California Introduces New Climate Disclosure Requirements

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On October 7th 2023, in addition to passing its Climate Accountability package of legislation (SB253 and SB261), the State of California passed the Voluntary Carbon Market Disclosures Act (VCMDA) or AB1305, which is intended to support the goal of strengthening the integrity of voluntary carbon offsetting and climate goal-related claims. AB1305 establishes new legal requirements for related corporate disclosures and while the bill text does not specify a due date for these new disclosures, a November 30, 2023 letter penned by the author of the bill seeks to clarify that the intended date for the first disclosure is 1 January, 2025. However, as legislative action has not been taken as of Jan 5, 2024 to add an effective date of Jan 1, 2025 to the bill text, the default effective date is understood to be Jan 1 2024. 

Anthesis will monitor further developments and will update this blog post accordingly.

What are the practical implications?

The following steps will help companies to comply with the AB1305 requirements:

  • Directly align climate goals and related claims with, and reference on the corporate website, relevant independently established standards, frameworks, and universally accepted definitions. Seek third party validation of climate goals where programs exist (e.g., SBTi for Net Zero or Climate Neutral Certification Standard)
  • Work with ICROA accredited organisations to source high integrity offsets and prioritize projects that have been assessed to conform with ICROA endorsed offset project standards.
  • Follow the Voluntary Carbon Markets Initiative Claims Code of Practice which establishes a claims rulebook for purchasers and users of carbon offsets.
  • Ensure recordkeeping for voluntary carbon offset purchases or use is adequately detailed and documented to meet the disclosure requirements in AB 1305.
  • Expand the scope of independent third-party assurance beyond the annual emissions inventory to include data underlying public claims such as year over year trends, progress against emissions reduction targets and carbon neutral achievement (i.e., offset purchases relative to emissions).

Who is affected?

Public and private companies of any size, which:

  • Have operations in California and
  • Purchase carbon offsets and/or
  • Make claims regarding the achievement of significant emissions reductions, carbon neutrality and/or net zero emissions.
  • Organisations that market and/or sell voluntary carbon offsets within the state of California.

What are the key requirements?

From the first due date, and annually thereafter:

  • Companies that purchase or use carbon offsets to make corporate or product related carbon neutral, net zero and/or emissions reduction claims, are required to disclose specific information related to the carbon offsets on their public website. Required information includes the name of the entity selling the offsets, the project(s) identification number, name and type and any protocol used to calculate related emissions benefits.
  • Companies making carbon neutral or net zero claims, and/or claims that they have achieved significant emissions reductions must disclose information on how their claims were determined to be accurate or accomplished, and how interim progress toward their goal(s) is being measured as well as whether there is independent third-party verification of company data and claims listed.
  • Entities selling offsets in California must provide specified information on their websites regarding the projects related to the offsets they sell.

Failure to comply carries a potential fine of up to $2,500 per day, for each day that information is not available or is inaccurate on the company’s website, up to a maximum of $500,000.

How Anthesis can help

Through our comprehensive and integrated advisory, digital and carbon markets services Anthesis can support you to prepare for these new California disclosure requirements. Areas of support include:

  • Helping you to define your best carbon credit investment strategy and source high integrity carbon offset purchases through our high-quality carbon credits portfolio – with decades of experience in carbon markets, through Climate Neutral Group, part of Anthesis and an ICROA member, Anthesis applies a strict set of criteria when selecting third-party projects or developing our own carbon projects to ensure their maximum quality.
  • Developing credible climate goals and targets, supporting third party validation (e.g., SBTi), providing world class emissions accounting advice, and delivering your assurance-ready emissions inventory through our RouteZero digital platform.
  • Certifying your climate effort through our Climate Neutral Certification Standard endorsed by ISEAL. With our Standard you ensure that your climate policy matches globally agreed goals and that you gradually reduce year by year.
  • Preparing a timely disclosure for your website, leveraging our unique combination of technical, strategic, and reporting & communications expertise, that meets the ‘credibility’ tests underpinning the AB1305 legislation.

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