The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law, the Climate Corporate Data Accountability Act, requires, on or before July 1, 2025, the state board to develop and adopt regulations to require a reporting entity to, among other things, annually disclose all of the reporting entitys scope 1 emissions, scope 2 emissions, and scope 3 emissions, as defined. Existing law also requires, on or before January 1, 2026, and biennially thereafter, a covered entity to prepare a climate-related financial risk report disclosing the entitys climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risk.

This bill would enact the California Contractor Climate Transparency Act, which would require the state board, beginning January 1, 2027, one year after the effective date of regulations adopted pursuant to the Climate Corporate Data Accountability Act, as specified, to require a large contractor and a significant contractor, as defined, to report annually specified information, including, for large contractors, an annual disclosure of scope 1 emissions, scope 2 emissions, scope 3 emissions, and climate-related financial risk, as specified, and for significant contractors, an annual disclosure of scope 1 emissions and scope 2 emissions, as specified.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law, the Climate Corporate Data Accountability Act, requires, on or before July 1, 2025, the State Air Resources Board board to develop and adopt regulations to require a reporting entity to, among other things, annually disclose all of the reporting entitys scope 1 emissions, scope 2 emissions, and scope 3 emissions, as defined. Existing law also states the intent of the Legislature for all state agencies, as defined, to aim to achieve net-zero emissions of greenhouse gases resulting from their operations, including scope 1 and scope 2 emissions, no later than January 1, 2035, or as soon as feasible thereafter. Existing law requires the Department of General Services, in consultation with the State Air Resources Board, in making progress toward the above-described goal, to, among other things, publish on its internet website or other publicly available location an inventory of the greenhouse gas emissions of state agencies for the prior calendar year, as specified. Existing law also requires, on or before January 1, 2026, and biennially thereafter, a covered entity to prepare a climate-related financial risk report disclosing the entitys climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risk.

This bill, the California Procurement Climate Information Act, bill would enact the California Contractor Climate Transparency Act, which would require the department, board, beginning January 1, 2027, to require a large contractor and a significant contractor, as defined, to report their greenhouse gas emissions and climate-related financial risk, as specified. The bill would require the report to include, annually specified information, including, for large contractors, an annual disclosure of scope 1 emissions, scope 2 emissions, scope 3 emissions, and climate-related financial risk, as specified, and for significant contractors, an annual disclosure of scope 1 emissions and scope 2 emissions, as specified.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. Existing law, the Climate Corporate Data Accountability Act, requires, on or before July 1, 2025, the State Air Resources Board to develop and adopt regulations to require a reporting entity to, among other things, annually disclose all of the reporting entitys scope 1 emissions, scope 2 emissions, and scope 3 emissions, as defined. Existing law also states the intent of the Legislature for all state agencies, as defined, to aim to achieve net-zero emissions of greenhouse gases resulting from their operations, including scope 1 and scope 2 emissions, no later than January 1, 2035, or as soon as feasible thereafter. Existing law requires the Department of General Services, in consultation with the State Air Resources Board, in making progress toward the above-described goal, to, among other things, publish on its internet website or other publicly available location an inventory of the greenhouse gas emissions of state agencies for the prior calendar year, as specified.

Existing law, the Buy Clean California Act, requires the Department of General Services, by January 1, 2022, to establish and publish in the State Contracting Manual, in a department management memorandum, or on the departments internet website a maximum acceptable global warming potential for each category of eligible materials, as defined, in accordance with specified requirements. By January 1, 2025, and every 3 years thereafter, existing law requires the department to review the maximum acceptable global warming potential for each category of eligible materials, as provided.

This bill, the California Procurement Climate Information Act, would require the department, beginning January 1, 2027, to require a large contractor and significant contractor, as defined, to report their greenhouse gas emissions and climate-related financial risk, as specified. The bill would require the report to include, for large contractors, an annual disclosure of scope 1 emissions, scope 2 emissions, scope 3 emissions, and climate-related financial risk, as specified, and for significant contractors, an annual disclosure of scope 1 emissions and scope 2 emissions, as specified.

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anna Caballero, Chair

2025 - 2026 Regular Session

SB 755 (Blakespear) - California Contractor Climate Transparency Act

Bill Summary:

This bill would require certain state contractors to annually report their emissions and climate-related financial risk, as specified.

Fiscal Impact:

• The California Air Resources Board (CARB) estimates ongoing costs of approximately $1.47 million in FY 2025–26 and $1.36 million annually thereafter (General Fund) and 6 positions to implement the provisions of this bill.
• The Department of General Services (DGS) estimates limited-term costs in the low hundreds of thousands of dollars annually (General Fund) for 1 position to field calls from small businesses and disabled veteran-owned businesses about these requirements as well as to make changes to the State Contracting Manual.
• To the extent that some small businesses have difficulty obtaining the emissions scope information required under this bill to the point where it results in a smaller pool of businesses willing to bid on state contracts, potential state costs related to smaller bidding pools and less competition for state contracts.

Background:

Scope 1, 2, and 3 emissions. The “scope” framework was introduced in 2001 by the World Resources Institute (WRI) and World Business Council for Sustainable Development as part of their Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. The goal was to create a universal method for companies to measure and report the emissions associated with their business. The three scopes allow companies to differentiate between the emissions they emit directly into the air, which they have the most control over, and the emissions they contribute to indirectly.

Scope 1 covers direct emissions from owned or controlled sources, such as fuel combustion, company vehicles, or fugitive emissions. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain. Recent research from CDP (formerly the Carbon Disclosure Project) found that among full-scope (i.e. 1, 2, and 3) reports, scope 3 supply chain emissions are on average 11.4 times higher than combined scope 1 and 2 emissions.

Scope 3 emissions are divided into fifteen categories: Purchased goods and services; capital goods; fuel-and energy-related activities; upstream transportation and distribution; waste generated in operations; business travel; employee commuting; upstream leased assets; downstream transportation and distribution; processing of sold products; end-of-life treatment of sold products; downstream leased assets; franchises; and investments.

While the range of categories is daunting, the U.S. Environmental Protection Agency (EPA) provides an extensive list of accepted emission factor (EF) values for common items. For instance, a business would not need to measure and calculate the GHG emissions associated with each and every vehicle its employees used to calculate “employee commuting”, they could instead determine the total vehicle-miles traveled by their employees via different modes, then multiply those miles by the provided EF to get an acceptable estimation of the CO2 associated with that travel.

Emissions from businesses. It should come as no surprise that, when considering scope 1, 2, and 3 emissions, businesses are responsible for a large share of GHG emissions. One frequently cited statistic from CDP states that 71% of all GHG emissions worldwide since 1988 are the result of a mere 100 companies. Those 100 companies are all fossil fuel producers, and given that scope 3 emissions include subsequent use of sold products, it follows that they would have tremendous scope 3 emissions.

The scope 3 emissions for one organization are often the scope 1 and scope 2 emissions of another. For example, the emissions created by burning natural gas in a power plant would be accounted for as scope 1 emissions for the power plant, as scope 3 emissions for the company responsible for initially extracting the natural gas from the earth, and as scope 2 emissions for any business who purchased the electricity made by that power plant.

State contracting in California. The Department of General Services (DGS) serves as the business manager for the state of California. DGS covers state procurement, acquisition, real estate management and design, and numerous other responsibilities. DGS administers statewide contracts for use by state departments and California local governments. Statewide contracts are used as one of the state's main procurement vehicles for leveraging its buying power. Most are mandatory for state departments.

Statewide contracts are primarily established to reduce the need for individual departments to conduct repetitive bids for like products, and many have green standards. These contracts are developed based on the business needs of state of California departments through a competitive bidding process.

The Climate Corporate Data Accountability Act. SB 253 (Wiener, Chapter 382, Statutes of 2023) established the Climate Corporate Data Accountability Act (HSC §38532):

• 1. Requires CARB, on or before July 1, 2025, to develop and adopt regulations requiring specified partnerships, corporations, limited liability companies, and other business entities with total annual revenues in excess of $1 billion and that do business in California, defined as “reporting entities,” to publicly disclose to the emissions reporting organization, as defined, and obtain an assurance engagement on, starting in 2026 on a date to be determined by CARB, and annually thereafter, their Scope 1 and Scope 2 greenhouse gas emissions, as defined, and, on a schedule specified as part of the implementing regulations, their Scope 3 GHG emissions, as defined, from the reporting entity’s prior fiscal year, as provided.
  2. Requires CARB to review during 2029, and update as necessary on or before January 1, 2030, these deadlines to evaluate trends in Scope 3 emissions reporting and to consider changes to the deadlines, as provided.

Proposed Law:

This bill would require certain state contractors to annually report their emissions and climate-related financial risk. Specifically, it would:

1. Define “large contractor” as any company doing business within the state as a vendor, contractor, or procurer that received more than $25 million in state contract obligations in the prior state fiscal year.
2. Define “significant contractor” as any company doing business within the state as a vendor, contractor, or procurer that received between $5 million - $25 million in state contract obligations in the prior state fiscal year.
3.  Require CARB, beginning one year after the effective date of regulations adopted, to require a large contractor and a significant contractor to report the following information annually:
   1. For large contractors, annual disclosure of scope 1 emissions, scope 2 emissions, scope 3 emissions, and climate-related financial risk, as specified.
   2. For significant contractors, annual disclosure of scope 1 emissions and scope 2 emissions, as specified.

Related Legislation:

SB 219 delayed the requirement that CARB adopt regulations implementing SB 253 until July 1, 2025; allows for consolidation of reports at the parent company level; requires that the reporting entity publicly disclose its Scope 3 emissions on a schedule specified by CARB, rather than no later than 180 days after its Scope 1 emissions and Scope 2 emissions are publicly disclosed; and makes other changes to the laws created by SB 253 and SB 261.

SB 253 (Wiener, Chapter 382, Statutes of 2023) requires reporting entities with over $1 billion in annual revenues to report their scope 1, 2, and 3 emissions, as specified.

SB 261 (Stern, Chapter 383, Statutes of 2023) requires specified entities to prepare a climate-related financial risk report.

Staff Comments:

DGS notes that since the reporting ceiling on this bill is relatively low - $5 million – this bill would impact thousands of small businesses that contract with the state. Since its General Services Office of Small Business and Disabled Veteran Business Enterprise Services are the primary point of contact for these businesses, DGS anticipates that it will be fielding many questions as these emission scope reporting requirements go live. DGS would also need make to necessary changes to the State Contracting Manual regarding these new requirements.

DGS states that it is important to note that smaller businesses would likely have a difficult time obtaining the emissions scope information required under this bill, to the point where it could result in a smaller pool of businesses willing to bid on state contracts. Smaller bidding pools and less competition could result in increased costs to the state and could make meeting DGS’s 25% small business participation goals more difficult.

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SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Blakespear, Chair

2025 - 2026 Regular

Bill No: SB 755

SUBJECT: California Contractor Climate Transparency Act

DIGEST: This bill requires “large” and “significant” state contractors (as defined) to report their scope 1, 2, and 3 or scope 1 and 2 emissions, respectively, in line with the reporting requirements created by SB 253 (Wiener, Chapter 382, Statutes of 2023).

ANALYSIS:

Existing law:

1. Pursuant to California Global Warming Solutions Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006] (Health & Safety (HSC) Code §38500 et seq.):
   1. Requires the California Air Resources Board (CARB) to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020, and requires the reduction of GHGs to 40% below 1990 levels by 2030 and to 85% below 1990 levels by 2045; and
   2. Requires the monitoring and annual reporting of GHG emissions from GHG emission sources beginning with the sources or categories of sources that contribute the most to statewide emissions, and dictates that for the cap-and-trade program established pursuant to AB 32, entities that voluntarily participated in the California Climate Action Registry prior to December 31, 2006, and had developed a GHG emission reporting program, would not be required to significantly alter their reporting or verification program except as necessary for compliance.
2. Pursuant to the Climate Corporate Data Accountability Act (HSC §38532):
   1. Requires CARB, on or before July 1, 2025, to develop and adopt regulations requiring specified partnerships, corporations, limited liability companies, and other business entities with total annual revenues in excess of $1 billion and that do business in California, defined as “reporting entities,” to publicly disclose to the emissions reporting organization, as defined, and obtain an assurance engagement on, starting in 2026 on a date to be determined by CARB, and annually thereafter, their Scope 1 and Scope 2 greenhouse gas emissions, as defined, and, on a schedule specified as part of the implementing regulations, their Scope 3 GHG emissions, as defined, from the reporting entity’s prior fiscal year, as provided.
   2. Requires CARB to review during 2029, and update as necessary on or before January 1, 2030, these deadlines to evaluate trends in Scope 3 emissions reporting and to consider changes to the deadlines, as provided.
3. Authorizes CARB, starting in 2033, to assess the global GHG accounting and reporting standards and to adopt an alternative standard if it determines that using the alternative standard would more effectively further the goals of the law.
   
4. Dictates the basis of contracts between state agencies in California and their contractors and subcontractors. (Public Contract Code (PCC) §10100 et seq.)
   

This bill:

1. Applies the Climate Corporate Data Accountability Act emission reporting requirements:
   1. For scope 1, 2, and 3 emissions and climate-related financial risk to “large contractors” with more than $25 million in state contract obligations in the prior fiscal year.
   2. For scope 1 and 2 emissions to “significant contractors” with between $5 and $25 million in state contract obligations in the prior fiscal year.
      

Background

1. Scope 1, 2, and 3 emissions. The “scope” framework was introduced in 2001 by the World Resources Institute (WRI) and World Business Council for Sustainable Development as part of their Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. The goal was to create a universal method for companies to measure and report the emissions associated with their business. The three scopes allow companies to differentiate between the emissions they emit directly into the air, which they have the most control over, and the emissions they contribute to indirectly.
   
   Scope 1 covers direct emissions from owned or controlled sources, such as fuel combustion, company vehicles, or fugitive emissions. Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain. Recent research from CDP (formerly the Carbon Disclosure Project) found that among full-scope (i.e. 1, 2, and 3) reports, scope 3 supply chain emissions are on average 11.4 times higher than combined scope 1 and 2 emissions.

Scope 3 emissions are divided into fifteen categories: Purchased goods and services; capital goods; fuel-and energy-related activities; upstream transportation and distribution; waste generated in operations; business travel; employee commuting; upstream leased assets; downstream transportation and distribution; processing of sold products; end-of-life treatment of sold products; downstream leased assets; franchises; and investments.

While the range of categories is daunting, the U.S. Environmental Protection Agency (EPA) provides an extensive list of accepted emission factor (EF) values for common items. For instance, a business would not need to measure and calculate the GHG emissions associated with each and every vehicle its employees used to calculate “employee commuting”, they could instead determine the total vehicle-miles traveled by their employees via different modes, then multiply those miles by the provided EF to get an acceptable estimation of the CO2 associated with that travel.

1. Emissions from businesses. It should come as no surprise that, when considering scope 1, 2, and 3 emissions, businesses are responsible for a large share of GHG emissions. One frequently cited statistic from CDP states that 71% of all GHG emissions worldwide since 1988 are the result of a mere 100 companies. Those 100 companies are all fossil fuel producers, and given that scope 3 emissions include subsequent use of sold products, it follows that they would have tremendous scope 3 emissions.
   
   The scope 3 emissions for one organization are often the scope 1 and scope 2 emissions of another. For example, the emissions created by burning natural gas in a power plant would be accounted for as scope 1 emissions for the power plant, as scope 3 emissions for the company responsible for initially extracting the natural gas from the earth, and as scope 2 emissions for any business who purchased the electricity made by that power plant.
   
2. State contracting in California. The Department of General Services (DGS) serves as the business manager for the state of California. DGS covers state procurement, acquisition, real estate management and design, and numerous other responsibilities. DGS administers statewide contracts for use by state departments and California local governments. Statewide contracts are used as one of the state's main procurement vehicles for leveraging its buying power. Most are mandatory for state departments.
   
   Statewide contracts are primarily established to reduce the need for individual departments to conduct repetitive bids for like products, and many have green standards. These contracts are developed based on the business needs of state of California departments through a competitive bidding process.
   

Comments

1. Purpose of Bill. According to the author, “California is a world leader in climate and resilience policy and has a goal of carbon neutrality by 2045, alongside other California Climate Commitments. The Sustainability Roadmap published by the Department of General Services focuses on state agencies’ role in achieving those goals. The state spends more than $60 billion a year on procurements. To help meet its goals, the state should know the impact of its supply chain and the greenhouse gas (GHG) emissions being made by large contractors.
   
   “In 2023, California passed SB 253 (Wiener) and SB 261 (Stern), which required the largest companies operating in California to disclose their GHG emissions and climate-related financial risk to the public. This information is crucial to understand the scope and scale of current emissions and identifying areas for improvement.
   
   “This bill bolsters existing California corporate climate disclosure laws by focusing on the largest contractors with the state, distinct from the largest companies in California by revenue. The California economy depends on a strong and resilient supply chain, which is presently being threatened by climate change. Without GHG emissions and climate-related financial risk data, the state does not have the information it needs to fight climate change and meet its carbon neutrality goals.”
   
2. Transparency guides action. In recent years, many companies have made or increased their commitments to climate action. The Climate Pledge, which calls for companies to commit to net zero carbon emissions by 2040, boasts 510 signatories as of August 2024. This is up nearly tenfold from 53 signatories when the original version of the Climate Corporate Data Accountability Act (SB 260, Wiener, 2021) was first introduced.
   
   Emission-reducing actions like shifting to cleaner power or greening supply chains—whether they are initiated by activists, board members, or investors—depends on transparency. Without an accurate accounting of a business’s real emissions, it is nigh impossible to target meaningful climate action. Scope 1, scope 2, and scope 3 emissions are all required for this transparency. Even existing voluntary reporting frameworks like CDP are neither necessarily public nor independently audited. Reducing scope 1 and 2 emissions by outsourcing polluting processes does not lead to a real, global reduction of GHG emissions. This underscores the need for scope 3 reporting to capture the climate impacts of a business’s full supply chain and the importance of that data for targeting meaningful climate action.
   
   In the context of SB 755, the intended change to company action is slightly different from in the original SB 253. Where in SB 253, more information was provided with hopes that it would shape stakeholder or investor action, SB 755 appears more to be focused on influencing who California contracts with. Although the original version of this bill would have made the full-scope GHG emissions a deciding factor in how the State chose contracts, the version before the committee today is retrospective. Thus, the State could, for example, choose to continue or renew multi-year relationships based on the GHG emissions data, but it will not necessarily influence the decision of which bidder is chosen initially. Either way, the bill sends a strong signal that the State of California values full-scope GHG emission reporting, which could potentially help make the accounting more common and accessible industry-wide.
   
3. Raising the bar by lowering the threshold. Under SB 253, the only companies that are required to report full-scope (1, 2, and 3) GHG emissions are those doing business in California that have over $1 billion in annual revenues. SB 755 applies those same reporting standards to companies with at least $25 million in state contract obligations in the previous year. Because of the difference between total annual revenues and state contract obligations, comparing the $1 billion threshold to the $25 million in this bill is not an apples-to-apples comparison, but it is still would be expected to apply to significantly more, smaller companies.
   
   Most companies do not have a GHG emissions reporting expert on staff, and so they would be expected to use the services of any of the businesses or software solutions available today. Fortunately, the smaller the company, the easier it will likely be to complete a full scope 3 emission inventory. Unfortunately, that still costs potentially on the order of several hundred thousand dollars a year. Moreover, it is not immediately obvious if companies with the amount of state contract obligations affected by this bill would have sufficient resources on hand to be able to afford full-scope emission reporting consulting. Setting the appropriate threshold is a balancing act: too low and small businesses are unable to compete for state contracts on the basis of GHG emission reporting requirements, too high and the bill wouldn’t appreciably expand the scope of SB 253 and SB 261.

Going forward, the author may wish to consider whether the “large” and “significant” contractor thresholds should be shifted upwards from $25 million and $5 million in state contract obligations, respectively, to avoid overly burdening smaller contractors who may be unable to afford the requisite reporting.

1. Ensuring cart follows horse. As it stands today, CARB is required by law to develop and adopt regulations to require a reporting entity to disclose its scope 1, 2, and 3 emissions by July 1, 2025. Pursuant to those regulations, reporting entities will then be required to report scope 1 and 2 emissions starting 2026, and scope 3 emissions starting 2027. SB 755 adopts a similar timeline, requiring large and significant contractors to begin reporting in 2027.
   
   Given that, as of writing, the deadline for CARB to develop and adopt regulations is 74 days away, and no proposed regulations have yet been released, that deadline seems unlikely to be met. Rather than creating additional reporting timelines that depend on regulations that are likely to be delayed, the author and committee may wish to make the reporting requirements in SB 755 begin up to one year after the effective date of the SB 253 regulations. This will ensure the original lead time intended for reporting entities between the promulgation of regulations and reporting remains intact for contractors under SB 755, even if the regulations themselves are further delayed.
   
2. Committee amendments. Staff recommends the committee adopt the bolded amendments in comment 4 above.
   

Related/Prior Legislation

SB 219 delayed the requirement that CARB adopt regulations implementing SB 253 until July 1, 2025; allows for consolidation of reports at the parent company level; requires that the reporting entity publicly disclose its Scope 3 emissions on a schedule specified by CARB, rather than no later than 180 days after its Scope 1 emissions and Scope 2 emissions are publicly disclosed; and makes other changes to the laws created by SB 253 and SB 261.

SB 253 (Wiener, Chapter 382, Statutes of 2023) requires reporting entities with over $1 billion in annual revenues to report their scope 1, 2, and 3 emissions, as specified.

SB 261 (Stern, Chapter 383, Statutes of 2023) requires specified entities to prepare a climate-related financial risk report.

SOURCE:

Carbon Accountable

SUPPORT:

Asian Pacific Environmental Network
Bay Area System Change Not Climate Change
California Environmental Voters (formerly Clcv)
Carbon Accountable
Ceres Accelerator for Sustainable Capital Markets
Ceres, INC.
Citizens' Climate Lobby, Santa Cruz Chapter
Clean Earth 4 Kids
Clean Water Action
Cleanearth4kids.org
Climate Action California
Climate Equity Policy Center
Climate Reality Project, California Coalition
Coalition for Clean Air
Courage California
Friends Committee on Legislation of California
Friends of the Earth
Glendale Environmental Coalition
Hammond Climate Solutions Foundation
Public Citizen
San Francisco Baykeeper
Transformative Wealth Management LLC

OPPOSITION:

American Council of Engineering Companies
American Subcontractors Association-California
Associated General Contractors, California Chapters
California Alliance for Jobs
California Asphalt Pavement Association
California Association of Sheet Metal & Air Conditioning Contractors National Association
California Chamber of Commerce
California Construction and Industrial Materials Association
California Legislative Conference of Plumbing, Heating & Piping Industry
Construction Employers Association
Finishing Contractors Association of Southern California
National Electrical Contractors Association (NECA)
Northern California Allied Trades
Rebuild Socal Partnership
Southern California Contractors Association
Southern California Glass Management Association (SCGMA)
United Contractors (UCON)
Wall and Ceiling Alliance
Western Line Constructors Chapter, Inc., Neca, INC.
Western Painting and Coating Contractors Association
Western Regional Association for Pavement Preservation
Western Wall and Ceiling Contractors Association (WWCCA)

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