Many of the world’s largest public and private companies will soon be required to track and report nearly all greenhouse gas emissions from doing business in California, including emissions from supply chains, business travel, employee commuting and the way customers use their products . product.
That means oil and gas companies like Chevron may have to consider emissions from the vehicles that use their gasoline, and Apple must consider the materials used in its iPhones.
it’s a huge leap current federation and National reporting requirements, which only requires reporting of certain emissions from a company’s direct operations. It will have a global impact.
California Governor Gavin Newsom Signed two new rules Becomes law on October 7, 2023.According to the new Climate Corporate Data Accountability ActU.S. companies with annual revenue of $1 billion or more must report their direct and indirect income emission of greenhouse gases Starting in 2026 and 2027.California Chamber of Commerce object to this provision, believing that this would increase the company’s costs.But there are more than a dozen large companies Agree to the rulesincluding Microsoft, appleSalesforce and Patagonia.
The second law, Climate Related Financial Risks Actrequiring companies with revenues of $500 million or more to report their financial risks related to climate change and their risk mitigation plans.
as a Professor of Economics and Public Policy, I study corporate environmental behavior and public policy, including whether such disclosure laws help reduce emissions. I believe California’s new rules represent an important step toward mainstreaming corporate climate disclosure and potentially meaningful corporate climate action.
Many large companies are already reporting
Most of the companies covered by California’s climate disclosure rules are multinational corporations. These include technology companies such as Apple, Google and Microsoft; large retailers such as Walmart and Costco; and oil and gas companies such as Exxon Mobil and Chevron.
Many of these large companies have been preparing for mandatory disclosure rules for years.
Nearly two-thirds of S&P 500 companies voluntarily go public Report to CDP, formerly known as the Carbon Disclosure Project. CDP is a not-for-profit organization that conducts investigations on behalf of institutional investors into companies’ carbon management and carbon reduction plans.
Many of them also face reporting requirements elsewhere, including in European Unionthis U.K., New Zealand, Singapore and cities like Hongkong.
In addition, some of the same U.S. companies, notably Banks and Asset Management Companies Businesses that operate or sell products in Europe have begun to comply with EU regulations Sustainable Financial Disclosure Regulations. These regulations require companies to report on how they incorporate sustainability risks into investment decisions.
While California is not the first place to mandate climate disclosure, it is fifth largest economy in the world. As a result, the state’s new law will have significant ramifications around the world. Company subsidiaries that previously did not have to report emissions will now be subject to disclosure requirements. California is actually using its considerable market power to establish climate disclosure as standard practice in the United States and beyond.
California has also become Test Bench The future of federal policy in the United States. The U.S. government is considering broader emissions reporting requirements.But California’s new rules go further than the SEC’s Proposed corporate climate disclosure rules or President Biden’s Proposed Federal Contractor Disclosure Rule.
The most controversial part of the new disclosure rules concerns scope 3 emissions. These are emissions produced by the use of its products by a company’s suppliers and its consumers, and they are notoriously difficult to track accurately.
Guidance on California’s new emissions reporting law California Air Resources Boardwhich will formulate regulations and manage them, leave some leeway In Scope 3 reporting, as long as the report is made on a reasonable basis and disclosed in good faith. It’s also important to note that disclosure laws currently do not require companies to reduce these emissions, only to report them. But tracking Scope 3 emissions does highlight where companies can pressure their suppliers to make changes.
What purpose can information disclosure achieve?
The plethora of climate disclosure requests around the world shows that policymakers and investors around the world view climate disclosure as a push to protect the environment. The big question is: Do disclosure rules actually reduce emissions?
my research Research shows that voluntary carbon disclosure systems like CDP that focus on reporting corporate sustainability outputs (such as setting science-based emissions targets) tend to be less effective than those that focus on outcomes (such as a company’s actual carbon emissions).
For example, a company can receive an A or B grade from CDP and still Increase the carbon footprint of the entire entityespecially when it does not face regulatory pressure.
In contrast, a recent study of the UK’s 2013 disclosure rules for listed companies incorporated in the UK found that companies Operational emissions reduced by approximately 8% There was no significant change in profitability compared to the control group.When companies report their emissions, they can gain important knowledge They have operational and supply chain inefficiencies that were not apparent before.
Ultimately, well-designed disclosure programs, whether voluntary or mandatory, need to focus on consistency, comparability, and accountability. These characteristics enable companies to demonstrate that their climate commitments and actions are real and not just a front for greenwashing.
Xue Lili is an associate professor of economics and public policy, Arizona State University.
This article is reproduced from dialogue Licensed under Creative Commons.read Source article.
Svlook
