In a groundbreaking move, California’s Governor, Gavin Newsom, declared on Sunday his intent to sign a groundbreaking climate bill that sailed through the state’s legislature the previous week. This legislation mandates that major corporations divulge their greenhouse gas emissions, sending shockwaves across the nation and the globe.
This new law, set to impact roughly 5,000 companies, will demand not only the disclosure of direct emissions from their operations but also indirect emissions from employee travel, waste disposal, and intricate supply chains. Advocates for climate policy have long contended that such disclosures are a crucial initial stride in leveraging financial markets to combat planet-warming pollutants. When investors gain awareness of a company’s climate impact, they might decide to park their dollars elsewhere.
This law’s scope encompasses both public and private companies generating more than a billion dollars annually while operating within the Golden State. Given California’s status as the world’s fifth-largest economy, its actions tend to set the national pace, and many affected entities are global behemoths.
Amid speculation about Governor Newsom’s stance on the bill, given some pushback from the California Chamber of Commerce and his state’s finance department, the suspense was palpable. Yet, when queried during a Climate Week event at the Times Center, he left no room for doubt.
“Would I cede that leadership by having a response that is anything but, Of course, I will sign that bill?” he retorted passionately. “No, I will not.”
While Governor Newsom expressed readiness to sign the bill, he did inject a dash of intrigue, alluding to “a modest caveat” requiring “some cleanup on some little language” within the legislation. The specifics of these alterations remained shrouded in mystery, with his office remaining silent in response to inquiries.
The roster of implicated companies reads like a who’s who of the corporate world, spanning giants like Chevron in the oil and gas sector, financial heavyweights like Wells Fargo, and global icons like Apple. Commencing in 2027, these firms will be under the microscope, compelled to bare all their emissions.
This new measure runs in tandem with another law that mandates companies with revenues exceeding $500 million to report climate-related risks, although specifics of emissions are exempted.
The scope of California’s legislation surpasses a proposal from the Securities and Exchange Commission, which only targets publicly-traded companies for emissions disclosure. This SEC proposal has sparked robust opposition from conservative quarters and business interests.
Robert Stavins, Director of the Environmental Economics program at Harvard, reflected on the significance of California’s move, saying, “The fact that a single state like California would do this is both potentially troubling and potentially promising.” He pointed out the potential impact on companies with a fraction of their activity in California but also highlighted California’s historical role in spearheading environmental regulation, with other states and the federal government ultimately following suit.
The announcement drew praise from climate policy advocates. Mindy S. Lubber, CEO and President of Ceres, a nonprofit collaborating with investors and companies on environmental matters, hailed the bills as “first-in-the-nation” measures offering unparalleled insights into corporate climate emissions and financial climate risks.
In opposition, detractors warned of the looming expense and burdensome nature of compliance, particularly the meticulous tracking and measurement of emissions. Clothing manufacturers, for instance, fretted about the need to report emissions tied to textile growth, weaving, and transportation in addition to those from their production plants.
The California Chamber of Commerce lambasted the legislation, terming it “a costly mandate” that wouldn’t directly reduce emissions and would negatively impact businesses of all sizes in the state. Denise Davis, an executive vice president at the Chamber, expressed disappointment but held out hope for “cleanup” legislation in the coming year to mitigate the new law’s impact.