California carbon emissions law (known as SB 253) could impact IT service providers (ITSPs) and consultancies of all sizes -- regardless of geographic location.
California's Senate passed the bill on September 12, 2023. Governor Gavin Newson signed the bill into law on October 7, 2023.
What Is California Bill SB 253?
The SB 253 law requires large companies doing business in state to disclose emissions tied to operations and supply chains, The Wall Street Journal notes.
At first glance, the only applies to companies with over $1 billion in revenue -- or roughly 5,400 companies, The Los Angeles Times estimates. But take a closer look, and the legislation extends to all companies that do business with those $1 billion+ organizations.
In other words, the carbon emissions legislation could impact any size IT service provider located anywhere in the world -- if the IT service provider does business with large companies in California.
The bill’s author has disputed the last concern, emphasizing that SB 253 only applies to billion-dollar corporations and would have no impact on the small businesses that supply them, The Los Angeles Times reported.
Most Channel Partners Don't Track Carbon Emissions, Sustainability KPIs
Big companies such as Apple, Microsoft, Salesforce and Google parent Alphabet support the legislation. But SB 253 compliance could be particularly challenging for small businesses that don't track so-called Scope 1, Scope 2 or Scope 3 carbon emissions.
The scopes, as outlined in the bill, are defined as:
- Scope 1 encompasses emissions directly caused by things the company owns or controls, such as burning fuel.
- Scope 2 is emissions caused indirectly by things like using electricity, heating, or cooling.
- Scope 3 is emissions from things the company doesn't own or control, such as when they buy products, employees travel for work, or people use the company's products.
The situation is particularly worrisome in the IT channel. Indeed, 55% of North America partners and 48% of Latin America partners are not yet tracking sustainability KPIs (key performance indicators), compared to 29% in EMEA (Europe, Middle East, Africa) and 34% in APAC (Asia-Pacific), Canalys reported.
SEC and European Union Policies: Meanwhile, additional regulatory challenges may be looming for businesses of all sizes.
For instance, SEC climate disclosure regulations are expected to surface in October 2023. Still, the SEC effort faces political hurdles on multiple fronts. Indeed, the agency is expected to face litigation over the proposed regulations following significant pushback from business interests, Republicans and some Democrats over its plans, Bloomberg law reported. Moreover, the pending rules could face constitution challenges, according to Donald J. Kochan, professor of law and the executive director of the Law & Economics Center at George Mason University’s Antonin Scalia Law School.
Meanwhile, the European Union CSRD (Corporate Sustainability Reporting Directive) will extend to more and more companies as that directive extends its reach to smaller and smaller companies -- many of which may not be located in Europe.
Note: Blog originally published September 13, 2023. Updated regularly thereafter.