California to enact ground-breaking ESG disclosure bill

The battle in the US over how far to take the effort on ESG and how accountable corporates are for past failings has been ramped up as California Governor Gavin Newsom said he would sign legislation requiring large companies to disclose their carbon footprints.

This would potentially put the state ahead of federal regulators on the management of corporate climate risks.

This followed the news on Friday that Governor Newsom and Attorney General Rob Bonta would sue Big Oil for more than 50 years of alleged deception, cover-up and damage.

The California State senate approved the bill, which mandates greenhouse gas emissions disclosure, last week. This means that it becomes law if signed by the Governor.

He was asked at the start of Climate Week in New York, a series of events that coincided with the UN General Assembly, whether he would sign the bill. According to news agency Reuters Newsom replied: “Of course I will sign that bill.”

The bill will require companies earning more than $1bn a year and operating in California to measure a range of emissions including a category linked to supply chains and end-users, known as Scope 3.

Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all indirect emissions, not included in scope 2, that occur in the reporting company’s value chain. This includes both upstream and downstream emissions.

California is ahead of the curve in the US on this matter as the Securities and Exchange Commission (SEC) is yet to issue any guidance.

But business, of course, is not convinced of the bill. According to the New York Times, the California Chamber of Commerce reportedly described the bill as a “costly mandate that will negatively impact businesses of all sizes in California and will not directly reduce emissions”.

On the Friday before the announcement on disclosures, Governor Newsom and Attorney General Bonta announced that California is suing Big Oil “for more than 50 years of deception, cover-up and damage that have cost California taxpayers billions of dollars in health and environmental impacts”.

“Oil executives deceived the public for decades about how fossil fuels are hurting our health and destroying our planet, protecting their own profits while sticking taxpayers with the bill for the damages. California is suing these big polluters to hold them accountable for their decades of deception, cover-up, and billions of dollars in harm done to our state,” they said.

Five of the world’s largest oil companies – Exxon, Shell, Chevron, ConocoPhillips and BP – and their subsidiaries are named in the suit.

The American Petroleum Institute is also named for allegedly promoting disinformation.

The suit states that it orders the oil companies to:

• Pay for the costs of their impacts to the environment, human health and Californians’ livelihoods, and to help protect the state against the harms that climate change will cause in years to come.
• Prohibit oil companies from engaging in further pollution and destruction of California communities and natural resources.
• Levy financial penalties on Big Oil for allegedly lying to the public, and order the industry to immediately stop its ongoing efforts to deceive or misinform about their catastrophic impacts.
• Award punitive damages to the state to punish these companies for their misconduct.

Governor Newsom said: “For more than 50 years, Big Oil has been lying to us – covering up the fact that they’ve long known how dangerous the fossil fuels they produce are for our planet. It has been decades of damage and deception. Wildfires wiping out entire communities, toxic smoke clogging our air, deadly heat waves, record-breaking droughts parching our wells. California taxpayers shouldn’t have to foot the bill. California is taking action to hold big polluters accountable.”