can rely on existing protocols without having to produce significant additional guidance. Similarly, SB 261 disclosures will be based on well-established recommendations by the Task Force on Climate-related Financial Disclosures, instituted by the Financial Stability Board in 2015 and adopted as the foundation of International Sustainability Reporting Standards. In addition, several platforms exist to enable companies to report their emissions to external stakeholders, some have been around for over 15 years (e.g., CDP and The Climate Registry).
The Governor opined that application of GHGP could result in inconsistent reporting. We strongly disagree that scope 3 accounting is uncharted territory for companies impacted by the rule—the country’s largest corporations. The GHGP Corporate Standard (including guidance on Scope 3) was first developed in 2001. A dedicated Scope 3 Reporting Standard was published in 2011, over a decade ago. US companies have been utilizing these resources for many years. More than 40 percent of companies reporting to CDP, many of them US multinationals, report their scope 3 emissions, and the number of reporting entities is growing every year. SB 253 allows for the fact that perfect information is not always available by making acceptable “use of both primary and secondary data sources, including the use of both industry average data, proxy data, and other generic data in Scope 3 emissions calculations.” Requiring scope 3 reporting is not a “gotcha” effort to catch companies misrepresenting their emissions. No administrative penalty is imposed for any misstatements made on a reasonable basis and disclosed in good faith.
The Governor predicted a deleterious financial impact on business. In fact, many impacted companies already report both emissions and climate risk annually and voluntarily, in response to requests from investors and business customers. Around 3,100 US multinationals, many doing business in California, are already taking steps to comply with the EU Corporate Sustainability Directive (CSRD) starting from next year; many others are now planning to report thanks to the passage of SB 253 and SB 261. We note that CSRD mandates disclosure of both GHG emissions and climate risks. We anticipate a cascading effect, where the largest companies will be asking their tier 1 suppliers to measure emissions, who in turn will be requesting this data from their tier 1 suppliers. Mandatory corporate reporting is happening on a global level and California is by no means an outlier in this respect.
Based on our analyses and the global trend toward corporate accounting and reporting of both emissions and climate-related financial risk, we question CARB’s estimates of the additional staffing required to implement these bills. We urge the budget committees to engage with CARB to review their projections, and explore possibilities for reducing their estimates.
Whatever the cost, we ask the committees to allocate sufficient funding to CARB for implementation of both SB 261 and SB 253 in 2024-2025. Once operational, both bills will be self-funding. And time is of the essence, as we know. Now is not the time to backtrack on the commitment made by the Governor and Legislature to raise the climate corporate accountability bar.
The list of organizations that signed onto the letter are as follows:
National organizations
Americans for Financial Reform
Moonyoung Ko, Climate Finance Campaign Manager
Climate Hawks Vote
RL Miller, President
Friends of the Earth
Paloma Henriques, Senior Petrochemical Campaigner
Natural Resources Defense Council
Victoria Rome, California Government Affairs Director
Public Citizen
Clara Vondrich, Senior Policy Counsel
Stand.earth
Amy Gray, Associate Director of
Climate Finance
The Climate Registry
Dan Krekelberg, Policy Director
Third Act
Bill McKibben, Founder
Union of Concerned Scientists
Daniel Barad, Western States Policy Manager
Vote Solar
Andrea León-Grossmann, Deputy Program Director - West
California Organizations
350 Bay Area Action
Marcia Liberson, Legislative Analyst
350 Conejo / San Fernando Valley
Alan Weiner, chapter lead
350 Humboldt
Daniel Chandler, Steering Committee
350 Marin
Patrick Costello, Steering Committee
350 Sacramento
Will Brieger, Chair, Legislation Team
350 South Bay Los Angeles
Sherry Lear, Organizer
350 Southland Legislative Alliance
Michael Rochmes, Steering Committee
350 Ventura County Climate Hub
Jan Dietrick, Policy Team Leader
1000 Grandmothers for Future Generations
Susan Penner, Co-Chair, Legislative Working Group
Active San Gabriel Valley
David Diaz, MPH, Executive Director
Ban SUP (Single Use Plastic)
Cheryl Auger, President
CALPIRG
Jenn Engstrom, State Director
Citizens' Climate Lobby, Sacramento/ Roseville Chapter
Edith Thacher, Chapter Lead
Climate 911
Wendy Ring, Convenor
Climate Action California
Janet Cox, CEO
Coalition for Clean Air
Bill Magavern, Policy Director
Coastside Jewish Community
Rabbi Moshe Heyn, Spiritual Leader
Conejo Climate Coalition
Faith Grant, Founding member
Cool Planet Group of First Presbyterian Church, Palo Alto
Patricia Kinney, Chair
East Valley Indivisibles
Jason Goodman, State Advocacy Committee Leader
Environment California
Dan Jacobson, Senior Advisor
Extinction Rebellion San Francisco Bay Area
Leah Redwood, Action Coordinator
Fossil Free California
Miriam Eide, Coordinating Director
Friends Committee on Legislation of California
Jim Lindburg, Legislative Consultant
Giniw Collective
Tara Houska , Founder
Glendale Environmental Coalition
Elise Kalfayan, Board Member
Humboldt Unitarian Universalist Fellowship Climate Action Campaign
Sue Lee Mossman, Chair
Indivisible Alta Pasadena
Anita Ghazarian, OD, Environmental Lead
Indivisible California Green Team
Jennifer Tanner, President
Indivisible California: StateStrong
Dennessa Atiles, Organizer
Leading Change Consulting and Coaching
Steve Levin, Owner
Mothers Out Front California
Alicia Nichols-Gonzalez, Organizing Manager for California
Oil & Gas Action Network
Christina Liu, Organizer
Peninsula Interfaith Climate Action (PICA)
Debbie Mytels, Chair
San Fernando Valley Climate Reality Project
Kathy Schaeffer, Legislative Coordinator
San Francisco Bay Physicians for Social Responsibility
Robert M. Gould, MD, President
Santa Cruz Climate Action Network
Pauline Seales, Organizer
Sierra Club California
Sakereh Carter, Senior Policy Advocate
Silicon Valley Climate Reality Project
Glen Garfunkel, Co-chair
SoCal 350 Climate Action
Jack Eidt, Co-Founder
SolidarityINFOService
Michael Eisenscher, Publisher
The Climate Center
Ellie Cohen, CEO
The Phoenix Group
Manuel J. Espinosa, Principal
Transformative Wealth Management, LLC
Allan Moskowitz CFP, AIF, CEO
Trinity Respecting Earth and Environment (TREE)
Ann Rothschild, Chair
Urban Ecology Project
Chris Peck, President
Organizations outside California
350Juneau
Douglas Woodby, Co-Chair
Catholic Network US (Colorado)
Stefanie Klass & Marie Venner, Co-Chair,
Colorado Businesses for a Livable Climate
Marie Venner & Jim Smith, Co-Chairs
Community for Sustainable Energy
Fred Kirsch, Director
Divest Oregon
Susan Palmiter, Co-Lead
Greater New Orleans Housing Alliance
Nichelle Taylor, Program Director for Policy Development and Implementation
Honor the Earth
Cheryl Barnds, Coalition Coordinator
Indivisible Ambassadors (Colorado)
Philip Beck, Co-Founder
Littleton Business Alliance
Patrick Santana, Chair
Mental Health & Inclusion Ministries
Amy Petré Hill, Founder/Community Chaplain
Mind Eye World
Lauren Swain, ED/Founder
North Range Concerned Citizens
Kristi Douglas, Commerce City Councilor and Co-Chair
RapidShift Network
Marie Venner, Chair
Save EPA (former employees)
Jeff Hart, Co-founder
Southwest Organization for Sustainability
Anna Ramirez, Staff
Spirit of the Sun, Inc.
Shannon Francis, Executive Director
System Change Not Climate Change
Maura Stephens, Coordinating Committee
The Vessel Project of Louisiana
Roishetta S Ozane, Founder and CEO
Western Slope Businesses for a Livable Climate
Chris Calwell, Co-Chair