california’s $1B co2 legislation

In January 2022, the California Senate passed a bill requiring every company which does business in California and generates upwards of $1B annually report their Scope 3 emissions - in addition to the already required Scope 1 & 2 emissions associated with their businesses.

 For reference, Greenhouse Gas (GHG) Protocol defines three different "Scopes" for carbon accounting purposes.

Scope 1 Emissions are 'directly' emitted emissions. I.E. An AV company uses 3 semi trucks to get their equipment to Coachella. Their truck emissions + all actions taken to design + produce the event are scope 1 emissions.

Scope 2 Emissions are associated with the purchase of electricity, heat, or cooling. So this is all the utilities used to power the AV company’s offices - and technically all of the energy used by the AV company to power the event would fall within the Emissions of the venue they are utilizing, ironically, being that they are pulling from their energy.

Scope 3 Emissions: Scope 3 is for… everything beyond directly produced emissions & electricity, heat, or cooling. I.E. all other emissions in a company's supply chain and attributable to their operations. This includes any work related travel, flights and every single delivery that arrives or exits your corporate doorstep. This also would include any waste generation associated with the business onsite or offsite, employee commutes, purchased goods + services - and more.

After that refresh, let’s get back to THE LEGISLATION. The Climate Corporate Accountability Act expands reporting requirements for large California businesses to include all of their emissions. Since almost all major U.S. corporations do significant business in California, this won’t just affect those headquartered in CA; it will affect most of the largest companies in the US.

This does not officially take effect until 2024 and the legislation states a requirement that the reporting be verified by a third party auditor. While this is a win for California, the planet and environmentalists, some people fear that pressure from big companies to tackle Scope 3 emissions will hurt small businesses in their supply chains which haven’t had the means to understand or reduce their own emissions.

This is a really good time *for any size business* to get in front of - and analyze - your footprint and operations, in general. The trickle down of these effects to mid & small sized businesses in not only California but around the US won’t be too far behind. The SEC is expected to give new federal guidance on climate reporting requirements for all public companies as soon as March 2022.

For smaller businesses, an interesting company with the insight that your employees are built-in sustainability champions - given the right tools - is EarthUP.

CEO Stephen Bay created the software so that you can connect your workforce to your sustainability mission; accelerating ESG goals while improving employee retention.

For larger operations, check out Watershed; which manages the footprints of juggernauts such as Airbnb, sweetgreen, DoorDash, Warby Parker, Twitter, Flexport, and Shopify. With their portfolio of businesses, they are already managing (and eliminating) four times the carbon footprint of the city of San Francisco - and just got a round of 70M to boot.