Recent legislation passed in California will significantly affect a wide range of businesses, as many shippers will have to consider mandatory sustainability reporting in 2024, according to a “Sustainability in Logistics” report from fourth party logistics provider (4PL) Redwood Logistics.
The report traces the impact of the so-called “California Effect,” as the state—which is such an industrial powerhouse that it represents the world’s fifth-largest economy—often influences national policy and corporate behavior through decisions made by the California Air Resource Board (CARB) and state legislation.
In its latest decisions, the state has been leading the charge in sustainable business practices in the United States through requirements that some companies must track their greenhouse gas (GHG) emission footprints, Redwood said. Recent examples that could effect shippers, manufacturers, fleet owners, and brokers include an acceleration to transition Class 2b to Class 8 vehicles from internal combustion engines to electric vehicles through the Advanced Clean Trucks (ACT) and Advanced Clean Fleets (ACF) regulations.
Those were followed by the recent Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) that will have additional impact on shippers operating in California.
As described by the Redwood report, the Climate Corporate Data Accountability Act will oblige companies earning annual revenues of $1 billion or more and operating in California to disclose their direct owned and controlled emissions by 2026 (Scope 1 and 2) and those produced by their upstream and downstream transportation (Scope 3) by 2027. This marks the first mandate to require GHG reporting compliance from enterprises in the United States, outside of US-based companies that may be enforced by existing international regulations such as EU’s Corporate Sustainability Reporting Directive (CSRD).
"This mandatory reporting is going to be here before shippers know it,” Nate Greensphan, Sr. Product Manager at Redwood, said in a release. “Businesses need to understand: will they be captured by the scope of these regulations and what are the reporting requirements? Then, they need to implement mechanisms to ensure compliance when reporting becomes mandatory. The time to act is now."
While those requirements seems challenging, implementing sustainable business practices can increase profitability when done right, Redwood said.
"While it's true that companies often invest in what's necessary, this legislation could align with their profitability goals,” Greensphan said. “Whether driven by investor expectations, consumer demand, or a competitive market shifting towards sustainable value chains, meeting these mandates could support businesses in their broader missions and bottom line objectives."
