Washington bill would mandate corporate GHG emission disclosures
UPDATE 2/14: On February 13, 2024, the Washington Senate passed SB 6092 by a nearly party-line vote of 30–19. The bill, as amended from its original form, directs the Washington Department of Ecology to develop policy recommendations to address climate-related disclosure requirements in Washington.
The bill’s Democratic sponsors see the measure as critical to aligning Washington’s carbon market with that of the joint California-Quebec market. They argue that the bill will lower the cost of allowances for businesses and thus decrease gas and energy prices for consumers. Opponents disagree, arguing that the bill has far-reaching implications for businesses, will be costly for businesses to implement, and will not actually reduce emissions.
The Washington Department of Ecology announced their decision to pursue linking the Washington carbon market with the joint California-Quebec market on November 13, 2023. However, optimistic estimates suggest that full linkage is unlikely to occur before 2025.
Washington State is considering mandatory greenhouse gas (GHG) disclosures for large businesses with the introduction of Senate Bill 6092 or the Washington Climate Corporate Data Accountability Act in early January 2024. If SB 6092 passes, Washington will become the second US jurisdiction – after California – to require economy-wide disclosure of all GHG emissions for businesses meeting a certain size threshold.
SB 6092 aims to help consumers understand the complete emissions footprint of Washington’s largest enterprises. The bill would require companies with over $1 billion in annual revenue and doing business in Washington (reporting entities) to report their direct and indirect GHG emissions annually to the Washington State Department of Ecology.
Although the bill does not define “doing business” in Washington, it is defined elsewhere as conducting “continuous or substantial activities in Washington state of such a character as to give rise to a legal obligation.” Wash. Admin. Code § 390-17-310. Considerations affecting that determination include whether a business registers as a corporation in Washington, appoints an in-state agent, hires employees, operates business locations, and purchases or sells goods or services in Washington. Wash. Admin. Code § 390-17-310.
Key highlights of the bill include the following:
- Reporting entities will have to disclose information regarding their Scope 1 emissions (direct GHG emissions from their operations), Scope 2 emissions (indirect GHG emissions from energy use), and Scope 3 emissions (indirect GHG emissions arising from the entity’s supply chain activities)
- Scope 3 emissions may include, among others, emissions from business travel, employee commutes, procurement, waste, and water usage. For the fossil fuel industry, “Scope 3 emissions include emissions from the use of products sold by that reporting entity”
- Reporting entities will be required to disclose their Scope 1 and Scope 2 emissions for the 2025 calendar year beginning October 1, 2026, and annually thereafter
- Scope 3 disclosures will be required for the 2026 calendar year beginning October 1, 2027, and annually thereafter
- Each report must be accompanied by independent third-party assurances that the report is complete and accurate
- Reports may be consolidated at the parent company level
- The Washington State Department of Ecology shall post a notice where a reporting entity fails to timely report
- The Department of Ecology must adopt guidelines for reporting entities to use in making their reports by January 1, 2025
Notably, SB 6092’s inclusion of Scope 3 emissions in its reporting requirements is critical. The purpose is to give consumers a glimpse into the emissions associated with an entity’s supply chains and employee activities. Such reporting creates critical compliance processes related to data collection and methodological rigor. By making Scope 3 reporting mandatory, the bill differentiates itself from Washington’s current mandatory GHG reporting, such as the state’s Clean Air Act and Climate Commitment Act, which requires certain large emitters in specified sectors to report their Scope 1 and 2 emissions.
This bill comes amid a flurry of other regulatory activity regarding climate-related disclosures. Just this past year, California passed a trio of climate disclosure laws, including SB 253, which shares many key provisions with Washington’s SB 6092 and will go into effect over the next three years. Likewise, the Securities and Exchange Commission may release its long-awaited final climate change disclosure rule in April 2024. Both moves come in the wake of the EU’s Corporate Sustainability Reporting Directive (CSRD), which went into effect at the beginning of 2023. If SB 6092 passes, Washington will join a growing number of jurisdictions where climate disclosure will become a critical compliance requirement.
Two Democratic senators introduced SB 6092 on January 9, 2024, and the Senate Committee on Environment, Energy, and Technology held its first hearing on the bill on January 17, 2024. It was scheduled for executive session in the Committee on January 30, 2024.
Washington businesses should prepare for SB 6092 by proactively examining their climate strategy, reporting policies, and disclosure requirements. To be best positioned to comply with SB 6092, as well as other climate disclosure laws (eg, California’s new climate disclosure statutes and the EU CSRD), reporting entities may begin considering implementing processes to track GHG emissions throughout their operations and supply chains. Washington constituents also have various avenues to provide input on the legislative process. Additionally, if SB 6092 becomes law, stakeholders will have an opportunity to participate in notice and comment once the Department of Ecology begins its rulemaking process.
For advice on participating in legislative and regulatory processes around SB 6092, and to find out more about the implications of this new bill for your business, please reach out to the authors or to your usual DLA Piper relationship attorney.