California lawmakers are weighing a bill that would reach well beyond the state’s borders by forcing large companies in the state to detail their greenhouse gas emissions — even those of their suppliers.
The bill, which cleared the state Senate on May 30, would require companies that operate in California and generate more than $1 billion a year to report greenhouse gas emissions across their supply chains. While a lot of companies measure and report at least some of their emissions without any legal requirements, many of them don’t account for all the emissions tied to their products. And they don’t all measure and report emissions in the same way. The Climate Corporate Data Accountability Act seeks to change that by making corporations — from giant banks like Wells Fargo to private, family-owned companies like In-N-Out Burger — follow the same protocol and account for all the emissions linked to their business.
“I think mandatory and standardized corporate climate disclosure is critically important — and even more important in an age of greenwashing,” said Kathy Mulvey, a climate accountability advocate at the Union of Concerned Scientists, referring to the idea that many companies overstate their environmental accomplishments.
To get through the state Assembly, the bill has to overcome ample opposition from industry lobbyists, who successfully stymied a similar proposal last year. The thought of a sweeping climate disclosure mandate has rankled the oil and gas industry, the California Chamber of Commerce, the California Cattlemen’s Association, other agricultural groups, and reportedly the state’s most popular fast-food business, In-N-Out. The burger conglomerate has spent $90,000 lobbying this session on the disclosure bill, among other pieces of legislation. (In-N-Out did not respond to multiple requests for comment.)
The proposed mandate is the latest example of an ambitious climate policy that’s been tied up at the federal level but taken up by California lawmakers. The U.S. Securities and Exchange Commission, the federal agency tasked with regulating markets and protecting investors, is considering a similar but less stringent rule requiring only public companies to report their emissions. As the draft SEC rule runs into industry headwinds and provokes legal questions that could prompt officials to whittle it down, California continues to serve as something of a climate-policy test kitchen for the rest of the country. And since many of the country’s biggest companies do business in the state, which boasts the fifth-largest economy in the world, a corporate disclosure mandate there would reach well beyond the state’s borders.
“States have a big responsibility to lead on climate because we’re not going to be able to get much done at the federal level given the politics around climate,” said Melissa Romero, the senior legislative affairs manager at California Environmental Voters. “States have to step up here. That’s literally the role California has played, and we have to play it once again.”
Climate advocates and policy analysts have long been saying that one of the first steps toward lowering greenhouse gas emissions is simply accounting for them. “You can’t manage a problem if you can’t first measure a problem,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, a nonprofit that advocates for market-based climate solutions (Both Ceres and California Environmental Voters have been working closely with legislators on the bill.)
But even as more investors see climate change as a financial risk and more companies, from McDonald’s to Mercedes-Benz, pledge climate action, there’s no shortage of empty promises. “There’s no one system” for accounting for emissions, Rothstein said. “If you’re a customer, or an investor, or a regulator, and you want to compare [companies’ disclosures], it’s very hard to do that.”
Supporters of the California bill say it would expose greenwashing not only by mandating corporate transparency but by implementing a standardized system. In-N-Out, McDonald’s, and Burger King, for example, would have to measure and report their emissions using the same protocol. The bill also would force companies to take into account the greenhouse gasses emitted up and down the supply chain — known as “Scope 3” emissions — not just from their own operations or energy use.
Globally, supply-chains make up, on average, 75 percent of a business’ emissions, but can top 90 percent in some industries, like finance and food. Raising cattle for beef puts a lot more heat-trapping gasses in the atmosphere than turning the lights on at a restaurant. One-third of global emissions are linked to food, and agriculture alone accounts for 10 percent of total U.S. emissions. But only about half of the world’s top 100 food and beverage companies measure, disclose, and set goals to reduce Scope 3 emissions.
Both in California and at the federal level, it’s the proposed requirement to disclose those kinds of emissions — from the cows, not just the kitchen — that has spawned the most resistance from industry groups. In a March 8 letter to legislators, the California Chamber of Commerce — leading a coalition of more than 50 groups — said the mandate would “necessarily require that large businesses stop doing business with small and medium businesses that will struggle to accurately measure their greenhouse gas emissions let alone meet ambitious carbon emission requirements, leaving these companies without the contracts that enable them to grow and employ more workers.” The American Farm Bureau Federation made a similar argument against the SEC rule when it was proposed last year, saying the rule would prove a major burden for farmers and ranchers who aren’t equipped to monitor and report climate pollution, like how much methane their cows burp.
Romero objected to those claims, noting that the Climate Corporate Data Accountability Act would allow companies to use industry averages in their calculations, rather than forcing suppliers to cough up primary data. She also noted that some companies — such as Patagonia, Ikea, and Sierra Nevada, the California-based brewery — have expressed support for the disclosure mandate as a way to help lower corporate emissions and hold companies accountable.
Although the bill narrowly failed in the Assembly last year, Romero said she’s more optimistic about its chances this session since there are several new climate-minded Assembly members. Governor Gavin Newsom, however, hasn’t taken a public position on it yet.