Many big U.S. companies have been fighting in Washington to block rules requiring them to disclose their greenhouse-gas emissions. They picked the wrong fight.
California and the European Union are both poised to approve rules that require companies that do business there to disclose their emissions. The rules would apply to private as well as public companies and require businesses to calculate and disclose emissions from their suppliers and customers, which goes beyond what was expected out of Washington.
The size of the two economies—if California was a country it would have the world’s sixth largest economy and the EU as a bloc ranks third—means that few large companies can duck their rules.
“In one shape or another, these disclosure requirements are coming,” said Sara Mahaffy, ESG strategist at RBC Capital Markets LLC.
The rules will be among the biggest changes in corporate disclosures in decades. They add climate information to the financial data that companies need to produce, making clear how businesses stack up against one another and whether they are reducing emissions in line with their commitments.
Businesses and Republicans have pushed back against an effort by the Securities and Exchange Commission to require disclosures of emissions and climate risks for public companies. It isn’t clear whether the SEC will require companies to report emissions from their suppliers and customers.
California Gov. Gavin Newsom has said he plans to sign a bill with his state’s rules into law in coming days. The rules in Europe are currently under review by the European Parliament and the national governments. They are expected to be approved in the coming months.
California also passed a bill that would require companies to disclose climate-related risks. The rules will take effect over the next several years. The California rules could be challenged in court or by a referendum that opponents could put before voters, a move that gig work employers and fast-food companies have tried in recent years.
Business groups fought against California’s emissions disclosure bill before it passed the legislature last week, though some large corporations such as Apple and Salesforce said they support it. It would apply to any business, public or private, that does business in the state and has more than $1 billion in revenue.
Newsom, a Democrat, said at a Climate Week event Sunday he would sign both bills, though he may request some changes when the legislature reconvenes in January. Democratic State Sen. Scott Wiener, the bill’s author, said it isn’t clear what specific changes Newsom is seeking but that it is unlikely the legislature would agree to remove Scope 3 disclosures from the requirements.
