The Biggest Change To Emissions Reporting In Decades

‍Fifth Wall Newsletter: https://mailchi.mp/fifthwall/the-biggest-change-to-emissions-reporting-in-decades 

What's going on: California's carbon disclosure regulations are happening sooner than expected. Both California and the European Union are set to approve regulations on emissions that cause climate change, the Wall Street Journal reports.

• California Governor Gavin Newsom said he would sign landmark legislation that would require public and private companies with at least $1 billion in revenue to begin reporting emissions. 
• A similar rule in the EU would be far-reaching and ultimately make it clear whether companies are reducing emissions and sticking to commitments, the WSJ covered earlier.

Why does it matter: The California law is significant because it's more stringent than the SEC's proposed disclosure rule, which only affects publicly held businesses. In total, the bill is estimated to affect at least 3,900 private businesses.

The challenge: Some say Scope 3 data is "hard to reliably measure and costly to produce." 

• Scope 3 emissions are produced by suppliers and customers—so these emissions are not directly owned by a company. For example, emissions in this category include a distributor's use of gas-powered transit to ship materials or the waste produced from a sold product.
• The California bill faced strong pushback because of the inclusion of Scope 3 emissions, but companies like Apple and Salesforce advocate for the regulation.
• What's more: There is a new industry of data suppliers from Big Four accounting firms to startups that work to gather and share complex Scope 3 data to ensure companies are in compliance.

The big picture: These rules are happening at a time when governments are subsidizing the energy transition—there are billions of dollars of incentives for companies looking to cut carbon emissions. Investors are on the same page and are willing to spend money to reduce emissions, WSJ reports.

• “There is a clear, worldwide, growing regulatory momentum for consistent information,” one industry expert told the WSJ. “Investors, companies, clients, employees, customers are all saying they don’t want to be blindfolded.”