To solve the climate crisis, we need the full picture

OPINION: We are entering a new era of bigger, more extreme, and more dangerous climate emergencies. We are also entering a new era of opportunity on climate action. Governments across the globe have set climate goals and targets and are investing billions in funding to fight climate change – the United States just celebrated the one year anniversary of its historic climate focused Inflation Reduction Act. These goals and investments are poised to catalyze trillions of dollars in private investment up and down every value chain throughout the global economy. Investors are recognizing that companies that take the climate crisis seriously are setting themselves up for long-term success.

But sound investment decisions depend on access to sound information, and when it comes to assessing the climate impacts associated with large companies’ activities and products, we are flying blind.

We cannot manage what we do not accurately measure. Companies routinely manipulate their reported carbon footprints to appear greener than they actually are. An oil company may pledge to zero out carbon emissions from running their drill sites and shipping oil to market, while conveniently omitting the climate impacts that come from actually burning all of that oil – up to 95% of the total pollution their profitability depends on. A bank may claim to be climate friendly by running its operations on wind and solar power, even as it continues to finance high-polluting projects like coal mines and fossil fuel power plants.

We cannot manage what we do not accurately measure.

These big sources of climate pollution that many corporations would rather hide from the public and investors are sometimes referred to as “Scope 3” emissions – emissions not associated with the day-to-day operations of offices and equipment, but those caused as an inherent part of their business. Without uniform and universal Scope 3 emissions reporting requirements, investors and members of the public are at the mercy of voluntary, spotty and often misleading data companies choose to publish. Funny accounting isn’t accounting at all.

That is why I ardently support California’s Senate Bill 253, the Climate Corporate Data Accountability Act – a bill authored by California State Senator Scott Wiener and currently making its way through the State Assembly. The bill would require corporations that do business in California and collect at least $1 billion in annual gross profits to report their emissions – including Scope 3 emissions. Having this information would allow for a centralized, comprehensive accounting of corporate emissions and set the stage for investors in California and beyond to confidently put their money where their mouths are in funding the climate transition.

Leading companies that are serious about reducing their climate impacts – and ensuring their own long-term business success – already measure and report their Scope 3 emissions. Many, including Microsoft, Salesforce, and Ikea, just to name a few, support the Climate Corporate Data Accountability Act, and with good reason: SB 253 would level the playing field by ensuring that all major public and private companies disclose their full emissions inventory. Companies putting in the work to lead the global transition to a clean energy economy are setting themselves up for long-term stability. But as long as their competitors can hide behind greenwashing and half-truths, the companies working for real progress face an unfair competitive disadvantage.

Requiring the most profitable corporations to report their Scope 3 emissions would be a game changer for climate accountability and investor confidence.

Even as the petroleum industry and major corporations seeking to delay the clean energy transition have been actively lobbying the federal Securities Exchange Commission to water down its proposed emissions rules, these same industries are watching the California legislature with fear in their hearts.

With California poised to become the world’s fourth-largest economy, our actions here will lead the way on meaningful emissions reporting rules worldwide. Investors will have the information they need to efficiently invest in the companies that will turn our pollution reduction goals into reality. And companies will no longer be able to hide behind marketing gimmicks and empty pledges. They will be required to do their part in building and ensuring a livable future for all of us.

Tom Steyer is an American climate investor and co-executive chair of Galvanize Climate Solutions.