Understanding California's New Emissions Legislation: A Game Changer for Big Businesses

by VesselBot’s Marketing Team

October 11, 2023
California Governor Signs the New Legislation into Law

In a landmark move, California has rolled out new emissions legislation that is set to reshape the way large companies operate in the state. Aimed at tackling climate change head-on, this legislation casts a wide net over entities doing business in California with annual revenues exceeding $1 billion, calculated globally. While the specifics of what constitutes "doing business in California" will likely receive further clarification, it's expected to encompass any entity engaged in financial transactions within the state. This legislation applies to both public and private companies, making it a significant development for corporate sustainability efforts.

California's new emissions legislation represents a significant milestone in the fight against climate change. It compels companies to take a proactive role in reducing their environmental footprint, fostering sustainability, and adopting transparency practices that will inevitably shape the future of business.

The new legislation catalyzes change, requiring companies to reevaluate their environmental impact and embrace sustainability at every level of their operations.
By taking proactive steps and fostering collaboration, businesses can meet regulatory requirements and contribute to a greener and more sustainable future for all without impacting their bottom line.

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What does this groundbreaking legislation entail?

Large companies subject to this scheme will be required to report their emissions in three distinct scopes defined by the GHG Protocol: Scope 1, Scope 2, and the often-elusive Scope 3 emissions.

Scope 1 and Scope 2 Emissions: These types of emissions refer to a company's direct emissions and those associated with purchased energy, such as electricity and heat. Companies must start reporting on these emissions in 2026, marking a pivotal step towards a more sustainable future.

Scope 3 Emissions: Here lies the most challenging aspect of emissions reporting. Scope 3 encompasses all emissions, both upstream and downstream, originating from sources not owned or directly controlled by the reporting company. This broad category includes emissions tied to purchased goods and services, transportation of goods, business travel, employee commutes, and product processing and use. The ”catch” here is that companies often have limited visibility into these emissions since they involve third-party activities. As a result, compliance with this aspect of the legislation will require companies to collaborate closely with suppliers, utilize cutting-edge technology, and obtain data from third-party providers. This transparency drive is not limited to the companies directly impacted by the legislation; even those exempt will be pressured to estimate and report their emissions to meet client demands.
To navigate this new landscape successfully, businesses must act swiftly to prepare for the reporting deadlines. Starting in 2026, they'll need to undergo audits and seek third-party assurance for their emissions reporting, ensuring data accuracy and reliability.

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Greenhouse Gas Protocol standards and beyond...

In the past, companies could only rely on outdated models to averagely measure their emissions. This process, centered around collecting inaccurate data, not only consumed an excessive amount of time but also placed a substantial burden on manual labor and valuable resources. The data obtained from these antiquated models lacked the granularity essential for meaningful analysis or effective cost-reduction strategies.

When faced with the challenge of emissions reporting, companies had no viable option but to merely "check the checkbox," despite the vast contrast between their data and reality. This not only left businesses vulnerable to accusations of greenwashing, but more critically, had a detrimental impact on our planet's well-being.

As the landscape of sustainability changes and the number of regulations and legislations increase, the concept of measuring and reporting scope 3 logistics emissions becomes more daunting; an ever-growing number of businesses are now either actively utilizing or considering adopting the services of third parties equipped with cutting-edge technology for real-time data integration and digital twin models.

For us, environmental compliance marks just the beginning of our mission. Our platform empowers you to not only identify "hotspots" within your value chain, but it can also enable you to make informed decisions, enhance efficiency and cost reduction, all while improving visibility into environmental impact.

Our overarching objective is to furnish companies with comprehensive, actionable data that underpins data-driven decision-making, allowing them to optimize their operations and reduce Scope 3 Transportation Emissions.

Looking ahead, we anticipate a wave of innovation and collaboration as companies collectively strive to meet these evolving standards, guiding us toward a greener and more sustainable future.

This journey toward sustainability represents not merely a legal obligation but a unique opportunity for innovation, growth, and a global impact that benefits us all.

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