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A push for corporate climate disclosures in California could influence rest of U.S.

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The skyline of downtown Los Angeles is seen behind highways filled with dozens of moving vehicles. Some greenery is seen and the skyline of apartments and office buildings is set against a partly cloudy sky.

If Senate Bill 253 goes into effect, roughly 5,400 companies in California would have to disclose greenhouse gas emissions generated by themselves, their suppliers, suppliers’ suppliers and consumers. Above, downtown Los Angeles. Mario Tama/Getty Images

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In California, a group of Democratic lawmakers has proposed a law that would require companies to disclose their greenhouse gas emissions using one standard.

At the federal level, a similar idea has been floated by the Securities and Exchange Commission, but it faces steep opposition.

With California poised to become the fourth-largest economy in the world, supporters of the proposal law say the state’s status as an economic heavyweight could help push climate disclosure rules into the mainstream. It would also expose what one lawmaker calls greenwashing.

Oil companies’ efforts to identify themselves with environmental solutions “make me sick to my stomach,” state Sen. Scott Wiener, who represents San Francisco, told Marketplace in an interview. “The oil companies are literally strangling the world with the fossil fuels that they’re producing, and for them to market themselves as green is disgusting.”

Senate Bill 253 would require any corporation with $1 billion or more in annual revenue doing business in California to disclose carbon emissions every year. Around 5,400 companies would have to comply.

“And then the public, investors and everyone else will know who is actually walking the walk,” Wiener said.

The bill would require reporting not just on a company’s direct emissions, but those of their suppliers, their suppliers’ suppliers and consumers — a category known as Scope 3.

Scope 3 emissions can make up the bulk of a business’s carbon footprint, according to Steven Rothstein of the nonprofit Ceres. While 90% of the largest corporations already make climate risk disclosures, he said they’re far from standardized. 

“One may be measuring carbon; one may be measuring methane. They have different reporting systems. So it is what I refer to as a climate Tower of Babel,” Rothstein said.

California’s bill goes further than the climate disclosure rule floated by the Securities and Exchange Commission last year. It would apply to private companies on top of the public ones the SEC regulates.

The agency is reportedly looking to water down its proposal after receiving complaints that compliance would be onerous and expensive.

Should the SEC move forward with implementing its own climate rule, there will probably be plenty of lawsuits, said Public Citizen’s Clara Vondrich.

“So if that happens, the California rule can be a crucial backstop,” Vondrich said. “And because it’s the fourth-largest economy in the world, it will cover just as many companies as the SEC would.”

California is no stranger to leveraging its immense market power. Stanford professor Anat Admati pointed to the state’s decades-old tailpipe emissions rules, which are stricter than federal standards — and prompted the automotive industry to capitulate. 

“That made a huge difference because manufacturing cars to sell in California with certain standards, that became the standard,” Admati said. “You can’t just produce cars for California.”

But Admati said she’s not convinced that mandating emissions disclosures will have the same coercive effect.

“There is a notion that maybe it’s name and shame, or people won’t invest in you — or will maybe divest — but you have other people who don’t care about it and they buy the shares cheaper,” Admati said. “So it just changes hands. It doesn’t really change what you do.”

Even in a state that’s as solidly blue as California, the proposal isn’t guaranteed to pass. A similar bill failed last year after a slew of industry groups lobbied against it.

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