As the current California legislative biennium enters its closing weeks, SB 260 (Wiener & Stern) is moving forward despite strong opposition from business groups. As has been previously noted in this space, the bill would require any U.S.-based business with annual revenues in excess of $1 billion and that does business in California to annually report the full range of greenhouse gas (GHG) emissions attributable to the business, including direct emissions, electricity use, and indirect emissions from the business’s supply chain and other sources. Although the bill appears to be limited to very large businesses, its costs will be felt by all businesses in their supply chain.
One headwind for the bill is the opposition of the Department of Finance. The DOF does not like the bill because it results in significant General Fund costs not included in the 2022 Budget Act, creates future General Fund cost pressures, and may create significant implementation challenges. The DOF is the Governor's chief fiscal policy advisor. Yesterday, the authors amended the bill in attempt to this concern by making implementation contingent upon an appropriation by the Legislature in the annual Budget Act or another statute for its purposes.
If enacted, SB 260 may face constitutional challenges, as I have previously observed:
By mandating disclosure, SB 260 constitutes "compelled speech" in violation of the First Amendment of the United States Constitution. Notably, SB 260 does not involve voluntary commercial advertising. Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47, 61 (2006) ("Some of this Court's leading First Amendment precedents have established the principle that freedom of speech prohibits the government from telling people what they must say.").
SB 260 will also violate the "Dormant Commerce Clause" of the United States Constitution. It will impose significant burdens on large companies and their shareholders. More importantly, the bill will impose enormous burdens on smaller companies, including those with no contacts with California, because of the requirement that companies disclose Scope 3 emissions.