In California, the Climate Corporate Accountability Act (CCAA), also known as SB 260, is making its way through the state legislature, as it passed the state Senate by a margin of 23-7. The bill is currently being considered by the California Assembly, whereafter it would require the Governor’s approval to become state law. The CCAA would be the first law in the country requiring companies to disclose greenhouse gas emission levels and, as such, the California greenhouse gas law has significant implications on corporate environmental stewardship efforts. Companies impacted by the CCAA must prepare now for the possibility that the California greenhouse gas law is passed, with the understanding that the mandatory disclosures could someday shape liability risks for the companies.
California Greenhouse Gas Law – CCAA
The CCAA would require any company doing business in California (whether domiciled in the state or not) with over $1 billion in annual revenue to disclose to the Secretary of State three distinct categories of greenhouse gas emissions from corporate practices:
- Scope 1 Emissions: greenhouse gas emissions from facilities or sources that the company owns or controls;
- Scope 2 Emissions: greenhouse gas emissions from indirect sources, including electricity purchased and used by the company; and
- Indirect greenhouse gas emissions from activities linked to the company but not owned or controlled by the company, including supply chain activities, business travel, employee commuting, waste and water usage, and procurement.
Companies that are required to make greenhouse gas emissions disclosures under the CCAA would be required to use a third-arty auditor approved by the California Air Resources Board (CARB) to perform the necessary carbon emissions levels checks. CARB would then compile all reports submitted annually to prepare state-wide greenhouse gas emissions reports.
Impact On Businesses
If passed into law, the CCAA will certainly accelerate many company’s efforts to reduce greenhouse gas emissions throughout the course of their entire supply chain. Businesses following that strategy will be in the best position possible to reduce future legal liabilities, as the number of climate-related or greenhouse-gas related lawsuits continue to grow in number. Failing to see the CCAA reporting requirement as a beneficial business tool will cause some businesses to fall further behind others in their efforts to curb carbon emissions, making them easier targets for future lawsuits alleging harms due to climate change.
CMBG3 Law LLC has represented corporate clients in environmental and social related issues for years. We regularly consult with private equity, banking, and investment world firms to identify future risk potentials from portfolios under consideration, and assist issuers and investment world firms alike with ESG related issues. For more information about our ESG and risk assessment consulting services, please contact John Gardella (617-279-8225).