‘A massive reporting challenge’: Employers brace for California’s new climate emissions law
California is the only U.S. state to enact a first-of-its-kind mandatory climate emissions disclosure rule. It means that companies operating in the state need to report what emissions they rack up in the running of their operations. And if they fail to comply once the law is enforced in 2027, they face penalties of up to $500,000.
The kind of emissions they need to report – officially called Scope 3 emissions – include everything from business travel and employee commuting to waste generated in operations and office furniture.
Many are starting their compliance journey by starting to evaluate their furniture inventory – no small task itself. Some businesses have already turned to environmental consultants – Reseat, Green Standards, ReWork and Anew, to name a few – who can assess the lifespan of furniture and help dispose of it sustainably. But since California introduced this new legislation at the end of 2023, their phones have been off the hook with companies who have to undertake a major challenge to comply with this new legislation.
Three years from now may seem a doable time to get it done, but it will require a huge lift to take inventory of every single piece of furniture used. “Ever since the law changed, we’ve been bombarded,” said Brandi Susewitz, CEO and founder of Reseat. “All of the companies are reaching out because it’s imperative to meet with us and your furniture dealer.”
California’s new climate disclosure laws
Two laws were signed into law by Governor Gavin Newsom in October 2023: The Climate Corporation Data Accountability Act (SB 253) and SB 261, which requires disclosure of climate-related financial risks. It’s monumental and sets a precedent for future legislation in other states. California is the world’s fifth-largest economy by GDP and home to corporate giants such as Apple, Google and Microsoft. Additionally, it will impact other offices across the country as long as their headquarters are in California. The law applies to public and private companies that exceed $1 billion in annual revenue.
Scope 1 and 2 emissions, which include onsite fuel combustion and energy produced offsite, will need to be reported starting in 2026 for emissions in the prior fiscal year. But the trouble comes with Scope 3 emissions. While larger companies might be well-advanced in identifying Scope 3 emissions, mid-sized companies are likely to struggle.
The bill also requires companies to make a copy of their reports available to the public on its own website. While the proposed fines will have a massive impact on pushing companies to comply, so will the friendly competition of who has the lowest carbon emissions, if a company wishes to tout themselves as being environmentally responsible.
“There’s going to be a healthy competition where companies look around at their peer organizations and see how their Scope 3 emissions stack up relative to them,” said Trevor Langdon, co-founder and CEO of Green Standards. “They’ll have to get their stuff together to make sure they’re not the laggard in their sector.”
How to get ready for the enforcement dates
“The knee-jerk reaction is one of fear and anxiety because it’s a big, massive reporting challenge for a lot of organizations,” said Langdon. “When this California law came through, the initial reaction was that people didn’t even want to acknowledge that it had happened, because now it really is a thing they have to deal with. But people are going through the stages of grief and that this is going to be real.”
So once an employer hits acceptance of this huge undertaking, what’s next? Experts say the first step is to actively establish a team to manage the climate reporting process.
“Most companies have started to build the teams that are going to be doing this,” said Langdon. “Much more frequent now with our conversations with clients, we’re talking not just to a head of real estate or somebody on the design side, but they’re also bringing along the people from their ESG [environmental, social, governance] team who are going to be required to do this reporting. They’re integrating better.”
The second step is to have a cross-departmental approach that encourages transparency across the organization. Langdon says that he’s worked with a lot of companies that might be doing the right thing in some places, but in other parts of the organization, it’s a black box. “That’s not going to serve them into 2027,” he said.
Other companies they’re working with, are way ahead of the game, like General Motors, which Landon said is: “doing a great job of it.” Langdon also works with companies like Adobe, Expedia, Microsoft and finance platform Charles Schwab.
From there, it’s identifying appropriate external advisers who can audit greenhouse gas emissions. It’s a time-consuming and logistically challenging process that will require an all-hands-on-board approach.
A big part of Scope 3 emissions is office furniture and it’s a good place for employers to start.
A total 17 billion pounds of office assets end up in landfills each year, according to the U.S. Environmental Protection Agency. Each time a company moves its office, approximately 269.53 tons of waste is created, along with 1,462 metric tons of carbon, according to research from global design and architectural services firm Gensler. But simply reusing one office desk would reduce a company’s carbon footprint by 36%. Plus, a business can save between 30% and 50% of their new-office furniture costs, if they choose to purchase recycled items, according to the same study.
Reseat specializes in extending the life cycle of furniture, in turn helping companies with their carbon emissions. Companies that know they need to dispose of their furniture can work with them to post it on their marketplace, similar to how Facebook Marketplace works in a way. As a part of identifying inventory, Reseat calculates the social cost of carbon (SCC) value, which gives an estimate, in dollars, of the economic damages that would result from emitting one additional ton of carbon dioxide into the atmosphere. Companies can even see where their furniture moved to and how it’s being used after the first life it had.
“If you have millions of square feet, we need to really understand your real estate portfolio and put together a schedule to start implementing this,” said Susewitz. “That’s the heavy lift. You’ve got to have all of your furniture in a database showing this information and you have to report it annually.”
Reseat is working with companies like Roku and Salesforce to begin the process of auditing all of their furniture and estimating carbon emissions on it.
And Green Standards is doing similar work by sustainability decommissioning things from workplaces to keep them out of landfill. It’s a part of the circular economy, which Gensler also encourages amongst its clients.
Gensler Product Sustainability (GPS) Standards
Gensler has long been at the forefront of helping design sustainable workplaces. There are a lot of different sustainability standards which makes it hard for the designer to know which one to follow. That’s why the architecture firm introduced its own standards, which aim to define minimum sustainability criteria for high-volume, market-ready material categories used in architecture and interior projects. “It helped create some sort of clarity to it,” said Marcus Hopper, design manager at Gensler.
A big part of that is increasing demand for sustainable materials in the market. Reseat is also collaborating with Gensler to be included in the next version of the GPS standards when it comes to reuse.
“It creates an advantage for teams to meet these standards,” said Hopper. “Reseat has the furniture thing going, and we ask ‘is there a way we can use their team on specification about furniture?’ and make it available and visible to the design team that is trying to meet these goals.”
These efforts combined are helping new office designs plan for a future that has sustainability at its center.
“If a project started, what are the interventions that we need to kind of start thinking about from our side?,” said Hopper.
But for now, when it comes to what has already been built and trying to meet sustainability goals, these outside advisors will continue to see employers asking for assistance. Langdon imagines these new initiatives will grow Green Standards significantly over the next three to five years.
“This is a classic case of what gets measured gets managed,” said Langdon. “Right now, it’s not being measured, so it’s not being managed. This is going to force the hand of all these organizations to start doing something about their Scope 3 emissions.”