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California SB 253: Five Key Takeaways from Our Webinar

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A Conversation with CA Senator Scott Weiner

In September, California’s legislature passed SB 253, the Climate Corporate Data Accountability Act, which will require thousands of large businesses to disclose their carbon footprints. 

The bill is a further sign of the times. Its passage cements a global shift that’s been unfolding the past few years — from an era of voluntary climate disclosure to regulated reporting. 

Last week, Persefoni CEO Kentaro Kawamori and Deputy General Counsel and Chief Sustainability Officer Kristina Wyatt sat down with the bill’s author, California Senator Scott Wiener (D-San Francisco), to discuss what businesses need to know about the new law. 

Here are five takeaways from their conversation: 

1. SB 253 will have global repercussions

SB 253 is poised to have a profound global impact. The legislation applies directly to thousands of large companies that do business in California, and it sets a groundbreaking standard for climate disclosure. Most importantly, the California law is consistent with the disclosure proposals, rules, and standards worldwide, all adhering to the GHG Protocol's framework. This landmark initiative is expected to influence international regulations and reporting practices for years to come. 

California is a heavyweight in the global economy, with the world’s fifth largest economy. The state has a history of using its market muscle to outpace the U.S. federal government, particularly with respect to environmental legislation. Senator Wiener pointed out that California has already implemented data privacy and consumer protection measures that are more ambitious than federal proposals — and when the state passed bold tailpipe regulations, it impacted automakers around the world. 

This is one reason SB 253 drew fire from national organizations like the US Petroleum Institute, Wiener noted. After deciding to sponsor the legislation, he quickly realized how far it would reach. “This is not simply a good solid bill that we should do, but a bill that will have national, and frankly, global implications,” he said.

2. As many as 5,400 businesses could be affected

SB 253 will apply to both US public and private companies with revenues exceeding $1B USD that do business in California. According to Kawamori, one of the biggest questions Persefoni has fielded since the bill passed in the Assembly is what, exactly, “doing business in California” means. 

The answer to that question is not entirely settled, Wyatt explained. The California Air Resources Board (CARB) will be charged with implementing regulations to carry out the law. It will be up to CARB to establish the exact definition. But it could align with criteria from California’s Franchise Tax Board

These criteria include:

While the tax board’s definition provides a glimpse into possible parameters, the current bill doesn’t explicitly state that this definition will be used. “We’re really going to have to wait and see what CARB says,” Wyatt remarked. 

3. Corporations will be able to use secondary data for scope 3 emissions 

To help address the complexity of calculating scope 3 emissions, the bill will allow businesses to use secondary data. “We were very careful with scope 3, to make sure it’s flexible and implementable,” Senator Wiener explained. 

One of the central narratives advanced by the bill’s opponents was that businesses would have to track down data from every single supplier — an overwhelming endeavor. “There was a perception painted by the opposition that this is an impossible task,” Kawamori observed. In reality, organizations will be able to rely on industry averages when supplier-specific data is insufficient, as a vast majority are already doing. This means that reporting scope 3 emissions will become considerably more straightforward.  

Indeed, a significant majority of corporate leaders recently surveyed by PwC LLC shared that they are already prepared for pending climate disclosure rules, with more than half saying they see climate change as a risk to their business. 

4. California’s bill could build momentum for SEC’s climate rule 

Many are wondering how California’s law will affect the proposed climate disclosure rule from the U.S. Securities and Exchange Commission (SEC). The SEC is an independent  entity with its own mandate, Wyatt noted, and there isn’t necessarily a direct link between the two policies. However, she emphasized that is would be unwise to ignore that we’re currently operating in a different world than when the SEC climate rule was first proposed — and California has played a significant role in shaping that change. 

“The die has been cast. It’s quite clear that companies will have to report their greenhouse gas emissions,” she explained. “It would be hard for the SEC not to be criticized as a laggard if it doesn’t follow suit.” 

The passage of SB 253 creates a new baseline and could, therefore, make the SEC climate rule more defensible in court. Businesses should also keep in mind that the SEC has the authority to decide whether to stay the rule pending litigation. That’s not likely to happen, according to Wyatt. “My guess is the SEC won’t stay the rule. Frankly, companies are going to be reporting in California, in Europe, and the rest of the world.” 

For a CFO responsible for reporting on a 10K, choosing to wait and see if the rule is overturned rather than preparing in advance is an unwarranted gamble, she noted. "I don’t know a single CFO on the planet who would take that risk."  

5. Carbon data will need to be treated like financial data 

In this new regulatory landscape, organizations must treat their emissions data, calculations, and results with the utmost diligence. Global reporting standards are converging and creating consistency in different jurisdictions — the bar is now higher than ever and will only continue to rise. 

For instance, SB 253, CSRD, and the SEC climate rule (per the proposal) would all require some level of third-party assurance over emissions reporting. Companies must ensure their data is traceable, transparent, and consistent. Many organizations will also incorporate controls into their processes to ensure the continued reliability of data, reduce the risk of assurance findings, and avoid misstating results to regulators or vendors. 

Carbon accounting software will be essential for meeting these new requirements. When Persefoni set out to design its platform, Kawamori explained, it was always with the anticipation that climate disclosure regulations were coming. As a result, the team built the platform to meet the highest bar for rigor, internal accounting controls, and transparency. 

SB 253 signals another milestone for climate disclosure, and organizations shouldn’t wait to prepare. Compiling investor-grade carbon data requires time and resources, especially when reporting across multiple jurisdictions. Companies that start now will gain an advantage, and robust software like Persefoni can simplify this complexity for you. 

Get ready for California Climate Disclosure.

Learn how Persefoni can help you build auditable, transparent, and accurate climate disclosures.

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