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California Climate Disclosure Laws 2023

The list of companies needing to start calculating and reporting their GHG emissions has multiplied thanks to two new California climate laws.  

  

On October 7, 2023, California Governor Gavin Newsom signed Senate Bill 253, or the Climate Corporate Data Accountability Act, and Senate Bill 261, or the Climate-related Financial Risk Act – two new bills that represent a significant step in raising the standard for corporate climate action in the US by requiring the disclosure of Scope 1, 2, and 3 emissions and climate-related financial risks.  

The legislation applies to any entity with annual revenue exceeding $1 billion globally and engaging in financial transactions – or “doing business” – within California. Although the precise definition of “doing business in California” remains open for discussion, it is expected to require more than 5,000 public and private companies to make disclosures.   

By signing these bills into law, California became the first state in the nation to make emissions reporting mandatory. This is especially significant because, as the fifth largest economy in the world, California has considerable influence in setting environmental standards and regulations.   

The Sustainable Travel & Transportation Network (STTN) is confident that this development will significantly impact the sustainability initiatives of business travel service providers in the United States and foster a greener future for all.   

STTN is sure this legislation will help drive positive change and push us towards a more sustainable future. The legislation requires companies to reevaluate their environmental impact and embrace sustainability at every level of their operations. By taking proactive steps and fostering collaboration, businesses can meet regulatory requirements and contribute to a greener, more sustainable future for all without impacting their bottom line.  

So, what does this groundbreaking legislation entail?   

Large companies subject to this scheme will be required to report their emissions in the three distinct scopes defined by the GHG Protocol: Scope 1, Scope 2, and Scope 3 emissions.  

Scope 1 and Scope 2 Emissions are a company’s direct emissions and those associated with purchased energy, such as electricity and heat.   

Scope 3 Emissions are the most challenging aspect of emissions reporting. This category includes all emissions from sources not owned or directly controlled by the reporting company. This broad category includes emissions tied to purchased goods and services, the transportation of goods, business travel, employee commutes, and product processing and use.   

As a result, compliance with this aspect of the legislation will require companies to collaborate closely with suppliers, utilize cutting-edge technology, and obtain data from third-party providers. Even those exempt from the legislation will be pressured to estimate and report their emissions to meet client demands.  

Companies must start reporting on these emissions in 2026, marking a pivotal step towards a more sustainable future.  

To navigate this new landscape successfully, corporate travel service buyers must start preparing for the reporting deadlines now so that they are fully ready to comply with the legislation. Of course, the regulations will also require that companies undergo audits and seek third-party assurance for their emissions reporting, ensuring data accuracy and reliability.  

Previously, companies could only rely on outdated models to measure their emissions, which consumed excessive time and substantially burdened manual labor and valuable resources. When faced with emissions reporting, companies had no viable option but to “check the checkbox,” despite the stark contrast between their data and reality. This left businesses vulnerable to accusations of greenwashing and detrimentally impacted our planet’s well-being.   

As the landscape of sustainability changes and the number of regulations and legislations increase, the concept of measuring and reporting Scope 3 business travel emissions has become more daunting.   

Thankfully, an ever-growing number of travel service businesses and their customers are now adopting the services of third parties equipped with cutting-edge technology for real-time data integration and modeling.  

The Tech360-powered sustainable business travel procurement platform empowers STTN members to identify “hotspots” within their travel service value chain, make informed decisions, enhance efficiency and cost reduction, and improve visibility into environmental impact. Our overarching objective is to furnish companies with comprehensive, actionable data that underpins data-driven decision-making, allowing them to optimize their operations and reduce Scope 3 Business Travel Emissions.   

We anticipate a wave of innovation and collaboration as companies collectively strive to meet these evolving standards, guiding us toward a greener and more sustainable future.   

This journey toward sustainability represents a legal obligation and a unique opportunity for innovation, growth, and a global impact that benefits us all.   

The new California laws and their requirements aren’t the first to be proposed: The Securities and Exchange Commission (SEC) and the Federal Acquisition Regulatory Council (FAR Council) have proposed similar rules.   

So, STTN and our partners urge all travel companies to embrace this new opportunity and take the necessary steps to contribute to a more sustainable future. 

 

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