California lawmakers have passed new legislation mandating that major corporations, including oil and gas firms and retail giants, disclose their direct and indirect greenhouse gas emissions, as reported by AP News on September 12. The law applies to companies operating in California with annual revenues exceeding USD1bn. Starting in 2026, these companies must report their Scope 1 emissions (direct emissions) and Scope 2 emissions (emissions related to electricity use). Reporting obligations for Scope 3 emissions (indirect emissions associated with supply chains, business travel, employee commuting, procurement, waste, and water usage) will commence in 2027. More than 5,300 companies will be impacted by this legislation, which aims to improve transparency and encourage efforts to reduce emissions.
This new law goes beyond the climate-related disclosure rules currently being developed by the U.S. Securities and Exchange Commission (SEC). The SEC’s rules would apply primarily to publicly traded companies and entail less extensive reporting requirements for Scope 3 emissions. Notably, the climate bill passed in California has garnered support from major corporations, including Apple [APPL:US], Microsoft [MSFT:US], and IKEA. In addition, another bill under discussion would require companies operating in California with annual revenues exceeding USD500m to report on climate-related financial risks, such as whether they have budgeted for increased compliance and insurance costs. These climate-related legislative measures underscore California’s commitment to maintaining its leadership role in the fight against climate change.