Navigating California’s Voluntary Carbon Market Disclosures Act (AB 1305)
Introduction
As the federal government grapples with climate disclosure regulations, California has taken decisive action to lead on corporate climate accountability. Through landmark legislation like SB 253, SB 261, and AB 1305, the state is setting a higher standard for transparency in greenhouse gas emissions, climate risk management, and the use of carbon offsets. These laws aim to ensure that companies operating in California not only disclose their environmental impacts but also take measurable steps toward sustainability.
In recent years, the scrutiny on corporate climate claims has intensified, with many companies leveraging carbon offsets to achieve net-zero or carbon-neutral goals. California’s AB 1305, also known as the Voluntary Carbon Market Disclosures Act, is set to change the way companies disclose their use of carbon offsets. This blog post explores the key requirements of AB 1305, its impact on businesses, and how companies can prepare for compliance while maintaining transparency and credibility.
What is AB1305 aspiring to do
AB 1305, also known as the Voluntary Carbon Market Disclosures Act (VCMDA), aims to enhance transparency around net-zero, carbon neutrality, and emissions reduction claims. It focuses specifically on companies that rely on voluntary carbon offsets as part of their emissions reduction strategy. The regulation works to ensure that such claims are substantiated and accurately represent the company’s impact on emissions to prevent greenwashing and increase accountability in the use of offsets.
What disclosures are required
AB 1305 requires companies that make net-zero, carbon neutrality, or emissions reduction claims to publicly disclose detailed information about their use of voluntary carbon offsets.
These disclosures must include:
A clear explanation of the projects associated with the offsets, including their location, type, and the amount of emissions they aim to reduce or remove.
Verification of the emissions reduction claims linked to these offsets, ensuring that they are real, quantifiable, and adding to what would have occurred without the offset project.
Any retirement of carbon offsets and the timeline over which these offsets are expected to generate reductions.
Who is impacted
AB 1305 applies to public and private companies operating in California that make climate-related claims involving carbon offsets.
Note that there is no income threshold; if you make climate-related claims you are subject to this rule.
This includes companies that market themselves as having achieved carbon neutrality or emissions reductions while relying on carbon offsets to support those claims.
Key deadlines
January 1, 2025: AB 1305 takes effect, companies in scope must comply with disclosure requirements by this date.
Current Status: Previous regulation attempts to delay enforcement of AB 1305 have not been successful. Unless another bill to amend AB 1305 is introduced before the January 2025 legislative session, companies in scope must comply with disclosure requirements.
How to get started
To comply with AB 1305, companies must start by gathering detailed information on any carbon offsets they currently use or plan to use in the future.
Preparation should include:
Validating the offsets: Ensure that the carbon offset projects being used are verified by a credible third party and meet the additionality, permanence, and measurability criteria required by the regulation.
Documenting all claims: Collect and organize data on the carbon offsets that support your company’s net-zero or emissions reduction claims, ensuring that every claim can be substantiated with robust documentation.
Our recommendation
AB 1305 sets a new standard for transparency in the use of carbon offsets. For companies that use offsets to support their sustainability goals, it’s essential to approach compliance thoughtfully. Our recommendation is to:
Start now: With the deadline fast approaching, companies should begin reviewing and validating their offset projects now to avoid last-minute compliance challenges.
Substantiate every claim: Any net-zero or emissions reduction claim involving carbon offsets should be fully backed by verifiable data. Failure to do so could expose companies to reputational risks or regulatory penalties.
Use offsets strategically: While carbon offsets can play a valuable role in sustainability strategies, they should be part of a broader emissions reduction plan. Companies that rely too heavily on offsets without reducing actual emissions may face scrutiny from both regulators and stakeholders.
Where Bespoke ESG can support
Bespoke ESG provides targeted support to help companies navigate the complexities of carbon offset disclosures under AB 1305, ensuring compliance while protecting brand integrity. Our services include:
Strategic Climate Communications: We help companies effectively communicate their emissions reduction strategies and the use of carbon offsets, ensuring transparency while avoiding greenwashing risks.
Carbon Offset Verification: We help companies assess and validate the carbon offsets they plan to use, ensuring they meet the necessary criteria and can be reliably included in net-zero claims.
Disclosure Preparation: We assist in gathering, verifying, and presenting the required data for AB 1305 compliance, ensuring that companies have everything they need to meet the regulatory standards.
Disclaimer: The information provided in this document is for general informational purposes only and does not constitute legal advice. Regulatory advice is provided solely within the scope of contracts between Bespoke ESG and its clients.