With the Biden administration now reportedly delaying federal rules forcing businesses to reveal their carbon emissions, industry groups are flocking to another forum to fight the key climate transparency measure: Sacramento, where state legislators are preparing to vote on a far-reaching measure to combat corporate greenwashing.
The California bill would require companies to disclose how much they contribute to climate change each year — including not only their direct emissions, which many companies now report annually, but also the largely hidden indirect emissions involved in the production and consumption of their goods. The proposal covers all large companies doing business in the state, and since California’s economy is on the brink of becoming the fourth-largest in the world, it would effectively become national policy.
The bill has drawn predictable opposition from oil and gas interests, but they’re not the only ones. Private equity and restaurant lobbying groups are also fighting the plan, as are major corporations like Meta Platforms, Wells Fargo, and beloved California burger chain In-N-Out Burger — all of which could end up looking a lot less sustainable than they currently claim if they’re forced to fully account for their contributions to climate change. Food systems, for example, likely account for more than a third of global emissions, according to one recent study.
After passing a key committee, the bill heads to the full State Senate this week. But in the brewing showdown, Governor Gavin Newsom, already under fire for slashing state spending on climate initiatives, has been notably absent.
California’s national leadership on climate stands in stark contrast to recent red-state laws such as Montana’s prohibition on state agencies factoring carbon emissions into the analysis of large projects. The blue state’s climate disclosure bill, which supporters say will make it easier to hold corporations accountable for their emissions, goes even further than proposed federal rules.
An earlier version of the bill passed the State Senate last year, but failed narrowly on the Assembly floor following a fierce industry opposition campaign that resulted in three Democrats changing their votes at the last minute, according to Melissa Romero, senior legislative manager for California Environmental Voters, a cosponsor of the plan.
So far this year, industry groups have reported spending nearly $2 million lobbying the state on legislation including the climate disclosure bill.
“These are the same entities trying to water down federal [climate disclosure] rules,” Romero said. “It’s not actually about the merits of the policy, it’s about a national campaign of climate denial.”
The Climate Tower of Babel
Advocates say that requiring corporations to disclose their carbon emissions is a necessary step toward reducing them. While most current reporting relies on estimates and industry averages, a cottage industry of “carbon accounting” technology has made it increasingly feasible for large companies to accurately measure their emissions.
Highly technical in nature, the issue has nonetheless become a political flash point in the GOP’s war on so-called woke investing. A rule proposed by the Securities and Exchange Commission (SEC) last March, which would require companies to include climate-related disclosures in their annual reporting, attracted a record-setting fourteen thousand comments from a wide range of both opponents and supporters.
The final SEC rule is reportedly on hold at least until the fall. In March, Massachusetts senator Elizabeth Warren and forty-six other congressional Democrats sent a letter to the agency urging it not to water down the proposal in response to corporate lobbying.
Where the SEC’s proposed rules would cover only publicly traded companies — and a separate set would apply to federal government contractors — all companies with annual revenues of at least $1 billion would have to comply with California’s more expansive requirements.
The state bill is also more ambitious when it comes to the types of emissions reported. Introduced in January by State Senator Scott Wiener, a Democrat, the measure would help expose greenwashing by requiring companies to disclose all emissions across their value chain, including those from suppliers and consumers.
Those “Scope 3” emissions typically account for the bulk of a company’s climate impact, eclipsing “Scope 1” and “Scope 2,” which measure a company’s direct emissions and those resulting from its energy purchases, respectively.
When ExxonMobil touts its net-zero climate target, for example, the oil company is referring only to the emissions involved in producing half a million barrels of oil each day — not the effects of customers burning it.
Most corporate climate pledges continue to omit Scope 3 emissions. And while 90 percent of Fortune 500 companies include some information about climate risks in their annual reporting, that reporting varies widely in quality and methodology, according to Steven Rothstein, managing director of the sustainable investment nonprofit Ceres.
That results in what he calls a “climate Tower of Babel,” making it difficult to decipher whether climate progress is actually being made.
“We need clear and consistent information for investors, policymakers, and the public,” he said.
Expanding the Scope
The SEC’s proposed rules require disclosure of Scope 3 emissions deemed “material,” a legal term referring to information that could impact investor decision-making.
Climate groups have said that leaves too much discretion in the hands of corporate management, which has an incentive not to disclose risk. Wiener’s bill would go a step farther, making all Scope 3 disclosure mandatory in the coming years.
It’s not just oil and gas companies opposed to more rigorous emissions disclosures. State records show that major industries including food and beverage, transportation, and finance are also lining up to fight the proposed measure.
Scope 3 is the major source of emissions for banks, which often downplay the climate impact of projects they finance. Wells Fargo became the last major bank to set a climate goal in 2021 but remains a top lender to oil and gas projects. So far this year, the bank has reported spending more than $50,000 lobbying on California legislation including the climate disclosure bill.
For fast-food restaurants like In-N-Out, more than 90 percent of emissions come from Scope 3, which includes carbon-intensive meat and dairy production. In-N-Out reported spending $90,000 lobbying the California legislature on two bills, including climate disclosure, so far this year. During the last legislative session, the company reported spending more than $180,000 lobbying on bills including Wiener’s.
Neither Wells Fargo nor In-N-Out responded to our request for comment by publication time.
“We Could Have Passed It Right Then”
But climate activists in the state say that, after touting the state’s climate commitments, Newsom has since walked back on the action needed to deliver.
Newsom has never taken a position on the disclosure bill, one of the only pieces of last year’s climate package to fail in the legislature — despite the fact that climate advocates have repeatedly flagged it as a priority for his office, according to California Environmental Voters’ Romero.
A spokesperson for Newsom told us that the governor would evaluate the bill on its merits, should it reach his desk.
After the bill’s previous version, also sponsored by Wiener, passed easily through the State Senate last January, the California Chamber of Commerce, a business lobbying group, led an industry campaign casting the measure as costly and “premature” in light of the SEC’s forthcoming regulations — which the US Chamber of Commerce, its federal counterpart, is also fighting.
When it came before the State Assembly last August, the bill was just one vote shy of the forty-one needed, according to Romero.
Had Democratic assembly speaker Anthony Rendon, who voted in favor of the measure, stepped in to press other members to do so, “we could have passed it right then,” she said.
Instead, as it became clear that the bill would fail, three Democrats — Representatives Joaquin Arambula, David Alvarez, and Jacqui Irwin — changed their “yes” votes to “no record,” according to Romero. Arambula had voted for the bill in committee earlier that month.
“When legislators see a bill isn’t going to pass, they’ll go ahead and just remove their vote so that they don’t have to answer tough questions from the oil lobby,” said Romero.
The state’s powerful fossil fuel industry spent more than $34 million lobbying and delivered nearly $3 million to politicians in the state last year, including $5,900 to Arambula and nearly $25,000 to Alvarez.
None of the legislators responded to our request for comment.
This year, Romero is optimistic that a more robust coalition will see the legislation over the finish line. A handful of individual businesses, including the clothing company Patagonia, have signed on to support the bill, and last year saw a new group of first-time candidates run successfully for the state legislature on a climate platform.
“This is going to have a national impact,” Romero said. “We need to be requiring transparency from every large company, because they all have an outsized impact on climate.”