As the new year approaches, many companies will need to make sure that their websites include disclosure by January 1, 2024, that complies with California Assembly Bill No. 1305 (AB 1305). AB 1305 is the only law among the three recent California climate disclosure bills that requires disclosure without implementing regulations, so while companies will likely be able to leverage information from their sustainability reports and other sources, they will need to make judgment calls about how to interpret language in AB 1305 and the form in which to present disclosures.

Companies in the following three categories need to comply with AB 1305:

(1) companies that (i) make claims regarding the achievement of net zero emissions, claims that the entity, related entity, or a product is “carbon neutral,” or makes other claims implying the entity, related entity, or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions (Climate-Related Claims) and (ii) operate in California or make Climate-Related Claims in California;

(2) companies that (i) buy or use voluntary carbon offsets (VCOs), (ii) operate in California or buy or use VCOs sold within California, and (iii) make Climate-Related Claims; or

(3) companies that market or sell VCOs in California.

Unlike SB 253 and SB 261, California’s other climate-disclosure bills, AB 1305 applies to public and private companies irrespective of their annual revenues.

Here are summaries of the disclosure requirements applicable to each of the three categories:

Disclosures by Entities That Make Climate-Related Claims

An entity in the first category will need to disclose the following on its website:

• All information documenting how, if at all, a Climate-Related Claim was determined to be accurate or actually accomplished, and how interim progress toward that goal is being measured. This information may include, but not be limited to, disclosure of independent third-party verification of all of the entity’s greenhouse gas emissions, identification of the entity’s science-based targets for its emissions reduction pathway, and disclosure of the relevant sector methodology and third-party verification used for the entity’s science-based targets and emissions reduction pathway.
• Whether there is independent third-party verification of the company data and claims listed.

Disclosures by Purchasers and Users of VCOs That Make Climate-Related Claims

An entity in the second category will need to disclose the following related to its VCOs on its website:

• The name of the business entity selling the offset and the offset registry or program.
• The project identification number, if applicable.
• The project name as listed in the registry or program, if applicable.
• The offset project type, including whether the offsets purchased were derived from a carbon removal, an avoided emission, or a combination of both, and site location.
• The specific protocol used to estimate emissions reductions or removal benefits.
• Whether there is independent third-party verification of company data and claims listed.

Disclosures by Carbon Sellers

A business entity in the third category will need to disclose the following on its website:

• Details regarding VCO projects (protocol used to estimate emissions reductions or removal benefits, location of offset project site, project timeline, project start date, dates and quantities of when a specified quantity of emissions reduction or removal started, will start or was modified or reversed, type of project (including whether such project removes or avoids emissions), whether the project meets standards established by law or a nonprofit entity, the durability period for projects where the durability of the projects reductions or removals is less than the atmospheric lifetime of carbon dioxide emissions, whether there is independent or third-party validation or verification of project attributes and emissions or carbon reduced or removed on an annual basis).
• Details regarding accountability measures if a project is not completed or does not meet projected emissions reductions or removal benefits.
• The pertinent data and calculation methods needed to independently reproduce and verify the number of emissions reduction or removal credits issued using the protocol.

AB 1305 provides that a person who violates the provisions of the bill is subject to a civil penalty of not more than two thousand five hundred dollars ($2,500) per day, for each day that information is not available or is inaccurate on the person’s website, for each violation, not to exceed a total amount of five hundred thousand dollars ($500,000), which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by a district attorney, county counsel, or city attorney in a court of competent jurisdiction.

For more information on AB 1305 or any related matter, please contact any member of the firm’s sustainability and ESG advisory or public company representation practices.

Additionally, please consider joining our webinar to be held on Thursday, December 7, 2023, to learn more about AB 1305, including practical advice and best practices for meeting the disclosure requirements of AB 1305 by the beginning of 2024.