In the past few years, the fight against climate change has gained momentum. Policymakers have been pushing for more transparency in corporate greenhouse gas (GHG) emissions. Two such initiatives are NY State Senate Bill S897 and California State Senate Bill 253. In parallel, the Securities and Exchange Commission (SEC) has proposed new rules for GHG disclosures.
NY State Senate Bill S897
Introduced in 2023, NY State Senate Bill S897 requires certain corporations, limited liability companies, and partnerships, defined as “reporting entities,” to disclose their GHG emissions. The bill focuses on the “Scope 1, 2, and 3” emissions, which include emissions from direct operations, energy purchases, and the entire value chain, respectively.
The reporting entities’ public disclosure must be independently verified by the emissions registry or a third-party auditor approved by the Department with expertise in GHG emissions accounting. The complete, audited GHG emissions inventory, including the name of the approved third-party auditor, must be provided to the emissions registry for public disclosure.
The bill also states that the Department will establish auditor qualifications and a process for the approval of auditors. Furthermore, the Department will create an emissions registry to develop a reporting and registry program to receive and make publicly available the required disclosures.
The Attorney General may bring a civil action against a reporting entity for willful failure to comply with the requirements of this bill or regulations set forth by the Department, with civil penalties of one hundred thousand dollars per day.
California State Senate Bill 253
California State Senate Bill 253, also known as the Climate Corporate Data Accountability Act, is another significant initiative. Introduced in 2023, this bill also requires certain business entities, identified as “reporting entities,” to disclose their GHG emissions, including Scope 1, 2, and 3 emissions.
Similar to NY State Senate Bill S897, the emissions data disclosed by the reporting entities must be independently verified by the emissions registry or a third-party auditor approved by the state board. The state board is also required to establish auditor qualifications and a process for approval of auditors.
Additionally, the bill requires the state board to contract with an emissions registry to develop a reporting and registry program to receive and make publicly available the required disclosures. The state board is also required to contract with a university or an equivalent academic institution to prepare a report on the public disclosures made by reporting entities to the emissions registry.
This bill also empowers the Attorney General to bring a civil action against a reporting entity for violations of these provisions, seeking civil penalties.
The Importance of Verified Data
The common thread in these bills is the requirement for independent verification of GHG emissions data. Here’s why it’s crucial:
- Accuracy: Verification ensures that the data provided by the companies is accurate, which is essential for regulatory compliance and for assessing the impact of these emissions on the climate.
- Transparency: Verified data enhances transparency, enabling stakeholders – including regulators, investors, and the public – to make informed decisions.
- Compliance: Verification holds companies accountable for their environmental impact, allowing them to use data with confidence that it meets the regulatory standards necessary to avoid costly fines.
These bills represent a crucial step towards mitigating climate change by promoting transparency in corporate GHG emissions. However, they also highlight the challenges in implementing such initiatives, including the need for a robust mechanism for data verification. It’s clear that the fight against climate change will require a multifaceted approach, and these initiatives are a part of that effort.