California's Groundbreaking Emission Reporting Law: SB 253

If California were a country, it would rank as the 5th largest economy in the world, surpassing countries such as India, the UK, France, and Canada. Companies like Walmart, Amazon, ExxonMobil, Apple, and Google are based in California.

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The state has passed a groundbreaking new law, SB 253, which will require any business that operates within California and has annual revenues of $1 billion or more to report all of its greenhouse gas emissions.

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It is important to note the keyword 'all' here. Businesses will not only need to report emissions directly related to their operations but also disclose all of their greenhouse gas emissions. This includes emissions from their supply chains, business travel, employees' commutes, and how customers use their products, which are designated as Scope 3 emissions.

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What are Scope 3 emissions?

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Activities such as business travel, commuting, waste, and third-party deliveries contribute to Scope 3 emissions, which originate from assets not owned or controlled by the reporting organization. For instance, when employees travel business class, the organization indirectly causes emissions through the aviation industry as employees travel for work.

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It is difficult to track these emissions, and the current federal and state reporting requirements do not require reporting of these emissions.

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California is asking businesses to disclose all of their emissions

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SB 253 requires California regulators to create greenhouse gas emission rules by 2025 for public and private companies whose annual revenues exceed $1bn. By 2026, these companies will have to report emissions from their operation and electricity use (Scope 1 and 2 emissions), and by 2027, they will also have to disclose their Scope 3 emissions. This will impact approximately 5,300 companies, the majority of which are multinational companies.

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While tech giants like Apple, Google, Salesforce, Microsoft, and Adobe and a few other organizations such as Ikea, Patagonia, and Amalgamated Bank have supported SB 253, The California Chamber of Commerce and fossil fuel giants are opposing it.

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Why are some companies opposing SB 253?

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Apart from impacting the businesses in California, SB 253 would also create a ripple effect on the subsidiaries of these companies across the U.S. and other parts of the world.

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Author Bill McKibben analyzed it extensively in his newsletter, The Crucial Years. In his analysis, he mentions that Apple's biggest source of carbon emissions is the money it keeps in America's banking system, which the system lends out to fossil fuel companies. These emissions are indirect or Scope 3 emissions for Apple. If companies like Apple are required to disclose their Scope 3 emissions, they would start asking banks to stop investing their money in fossil fuel projects owned by Exxon and Chevron.

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This is one of the reasons why fossil fuel giants oppose the bill. The bill would make it really difficult for them to greenwash but would help California achieve net-zero emissions statewide by 2045.