AGENDA REPORT
Meeting Date: September 12, 2023
Item Number:
To: Honorable Mayor and City Council
From: Cynthia Owens, Municipal Affairs Program Manager
Subject: SENATE BILL 253 (WIENER) - CLIMATE CORPORATE DATA
ACCOUNTABILITY ACT
Attachments: 1. Bill Summary
2. Bill Text
RECOMMENDATION
Staff recommends that the City Council provide direction on taking a position on Senate Bill 253 (Wiener) - Climate Corporate Data Accountability Act (SB 253). The City Council may recommend any of the following positions on this bill:
• Support;
• Support if amended;
• Oppose;
• Oppose unless amended;
• Remain neutral; or
• Provide other direction to City staff.
INTRODUCTION
SB 253 would require any partnership, corporation, limited liability company, or other United States business entities with total annual revenues in excess of $1 billion who conduct business in California to publicly report their annual greenhouse gas (GHG) emissions, as specified by the California Air Resources Board (CARB). This item seeks direction for a position on SB 253 as the Beverly Hills City Council Legislative / Lobby Liaison Committee (Mayor Gold and Councilmember Mirisch) were unable to reach a consensus for a direction to recommend to the City Council on September 6, 2023.
DISCUSSION
California has been at the forefront of climate policy for decades, establishing renewable energy requirements for electricity providers, committing to preserve 30 percent of California’s lands in their natural state, and setting and achieving ambitious emission reduction targets. These reductions were partially met and continue to be bolstered by Meeting Date: September 12, 2023
the emission reporting requirements as laid out in the California Global Warming Solutions Act.
Currently, these requirements, only apply to electricity generators, industrial facilities, fuel suppliers, and other major emitters. Without the same requirements for other corporate entities, California is left without the proper information needed to regulate GHG, and consumers are left in the dark about the climate impacts of their business decisions.
According to Senator Wiener, the first step needed to decrease global corporate carbon emissions, which impact the health of California’s residents and its natural environment, is expanding reporting requirements beyond what California currently has in place.
However, many of the largest corporations doing business in California are not subject to the state’s carbon reporting laws and those that currently report their emissions often do not report their full GHG footprint. Rather, they report a subset of their activities and subsequent emissions, leaving out crucial aspects of their supply chain and operations.
The result is a continuing lack of transparency from corporate polluters and an inability to properly regulate them due to a lack of accurate information.
SB 253 would provide a first in the nation, comprehensive, public reporting of the GHG emissions inventories for corporations with revenue over $1 billion who do business in California, and would enhance California’s position as a global leader in carbon accountability and reporting. Companies subject to the SB 253 would, starting in 2026, be responsible for annually reporting GHG emissions, aligned with the GHG Protocol.
More information on this bill may be found in Attachments 1 and 2.
On September 6, the Beverly Hills City Council Legislative / Lobby Liaison Committee (“Committee) reviewed SB 253. Councilmember Mirisch voiced his support for the bill while Mayor Gold was concerned the bill was overly broad. Mayor Gold was further concerned that data collection from supply chain sources outside the United States, such as Europe or South America, may be unreasonable to obtain or unreliable. The Mayor felt the bill could be narrowed to make the goal of the reporting more obtainable.
Supporters for this bill include Dignity Health, IKEA, Patagonia, Sierra Nevada Brewing Co., and Seventh Generation. Those in opposition include the American Beverage Association, CalChamber and several other Chamber of Commerce’s. A complete list of who is in support or who opposes SB 253 may be found in Attachment 1.
FISCAL IMPACT
The costs to the City are unknown.
According to the State Assembly Appropriations Committee, this bill will result in the following costs to the state:
1) Estimated costs for CARB of approximately $3 million in fiscal year (FY) 2023-24, $7.7 million in FY 2024-25, and $6.9 million in FY 2025-26 and ongoing (Climate Accountability and Emissions Disclosure Fund) in staffing and contracting costs. 2) Additional costs of approximately $600,000 for CARB in contract funds starting in 2032 and every five years thereafter to conduct the evaluation of alternative GHG protocols, and if needed, adopt new regulations and modify third-party assurance provider training to conform to the new protocol. This bill requires each reporting entity subject to the bill's requirements to pay CARB an annual fee and requires CARB to set the fee at an amount sufficient to cover its full costs of administering Meeting Date: September 12, 2023
and implementing this bill, including reimbursing any loans made from other funds to finance CARB's startup costs.
3) Unknown, but potentially significant costs (Legal Services Revolving Fund) to the Department of Justice (DOJ). The Natural Resources Law Section within DOJ's Public Rights Division anticipates the potential for increased litigation referrals from its client, CARB, for legal challenges arising from this bill. DOJ notes the increased costs associated with this potential litigation are unquantifiable but potentially significant; however, DOJ will bill CARB for these costs, which CARB will reimburse fully.
4) To the extent CARB successfully seeks and recovers administrative penalties from a covered entity in violation of this bill, this bill could result in a potential increase in the State’s General Fund revenue of an unknown amount. This bill provides that administrative penalties imposed on a reporting entity shall not exceed $500,000 in a reporting year and that in imposing penalties, CARB shall consider relevant circumstances, such as the violator's past and present compliance with this bill and whether the violator took good faith measures to comply with this bill and when those measures were taken.
Gabriella Yap
Senior Policy & Management
Administrator, Public Safety
Approved By
Attachment 1
9/7/23, 10:23 AM Senate Bill Third Reading Analysis
https://ctweb.capitoltrack.com/Bills/23Bills/sen/sb_0251-0300/sb_253_cfa_367656_asm_comm.html 1/4 SB 253
SENATE THIRD READING
SB 253 (Wiener, et al.)
As Amended September 1, 2023
Majority vote
SUMMARY
Requires any partnership, corporation, limited liability company, or other U.S. business entity with total annual revenues in excess of $1 billion and that does business in California to publicly report their annual greenhouse gas (GHG) emissions, as specified by the California Air Resources Board (ARB).
Major Provisions
1) Establishes the Climate Corporate Data AccountabilityAct. 2) Requires, on or before January 1, 2025, ARB to develop and adopt regulations to require a reporting entity to annually disclose to the emissions reporting organization and verify all of the reporting entity's Scope 1 emissions, Scope 2 emissions, and Scope 3 emissions. Requires ARB to ensure that the regulations establish specified requirements, including conformance with the Greenhouse Gas Protocol standards and guidance, and obtainment of an assurance engagement performed by an independent third-party assurance provider. 3) Requires ARB, during 2026, to review and evaluate trends in third-party assurance requirements for Scope 3 emissions. Authorizes, on or before January 1, 2027, ARB to establish an assurance requirement for third-party assurance engagements of Scope 3 emissions. Requires the assurance engagement for Scope 3 emissions to be performed at a limited assurance level beginning in 2030. 4) Requires a third-party assurance provider to have significant experience in measuring, analyzing, reporting, or attesting to the emission of GHGs and sufficient competence and capabilities necessary to perform engagements in accordance with professional standards and applicable legal and regulatory requirements. 5) Requires a reporting entity, upon filing its disclosure, to pay an annual fee that may not exceed the reasonable regulatory costs ofARB for the administration and implementation of this bill. Deposits the proceeds of the fees in the Climate Accountability and Emissions Disclosure Fund. 6) Requires ARB to contract with an emissions reporting organization to develop a reporting program to receive and make publicly available disclosures.
7) Authorizes ARB to adopt or update any other regulations that it deems necessary and appropriate. Requires ARB, in developing the regulations, to consult with specified entities. 8) Provides the bill does not require additional reporting of emissions of greenhouse gases beyond the reporting of scope 1 emissions, scope 2 emissions, and scope 3 emissions required pursuant to the GHG Protocol standards and guidance or an alternative standard, if one is adopted after 2033. 9) Requires, on or before July 1, 2027, ARB to contract with the University of California, the California State University, a national laboratory, or another equivalent academic institution to prepare a report on the public disclosures made by reporting entities to the emissions reporting organization and the regulations adopted byARB 9/7/23, 10:23 AM Senate Bill Third Reading Analysis
https://ctweb.capitoltrack.com/Bills/23Bills/sen/sb_0251-0300/sb_253_cfa_367656_asm_comm.html 2/4 10)Requires ARB to submit the report to the emissions reporting organization to be made publicly available on the digital platform required to be created by the emissions reporting organization. 11)Provides that a reporting entity shall not be subject to an administrative penalty for any misstatements with regard to Scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith.
COMMENTS
On a global scale, the "Scope" framework was introduced in 2001 by the WRI and World Business Council for Sustainable Development as part of their Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. The goal was to create a universal method for companies to measure and report the emissions associated with their business.
The three Scopes allow companies to differentiate between the emissions they emit directly into the air, which they have the most control over, and the emissions they contribute to indirectly.
Scope 1 covers all direct GHGs that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.
Scope 2 covers indirect GHGs from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.
Scope 3 includes all other indirect emissions that occur in a company's value chain, such as purchased goods and services, business travel, employee commuting, waste disposal, use of sold products, transportation and distribution (upand downstream), investments, and leased assets and franchises.
Scope 1 and 2 emissions alone have shortcomings as their sums can be manipulated. These deficiencies can be addressed through the inclusion of Scope 3 emissions.
Recent research from CDP (formerly the Carbon Disclosure Project) found that Scope 3 supply chain emissions are on average 11.4 times greater than operational (Scope 1 and 2) emissions, which is more than double the previous estimate.
SB 253 would require companies to use the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard to detail its Scope 3 emissions calculations. The emissions disclosures would need to be independently verified by an assurance provider, and businesses would pay an annual fee of up to $1,000 to cover state administrative costs.
According to Ceres, one of the sponsors of this bill, of the 5,300 United States (U.S.) corporations that would have to report their emissions, about 73% are private companies. Many publicly traded companies already report climate risks in their financial disclosure reports.
There are challenges in acquiring comprehensive and consistent Scope 3 emissions data. Businesses will have to report not only the GHGs emitted globally from their operations and energy use, but also from indirect sources, such as emissions from their supply chains, contractors and use of their products. These Scope 3 emissions have raised the concerns of business groups. A 2021 article in the Harvard Business Review said such protocols could lead to the same emissions being reported multiple times by different companies, a critique that the California Chamber of Commerce (CalChamber) echoes.
The author contends that double counting in the context of climate emissions accounting is a consideration when there is a need for one comprehensive global or national system level accounting to track aggregate progress and/or implement carbon markets, and there are multiple different entities with GHG emissions chains that are interconnected. In that context, the author believes it is important to have a clear understanding of the actual total emissions contributed by those entire systems.
9/7/23, 10:23 AM Senate Bill Third Reading Analysis
https://ctweb.capitoltrack.com/Bills/23Bills/sen/sb_0251-0300/sb_253_cfa_367656_asm_comm.html 3/4 According to the Author
California has been at the forefront of climate policy in recent decades, establishing a successful cap and trade program, committing to preserve 30% of California's lands in their natural state, and setting and achieving ambitious emission reduction targets. These reductions were partially met, and continue to be bolstered by the emission reporting requirements as laid out in the California Global Warming Solutions Act. These requirements, however, only apply to electricity generators, industrial facilities, fuel suppliers, and other major emitters, missing many sources of corporate pollution. Without the same requirements for these corporate entities, California is left without proper information and will not be able to accurately regulate and reduce these emissions. Filling this gap with detailed data regarding corporate activities is a crucial next step for the state to ensure that we continue to decrease the rampant GHGs that are destroying our planet.
California, like the rest of the world, is already deeply impacted by climate change … We no longer have the time to rely on massive corporations to voluntarily report their emissions, and cannot afford any possibility that the emissions we are being told about have been altered or manipulated to ensure a positive public-facing appearance for a particular company. Rather, these corporations must be required to transparently report their activities and the emissions associated with them. Californians are watching their state get irrevocably harmed by climate change, and they have a right to know who is at the forefront of the pollution causing this. SB 253 would bolster California's position as a leader on climate change, will allow for consumers to make informed decisions regarding their patronage of these corporations, and will give policymakers the specific data required to significantly decrease corporate emissions.
Arguments in Support
Dignity Health, IKEA, Patagonia, Sierra Nevada Brewing Co., and Seventh Generation write, "California is on track to be the fourth-largest economy in the world and this bill would set a global standard for emissions disclosure. SB 253 would level the playing field by ensuring that all major public and private companies disclose their full emissions inventory, creating a pathway for collective reduction strategies." Arguments in Opposition
CalChamber worries the emissions estimates could be inaccurate, resulting in misguided public policy, while putting an onerous burden on companies, and expresses concerns the reports would include vulnerabilities to shareholder value, consumer demand, supply chains, employee safety, loans and other economic threats that may be amplified by changing climate and more extreme weather events.
FISCAL COMMENTS
According to the AssemblyAppropriations Committee, this bill will result in:
1) Estimated costs for ARB of approximately $3 million in fiscal year (FY) 2023-24, $7.7 million in FY 2024-25, and $6.9 million in FY 2025-26 and ongoing (Climate Accountability and Emissions Disclosure Fund) in staffing and contracting costs.
2) Additional costs of approximately $600,000 for ARB in contract funds starting in 2032 and every five years thereafter to conduct the evaluation of alternative GHG protocols, and if needed, adopt new regulations and modify third-party assurance provider training to conform to the new protocol. This bill requires each reporting entity subject to the bill's requirements to payARB an annual fee and requires ARB to set the fee at an amount sufficient to cover its full costs of administering and implementing this bill, including reimbursing any loans made from other funds to finance ARB's startup costs.
3) Unknown, but potentially significant costs (Legal Services Revolving Fund) to the Department of Justice (DOJ). The Natural Resources Law Section within DOJ's Public Rights Division anticipates the potential for increased litigation referrals from its client, ARB, for legal challenges arising from this bill. DOJ notes the increased costs associated with 9/7/23, 10:23 AM Senate Bill Third Reading Analysis
https://ctweb.capitoltrack.com/Bills/23Bills/sen/sb_0251-0300/sb_253_cfa_367656_asm_comm.html 4/4 this potential litigation are unquantifiable but potentially significant; however, DOJ will billARB for these costs, which ARB will reimburse fully.
4) To the extent ARB successfully seeks and recovers administrative penalties from a covered entity in violation of this bill, this bill could result in a potential increase in General Fund revenue of an unknown amount. This bill provides that administrative penalties imposed on a reporting entity shall not exceed $500,000 in a reporting year and that in imposing penalties, ARB shall consider relevant circumstances, such as the violator's past and present compliance with this bill and whether the violator took good faith measures to comply with this bill and when those measures were taken.
VOTES
SENATE FLOOR: 24-9-7
YES: Allen, Archuleta, Atkins, Becker, Blakespear, Bradford, Cortese, Durazo, Eggman, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Padilla, Portantino, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener NO: Alvarado-Gil, Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto, Wilk ABS, ABST OR NV: Ashby, Caballero, Dodd, Glazer, Newman, Roth, Rubio ASM NATURAL RESOURCES: 8-3-0
YES: Luz Rivas, Addis, Friedman, Muratsuchi, Pellerin, Ward, Wood, Zbur NO: Flora, Hoover, Mathis
ASM APPROPRIATIONS: 11-4-1
YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Wilson NO: Megan Dahle, Dixon, Mathis, Sanchez
ABS, ABST OR NV: Soria
UPDATED
VERSION: September 1, 2023
CONSULTANT: Paige Brokaw / NAT. RES. / (916) 319-2092 FN: 0001674 Attachment 2
AMENDED IN ASSEMBLY SEPTEMBER 1, 2023
AMENDED IN ASSEMBLY JULY 12, 2023
AMENDED IN ASSEMBLY JUNE 30, 2023
AMENDED IN SENATE MAY 18, 2023
SENATE BILL No. 253
Introduced by Senators Wiener, Gonzalez, and Stern
(Principal coauthors: Assembly Members Kalra and Muratsuchi) (Coauthors: Senators Min and Skinner)
(Coauthors: Assembly Members Boerner, Bryan, Friedman, Haney, Lee, Ting, and Ward) Ward, and Zbur)
January 30, 2023
An act to add Section 38532 to the Health and Safety Code, relating to greenhouse gases, and making an appropriation therefor. legislative counsel’s digest
SB 253, as amended, Wiener. Climate Corporate Data Accountability Act.
The California Global Warming Solutions Act of 2006 requires the State Air Resources Board to adopt regulations to require the reporting and verification of statewide greenhouse gas emissions and to monitor and enforce compliance with the act. The act requires the state board to make available, and update at least annually, on its internet website the emissions of greenhouse gases, criteria pollutants, and toxic air contaminants for each facility that reports to the state board, as provided.
This bill would require the state board, on or before January 1, 2025, to develop and adopt regulations requiring specified partnerships, corporations, limited liability companies, and other business entities with total annual revenues in excess of $1,000,000,000 and that do
95 business in California, defined as “reporting entities,” to publicly disclose to the emissions reporting organization, as defined, and verify, obtain an assurance engagement on, starting in 2026 on a date to be determined by the state board, and annually thereafter, their scope 1 and scope 2 greenhouse gas emissions, as defined, and, starting in 2027 and annually thereafter, their scope 3 greenhouse gas emissions, as defined, from the specified reporting entity’s prior fiscal year, as provided. The bill would require the state board to review during 2029, and update as necessary on or before January 1, 2030, these deadlines to evaluate trends in scope 3 emissions reporting and to consider changes to the deadlines, as provided. The bill would require reporting entities to disclose their greenhouse gas emissions in a manner that is easily understandable and accessible to residents of the state. The bill would require reporting entities to ensure that their public disclosures have been independently verified by a third-party auditor, a reporting entity to obtain an assurance engagement, performed by an independent third-party assurance provider, of the entity’s public disclosure as provided. The bill would require the state board, in developing these regulations, to consult with the Attorney General, other government stakeholders, investors, stakeholders representing consumer and environmental justice interests, and reporting entities that have demonstrated leadership in full-scope greenhouse gas emissions accounting and public disclosure and greenhouse gas emissions reductions. The bill would also require the state board to ensure that the verification assurance process minimizes the need for reporting entities to engage multiple auditors assurance providers and ensures sufficient auditor assurance provider capacity, as well as timely reporting implementation, as required. The bill would further require the state board to contract with an emissions reporting organization to develop a reporting program to receive and make publicly available the required disclosures. The bill would authorize the state board, starting in 2033 and every 5 years thereafter, to assess the global greenhouse gas accounting and reporting standards and to adopt an alternative standard if it determines that using the alternative standard would more effectively further the goals of the bill.
This bill would require the state board, on or before July 1, 2027, to contract with the University of California, the California State University, a national laboratory, or another equivalent academic institution to prepare a report on the public disclosures made by reporting entities to the emissions reporting organization. The bill would 95 SB 253 — 2 —
require, in preparing the report, consideration to be given to, at a minimum, greenhouse gas emissions from reporting entities in the context of state greenhouse gas emissions reduction and climate goals.
The bill would require the state board to provide the report to the emissions reporting organization to post on a digital platform that would be required to be created by the emissions reporting organization, and publicly accessible, to house the state board’s report and the reporting entities’ public disclosures. The bill would require the emissions reporting organization to provide the state board’s report to the relevant policy committees of the Legislature.
This bill would require reporting entities to pay an annual fee, not to exceed $1,000, for the reasonable regulatory costs of the state board for the administration and implementation of these provisions. a reporting entity, upon filing its disclosure, to pay to the state board an annual fee set by the state board, as provided. The bill would create the Climate Accountability and Emissions Disclosure Fund, require the proceeds of the fees to be deposited in the fund, and continuously appropriate the moneys in the fund to the state board for purposes of the bill. By creating a continuously appropriated fund, the bill would create an appropriation. The bill would require the state board to adopt regulations that authorize it to seek administrative penalties for violations of these provisions, as specified.
Vote: majority. Appropriation: yes. Fiscal committee: yes.
State-mandated local program: no.
The people of the State of California do enact as follows:
line 1 SECTION 1. The Legislature finds and declares all of the line 2 following:
line 3 (a) California has demonstrated its leadership in the battle line 4 against climate change and the climate actions of the state have line 5 inspired and contributed to bold actions in other states and across line 6 the globe.
line 7 (b) Californians are already facing devastating wildfires, sea line 8 level rise, drought, and other impacts associated with climate line 9 change that threaten the health and safety of Californians, line 10 undermines the sustainability of our communities, particularly line 11 those communities most affected by the negative effects of climate line 12 change, and the economic well-being of the state and its residents, line 13 including threatening many of the state’s largest industries. 95 — 3 — SB 253
line 1 (c) Climate change also poses a significant risk to companies’ line 2 long-term economic success and disrupts the value chains on which line 3 they rely. Managing these risks requires investments in line 4 decarbonization strategies that unlock emissions reductions and line 5 provide economic benefits for Californians and the state economy. line 6 (d) California has achieved record economic growth, is on track line 7 to be the fourth largest economy in the world, and is a highly line 8 desirable market for the globe’s most profitable companies. line 9 (e) California investors, consumers, and other stakeholders line 10 deserve transparency from companies regarding their greenhouse line 11 gas (GHG) emissions to inform their decisionmaking. line 12 (f) United States companies that have access to California’s line 13 tremendously valuable consumer market by virtue of exercising line 14 their corporate franchise in the state also share responsibility for line 15 disclosing their contributions to global GHG emissions. line 16 (g) Companies can increase the state’s climate risk through line 17 emissions activities that include, but are not limited to, company line 18 operations, supply chain activities, employee and consumer line 19 transportation, goods production and movement, construction, land line 20 use, and natural resource extraction.
line 21 (h) Accurate, verified, Accurate and comprehensive data that line 22 is subject to an assurance engagement performed by an line 23 independent third-party assurance provider is required to line 24 determine a company’s direct and indirect GHG emissions, also line 25 known as its carbon footprint, and to effectively identify the line 26 sources of the emissions and develop means to reduce the same. line 27 (i) The current approach for disclosure of climate emissions line 28 from public and private corporate enterprises relies largely on line 29 voluntary reporting of GHG inventories, goals, commitments, and line 30 agreements, and lacks the full transparency and consistency needed line 31 by residents and financial markets to fully understand these climate line 32 risks.
line 33 (j) The people, communities, and other stakeholders in line 34 California, facing the existential threat of climate change, have a line 35 right to know about the sources of carbon pollution, as measured line 36 by the comprehensive GHG emissions data of those companies line 37 benefiting from doing business in the state, in order to make line 38 informed decisions.
line 39 (k) The Greenhouse Gas Protocol—the Protocol is the globally line 40 recognized GHG emissions accounting and reporting standard 95 SB 253 — 4 —
line 1 developed and updated by the World Resources Institute and the line 2 World Business Council for Sustainable Development—provides line 3 Development and provides the framework for corporate GHG line 4 emissions accounting and reporting. The framework defines and line 5 categorizes emissions as scopes 1, 2, and 3 emissions. Many line 6 companies already partially or fully disclose their emissions data. line 7 (l) Mandating annual, full-scope GHG emissions data reporting line 8 to the emissions reporting organization for all United States line 9 companies with total annual revenues in excess of $1,000,000,000 line 10 that do business in California, as well as ensuring public access to line 11 the data in a manner that is easily understandable and accessible, line 12 will inform investors, empower consumers, and activate companies line 13 to improve risk management in order to move towards a net-zero line 14 carbon economy and is a critical next step that California must line 15 take to protect the state and its residents.
line 16 SEC. 2. Section 38532 is added to the Health and Safety Code, line 17 to read:
line 18 38532. (a) This section shall be known, and may be cited, as line 19 the Climate Corporate Data Accountability Act.
line 20 (b) For purposes of this section, the following terms have the line 21 following definitions:
line 22 (1) “Emissions reporting organization” means a nonprofit line 23 emissions reporting organization contracted by the state board line 24 pursuant to paragraph (2) of subdivision (c) that both:
line 25 (A) Currently operates a greenhouse gas emission reporting line 26 organization for organizations operating in the United States. line 27 (B) Has experience with greenhouse gas emissions disclosure line 28 by entities operating in California.
line 29 (2) “Reporting entity” means a partnership, corporation, limited line 30 liability company, or other business entity formed under the laws line 31 of this state, the laws of any other state of the United States or the line 32 District of Columbia, or under an act of the Congress of the United line 33 States with total annual revenues in excess of one billion dollars line 34 ($1,000,000,000) and that does business in California. Applicability line 35 shall be determined based on the reporting entity’s revenue for the line 36 prior fiscal year.
line 37 (3) “Scope 1 emissions” means all direct greenhouse gas line 38 emissions that stem from sources that a reporting entity owns or line 39 directly controls, regardless of location, including, but not limited line 40 to, fuel combustion activities.
95 — 5 — SB 253
line 1 (4) “Scope 2 emissions” means indirect greenhouse gas line 2 emissions from consumed electricity, steam, heating, or cooling line 3 purchased or acquired by a reporting entity, regardless of location. line 4 (5) “Scope 3 emissions” means indirect upstream and line 5 downstream greenhouse gas emissions, other than scope 2 line 6 emissions, from sources that the reporting entity does not own or line 7 directly control and may include, but are not limited to, purchased line 8 goods and services, business travel, employee commutes, and line 9 processing and use of sold products.
line 10 (c) (1) On or before January 1, 2025, the state board shall line 11 develop and adopt regulations to require a reporting entity to line 12 annually disclose to the emissions reporting organization, and line 13 verify, obtain an assurance engagement performed by an line 14 independent third-party assurance provider on all of the reporting line 15 entity’s scope 1 emissions, scope 2 emissions, and scope 3 line 16 emissions. The state board shall ensure that the regulations adopted line 17 pursuant to this subdivision require all of the following:
line 18 (A) (i) (I) That a reporting entity, starting in 2026 on or by a line 19 date to be determined by the state board, and annually thereafter line 20 on or by that date, publicly disclose to the emissions reporting line 21 organization all of the reporting entity’s scope 1 emissions and line 22 scope 2 emissions for the reporting entity’s prior fiscal year. line 23 (II) That a reporting entity, starting in 2027 and annually line 24 thereafter, publicly disclose its scope 3 emissions no later than 180 line 25 days after its scope 1 emissions and scope 2 emissions are publicly line 26 disclosed to the emissions reporting organization for the prior fiscal line 27 year.
line 28 (ii) A reporting entity shall shall, beginning in 2026, measure line 29 and report its emissions of greenhouse gases in conformance with line 30 the Greenhouse Gas Protocol standards and guidance, including line 31 the Greenhouse Gas Protocol Corporate Accounting and Reporting line 32 Standard and the Greenhouse Gas Protocol Corporate Value Chain line 33 (Scope 3) Accounting and Reporting Standard developed by the line 34 World Resources Institute and the World Business Council for line 35 Sustainable Development, including guidance for scope 3 emissions line 36 calculations that detail acceptable use of both primary and line 37 secondary data sources, including the use of industry average data, line 38 proxy data, and other generic data in its scope 3 emissions line 39 calculations.
95 SB 253 — 6 —
line 1 (iii) (I) Starting in 2033 and every five years thereafter, the line 2 state board may survey and assess currently available greenhouse line 3 gas accounting and reporting standards. At the conclusion of this line 4 assessment the state board may adopt a globally recognized line 5 alternative accounting and reporting standard if it determines its line 6 use would more effectively further the goals of this section. This line 7 review process shall include consultation with the stakeholders line 8 identified in paragraph (4).
line 9 (II) If the state board adopts an alternative accounting and line 10 reporting standard, the state board shall develop and adopt new line 11 regulations, pursuant to paragraph (1), to ensure full conformance line 12 with the new standard and reporting of scopes 1, 2, and 3 emissions line 13 and other requirements of this section.
line 14 (iii)
line 15 (iv) During 2029 the state board shall review, and on or before line 16 January 1, 2030, the state board shall update as necessary, the line 17 public disclosure deadlines established pursuant to clause (i) to line 18 evaluate trends in scope 3 emissions reporting and consider changes line 19 to the disclosure deadlines to ensure that scope 3 emissions data line 20 is disclosed to the emissions reporting organization as close in line 21 time as practicable to the deadline for reporting entities to disclose line 22 scope 1 emissions and scope 2 emissions data.
line 23 (iv)
line 24 (v) The reporting timelines shall consider industry stakeholder line 25 input and shall take into account the timelines by which reporting line 26 entities typically receive scope 1, scope 2, and scope 3 emissions line 27 data, as well as the capacity for independent verification to be line 28 performed by a third-party auditor. an independent assurance line 29 engagement to be performed by a third-party assurance provider. line 30 (B) That a reporting entity’s public disclosure is made in a line 31 manner that is easily understandable and accessible to residents, line 32 investors, and other stakeholders of the state. line 33 (B) That a reporting entity’s public disclosure maximizes access line 34 for consumers, investors, and other stakeholders to comprehensive line 35 and detailed greenhouse gas emissions data across scopes 1, 2, line 36 and 3 emissions, as defined by this section, and is made in a line 37 manner that is easily understandable and accessible. line 38 (C) That a reporting entity’s public disclosure includes the name line 39 of the reporting entity and any fictitious names, trade names, line 40 assumed names, and logos used by the reporting entity. 95 — 7 — SB 253
line 1 (D) (i) That the emissions reporting is structured in a way that line 2 minimizes duplication of effort and allows a reporting entity to line 3 submit to the emissions reporting organization reports prepared to line 4 meet other national and international reporting requirements, line 5 including any reports required by the federal government, as long line 6 as those reports satisfy all of the requirements of this section. line 7 (ii) Reporting entities that are required to report mandatory line 8 industrial emissions pursuant to regulations adopted pursuant to line 9 Section 38530 may provide that data with the disclosure required line 10 pursuant to this section.
line 11 (E) That a reporting entity’s disclosure takes into account line 12 acquisitions, divestments, mergers, and other structural changes line 13 that can affect the greenhouse gas emissions reporting, and is line 14 disclosed in a manner consistent with the Greenhouse Gas Protocol line 15 standards and guidance. guidance or an alternative standard, if line 16 one is adopted after 2033.
line 17 (F) (i) That a reporting entity’s public disclosure is line 18 independently verified by a third-party auditor. entity obtains an line 19 assurance engagement, performed by an independent third-party line 20 assurance provider, of their public disclosure. The reporting entity line 21 shall ensure that a copy of the complete, audited complete line 22 assurance provider’s report on the greenhouse gas emissions line 23 inventory, including the name of the third-party auditor, assurance line 24 provider, is provided to the emissions reporting organization as line 25 part of or in connection with the reporting entity’s public line 26 disclosure.
line 27 (ii) Scope The assurance engagement for scope 1 emissions and line 28 scope 2 emissions shall be audited performed at a limited assurance line 29 level beginning in 2026 and at a reasonable assurance level line 30 beginning in 2030.
line 31 (iii) During 2026, the state board shall review and evaluate line 32 trends in third-party verification assurance requirements for scope line 33 3 emissions. On or before January 1, 2027, the state board may line 34 establish an assurance requirement for third-party audits assurance line 35 engagements of scope 3 emissions. Scope The assurance line 36 engagement for scope 3 emissions shall be audited performed at line 37 a limited assurance level beginning in 2030.
line 38 (iv) A third-party auditor shall be an expert in the emission of line 39 greenhouse gases because of significant experience in measuring, line 40 analyzing, reporting, or attesting to the emission of greenhouse 95 SB 253 — 8 —
line 1 gases. A third-party auditor shall have assurance provider shall line 2 have significant experience in measuring, analyzing, reporting, line 3 or attesting to the emission of greenhouse gasses and sufficient line 4 competence and capabilities necessary to perform engagements line 5 in accordance with professional standards and applicable legal and line 6 regulatory requirements and to enable the auditor requirements. line 7 The assurance provider shall be able to issue reports that are line 8 appropriate under the circumstances and independent with respect line 9 to the reporting entity, and any of the reporting entity’s affiliates line 10 for which it is providing the verification report, during the line 11 verification and professional engagement period. assurance report. line 12 During 2029 the state board shall review, and review and, on or line 13 before January 1, 2030, the state board shall update as necessary, line 14 the qualifications for third-party auditors to evaluate assurance line 15 providers based on an evaluation of trends in education relating line 16 to the emission of greenhouse gases and consider updating line 17 guidance on third-party auditors. and the qualifications of line 18 third-party assurance providers.
line 19 (v) The state board shall ensure that the verification assurance line 20 process minimizes the need for reporting entities to engage multiple line 21 auditors assurance providers and ensures sufficient auditor line 22 assurance provider capacity, as well as timely reporting line 23 implementation as required under clause (i) of subparagraph (A). line 24 (G) (i) That a reporting entity, upon filing its disclosure, shall line 25 pay an annual fee that may not exceed the reasonable regulatory line 26 costs of to the state board for the administration and line 27 implementation of this section. The annual fee imposed on a line 28 reporting entity may not exceed one thousand dollars ($1,000). line 29 (ii) The state board shall set the fee established pursuant to line 30 clause (i) in an amount sufficient to cover the state board’s full line 31 costs of administrating and implementing this section. The total line 32 amount of fees collected shall not exceed the state board’s actual line 33 and reasonable costs to administer and implement this section. line 34 (ii)
line 35 (iii) The proceeds of the fees imposed pursuant to clause (i) line 36 shall be deposited in the Climate Accountability and Emissions line 37 Disclosure Fund, which is hereby created in the State Treasury. line 38 Notwithstanding Section 13340 of the Government Code, the line 39 money in the fund is continuously appropriated to the state board line 40 for the costs of administering and implementing this section. and 95 — 9 — SB 253
line 1 shall be expended by the state board for the state board’s activities line 2 pursuant to this section and to reimburse any outstanding loans line 3 made from other funds used to finance the initial costs of the state line 4 board’s activities pursuant to this section. Moneys in the fund shall line 5 not be expended for any purpose not enumerated in this section. line 6 (iv) The state board may adjust the fee in any year to reflect line 7 changes in the California Consumer Price Index during the prior line 8 year.
line 9 (2) The state board shall contract with an emissions reporting line 10 organization to develop a reporting program to receive and make line 11 publicly available disclosures required by this section pursuant to line 12 paragraph (1).
line 13 (3) The state board may adopt or update any other regulations line 14 that it deems necessary and appropriate to implement this line 15 subdivision. section.
line 16 (4) In developing the regulations required pursuant to this line 17 subdivision, the state board shall consult with all of the following:
line 18 (A) The Attorney General.
line 19 (B) Other government stakeholders, including, but not limited line 20 to, experts in climate science and corporate carbon emissions line 21 accounting. accounting and reporting.
line 22 (C) Investors.
line 23 (D) Stakeholders representing consumer and environmental line 24 justice interests.
line 25 (E) Reporting entities that have demonstrated leadership in line 26 full-scope greenhouse gas emissions accounting and public line 27 disclosure and greenhouse gas emissions reductions. line 28 (5) Nothing in this section requires This section does not require line 29 additional reporting of emissions of greenhouse gases beyond the line 30 reporting of scope 1 emissions, scope 2 emissions, and scope 3 line 31 emissions required pursuant to the Greenhouse Gas Protocol line 32 standards and guidance. guidance or an alternative standard, if line 33 one is adopted after 2033.
line 34 (d) (1) On or before July 1, 2027, the state board shall contract line 35 with the University of California, the California State University, line 36 a national laboratory, or another equivalent academic institution line 37 to prepare a report on the public disclosures made by reporting line 38 entities to the emissions reporting organization pursuant to line 39 subdivision (c) and the regulations adopted by the state board line 40 pursuant to that subdivision. In preparing the report, consideration 95 SB 253 — 10 —
line 1 shall be given to, at a minimum, greenhouse gas emissions from line 2 reporting entities in the context of state greenhouse gas emissions line 3 reduction and climate goals. The entity preparing the report shall line 4 not require reporting entities to report any information beyond line 5 what is required pursuant to subdivision (c) or the regulations line 6 adopted by the state board pursuant to that subdivision. line 7 (2) The state board shall submit the report required by this line 8 subdivision to the emissions reporting organization to be made line 9 publicly available on the digital platform required to be created line 10 by the emissions reporting organization pursuant to subdivision line 11 (e).
line 12 (e) (1) (A) The emissions reporting organization, on or before line 13 the date determined by the state board pursuant to clause (i) of line 14 subparagraph (A) of paragraph (1) of subdivision (c), shall create line 15 a digital platform, which shall be accessible to the public, that will line 16 feature the emissions data of reporting entities in conformance line 17 with the regulations adopted by the state board pursuant to line 18 subdivision (c) and the report prepared for the state board pursuant line 19 to subdivision (d). The emissions reporting organization shall make line 20 the reporting entities’ disclosures and the state board’s report line 21 available on the digital platform within 30 days of receipt. line 22 (B) The digital platform shall be capable of featuring individual line 23 reporting entity disclosures, and shall allow consumers consumers, line 24 investors, and other stakeholders to view reported data elements line 25 aggregated in a variety of ways, including multiyear data, in a line 26 manner that is easily understandable and accessible to residents line 27 of the state. All data sets and customized views shall be available line 28 in electronic format for access and use by the public. line 29 (2) The emissions reporting organization shall submit, within line 30 30 days of receipt, the report prepared for the state board pursuant line 31 to subdivision (d) to the relevant policy committees of the line 32 Legislature.
line 33 (f) (1) Section 38580 does not apply to a violation of this line 34 section.
line 35 (2) (A) The state board shall adopt regulations that authorize line 36 it to seek administrative penalties for nonfiling, late filing, or other line 37 failure to meet the requirements of this section. The administrative line 38 penalties authorized by this section shall be imposed and recovered line 39 by the state board in administrative hearings conducted pursuant line 40 to Article 3 (commencing with Section 60065.1) and Article 4 95 — 11 — SB 253
line 1 (commencing with Section 60075.1) of Subchapter 1.25 of Chapter line 2 1 of Division 3 of Title 17 of the California Code of Regulations. line 3 The administrative penalties imposed on a reporting entity shall line 4 not exceed five hundred thousand dollars ($500,000) in a reporting line 5 year. In imposing penalties for a violation of this section, the state line 6 board shall consider all relevant circumstances, including both of line 7 the following:
line 8 (i) The violator’s past and present compliance with this section. line 9 (ii) Whether the violator took good faith measures to comply line 10 with this section and when those measures were taken. line 11 (B) A reporting entity shall not be subject to an administrative line 12 penalty under this section for any misstatements with regard to line 13 scope 3 emissions disclosures made with a reasonable basis and line 14 disclosed in good faith.
line 15 (g) This section shall apply applies to the University of line 16 California only to the extent that the Regents of the University of line 17 California, by resolution, make any of these provisions applicable line 18 to the university.
line 19 (h) The provisions of this section are severable. If any provision line 20 of this section or its application is held invalid, that invalidity shall line 21 not affect other provisions or applications that can be given effect line 22 without the invalid provision or application.
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