FOR IMMEDIATE RELEASE 

October 26, 2023 

CONTACT:
Patrick Davis, Public Citizen, pdavis@citizen.org; William Pierre-Louis, Jr., william@ourfinancialsecurity.org

California’s New Climate Disclosure Laws Cover Nearly Three-Quarters of Fortune 1000 Companies 

New Analysis Shows Proposed SEC Rule Should Not Substantially Increase Compliance Costs for Most Fortune 1000 Firms in Light of California’s Disclosure Requirements 

WASHINGTON, DC – There should be no added compliance costs for 75% of the largest public companies to disclose their greenhouse gas emissions under the upcoming Securities and Exchange Commission (SEC) climate financial risk disclosure rules, a new report has found. The findings cast doubt on U.S. business groups’ claims that the costs of fully disclosing their climate risks would be too high. 

The report finds that 75% of public companies in the Fortune 1000 are likely covered by new California laws requiring firms doing business within the state to disclose their Scope 1, 2, and 3 greenhouse gas emissions, while 73% will also likely need to disclose their climate-related financial risks and strategies. Scope 3 emissions are those generated within the value chain, for example, when oil and gas companies’ customers burn the fuels they produce. The SEC has been on the fence about whether to include Scope 3 emissions disclosure in its long-delayed rule and to what extent. 

The new analysis was released today by Americans for Financial Reform Education Fund, Public Citizen, and Sierra Club. Given that most major U.S. public companies will need to adhere to California’s requirements, it finds that the marginal cost of complying with the overlapping requirements of the proposed SEC climate financial risk disclosure rule—even if it includes Scope 3 emissions—will be minimal to non-existent for many firms. 

Scope 3 emissions account for a whopping 70% of the average corporate value chain’s total emissions, studies show. If the SEC fails to require Scope 3 disclosures, investors and financiers will lack crucial information needed to evaluate investment and business risks. Yet companies and trade groups, particularly in carbon-intensive industries like fossil fuels, have objected to the requirement, claiming financial and logistical challenges posed by Scope 3 emissions disclosures would be too onerous. These objections seem to be contributing to delays in the issuance of the SEC’s final rule as the agency evaluates its options. 

For many companies, the new report shows, excluding Scope 3 emissions from the SEC rule would not reduce their compliance costs. Thanks to the landmark California laws, they would simply be disclosing data already known to them.

The report, How might California’s new climate disclosure laws impact federal rulemaking?, makes it evident that the laws enacted in California are poised to add new momentum for a strong rule from the SEC. 

Key Takeaways: 

• Company Overlaps: Approximately 73% of the Fortune 1000, representing the largest publicly traded U.S. companies, will be subject to both California’s climate disclosure laws, SB 253 and SB 261, while 75% will be subject to SB 253. These laws will mandate these companies to disclose climate-related risks, strategies, and Scope 1, 2, and 3 emissions, with the first requirements starting in 2026. 
• SEC Rule: A significant proportion of SEC registrants are expected to fall within the scope of California’s mandates, potentially alleviating the purported financial burdens associated with complying with many of the SEC’s proposed climate disclosure requirements. 
• Scope 3 Emissions: The convergence of California’s strict disclosure mandates and the impending SEC rule indicates a pivotal shift toward enhanced transparency and accountability in corporate climate reporting demanded by investors. 
• Lowered Costs: For companies already covered by California’s laws, excluding Scope 3 emissions from the SEC rule won’t significantly reduce their compliance costs. They would simply be disclosing information they already possess. The SEC’s final rule should recognize there are no additional compliance costs to disclose Scope 3 emissions for those already subject to California’s stringent measures. 

The full report, including detailed findings and analysis methodology, is available for public viewing here. 

About the Report 

This report was researched and written by Sadie Frank with contributions from David Arkush (Public Citizen), Clara Vondrich (Public Citizen), Alex Martin (Americans for Financial Reform Education Fund), John Kostyack (Sierra Club), and Ben Cushing (Sierra Club). Cover and design by Isis Kenney (Americans for Financial Reform Education Fund). 

Quotes
Alex Martin, Americans for Financial Reform Education Fund, Climate Finance Policy Director, stated: “The California laws are going to drastically improve the landscape of corporate climate disclosure in the U.S., establishing a new norm and generating more high-quality data for investors. This is the clear direction of travel, and the SEC should lean in and strengthen the GHG provisions in their proposal. Doing so will benefit investors and capital markets by leveling the playing field for companies outside of California, improving comparability by requiring a standard methodology that the SEC defines for the whole market, and ensuring data accessibility in the SEC’s EDGAR system.” 

Clara Vondrich, Senior Policy Counsel for Public Citizen’s Climate Program, stated: “While the CEOs of the world’s biggest oil and gas companies have complained about the costs of disclosing their carbon footprint, the people of the world have had to carry the weight of increasing climate impacts. Now that California has acted, these companies have nowhere to hide. And the SEC has no more excuses: It should quickly finalize its long-awaited climate rule with an affirmative obligation on companies to disclose the total value of heat-trapping emissions up and down their supply chains. This is the only way investors can know what they are getting into as the energy transition accelerates, thereby fulfilling the SEC’s essential investor protection mandate.”

Ben Cushing, Sierra Club Fossil-Free Finance Campaign Director, stated: “Thanks to California’s leadership, disclosure of Scope 3 emissions inventories and other information concerning large companies’ handling of climate risks is the new baseline in the U.S. Investors and other market participants are now counting on the SEC to join California and regulators around the world to create a common framework for evaluating and addressing climate risks.” 

CA Senator Henry Stern, author of SB 261, stated: “Disclosure done right is actually a cost avoider. Companies that strategically manage climate risks and emissions in their operations and—most importantly, in their supply chains—are finding smart ways to strengthen their bottom lines. Getting wrapped up in compliance cost analyses is just taking the bait from Big Oil, who really don’t want corporations to de-risk from fossil fuels. Especially if we’re talking material emissions and risks, failing to disclose is a breach of fiduciary responsibility.”