ESG INTEL
...On An Additional California Climate Change Disclosure Rule
Written by Leslie Wong
California Governor Gavin Newsome gained worldwide attention when he signed legislation on October 7, 2023, requiring high-revenue companies doing business in California to report Scope 1, 2, and 3 greenhouse gas (GHG) emissions and climate-related risks by 2026. He also signed a third GHG-related action, SB1305, which targets the voluntary carbon offset market.
Named the Voluntary Carbon Market Disclosures Business Regulation Act, SB1305 regulates the entities doing business in California that sell and market carbon offsets, purchase and use carbon offsets, and/or make public claims regarding the achievement of net-zero emissions, carbon neutral status, or significant carbon emissions reductions. Unlike the other two actions, SB1305 is revenue neutral and goes into effect on January 1, 2024.
The entities subject to SB1305 must disclose information relevant to the offsets offered for sale, offsets purchased or used, and emissions reduction/net-zero claim details on their website, as applicable. The goal of the required disclosure is to provide transparency on the quality and validity of voluntary carbon offsets on the market, as well as on the accuracy and progress to date on net-zero and carbon reduction claims. The required disclosures emphasize the importance of third-party validation of data used to support offset generation and GHG reduction goals.
Disclosures are required to be updated annually. Entities that fail to publish the required information on their website or publish inaccurate information are subject to a civil penalty of up to $2,500 per day with a cap of $500,000
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