Bloomberg Law, October 11, 2023

Patagonia is a fan of California’s plan to ramp up corporate climate disclosures. In fact, it thinks it’s long overdue.

The Ventura-based outdoor clothing company, as a private business, has been tracking data on its direct and indirect greenhouse gas emissions impact for years, using the information to calculate the carbon footprint of products as it designs them.

“It will be advantageous to have a standard that we’re all required to follow and be held accountable to,” said J.J. Huggins, a spokesperson for Patagonia who helped the business lobby for the new rule.

The law, which California Gov. Gavin Newsom (D) signed Oct. 7, will go beyond California’s borders by requiring public and private companies with annual revenues over $1 billion that do business in the state to disclose their direct and indirect greenhouse gas emissions. Companies are getting ready by talking to auditors, lawyers and contractors in their supply chains to set their annual reporting in motion.

For some businesses starting from scratch—unlike Patagonia—there’s a long road ahead in both seeking pertinent data and determining how they can use those disclosures to showcase or make changes to their business.

“They’re asking what do I need to report and where, organizationally who is going to own it, and how do we actually drive change from the metrics once we know them,” said Julia Salant, head of sustainability innovation and carbon solutions at EcoVadis, a supply chain sustainability business.

A Definitive Timeline

“They knew they would need to do something eventually, and they now have a definitive timeline that’s probably faster than they anticipated,” said Jim Wetekamp, CEO of risk management software company Riskonnect.

Scope 3 data won’t be required under the California law until 2027, while the mandate to report emissions under Scopes 1 and 2—from operations and outputs from energy use—starts in 2026. When signing the bill, however, Newsom said that the deadlines are likely infeasible and that his administration will work to address the issue.

But some businesses will want to get a head start on the California law by voluntarily reporting ahead of the requirements. It’s an opportunity “to manage risk and control the narrative,” said EcoVadis’s Salant.

Some will change their operations to lower future emissions, which would require them to consider switching their suppliers or modify the materials the business uses, for example, Wetekamp said.

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