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Comply With AB 1305: Bill & Disclosures
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Several states within the U.S. aren’t waiting on national environmental legislation to battle the current climate emergency, such as New York and California.
California has always been a leader in many ways, for its globally renowned fiscal status landing a spot as the fifth largest economy in the world and in terms of combating climate change – having developed a set of statewide climate legislation before many other states and even countries back in September 2022.
Now, California is back at it again with AB 1305 – a new bill and disclosure aimed at regulating the amount of carbon offsets purchased by companies within the state to avoid trying to compensate for excess emissions.
In this article, we’ll provide an overview of AB 1305, its importance, and how companies can ensure compliance.
What is AB 1305?
AB 1305, a bill and disclosure in California, refers to how companies are regulated in terms of marketing, selling, and purchasing voluntary carbon offsets for businesses within the state.
💡 AB 1305 is commonly referred to as the Voluntary Carbon Market Disclosures Act (VCMDA) just as voluntary carbon offsets are often referred to as VCOs.
“ California's Assembly Bill 1305 (AB 1305) is meant to help companies to practice transparency and take accountability within the voluntary carbon offset market. ”
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Developed for the state of California, AB 1305 requires businesses in the state that engage with the market for voluntary carbon offsets (VCOs) to publicly disclose details regarding their current offset projects.
Under AB 1305, it is imperative that these disclosures are made publicly available on the organization’s website and that it is updated every year in line with the annual disclosure date for AB 1305 – January 1st.
The main requirements businesses must follow under AB 1305 include:
- Providing Details on the Carbon Offset Project – Companies required to comply with AB 1305 must provide ample Information regarding the nature of their carbon offset project – such as the timeline, type of offset, and location in which the project takes place.
- Verified Status – Companies must demonstrate that the offset project has been verified by a third party. If available, companies should also provide the project identification number and the name of the party selling the offset program, such as California’s Cap-and-Trade Program which is administered by the California Air Resources Board (CARB).
- Demonstrate Accountability – Companies should reveal any measures taken to combat potential setbacks to the project itself in addition to the efforts the company made to reduce their own emissions, but fell short – and therefore referred to the use of a carbon offset project. This helps companies to take accountability for their individual failure to meet their emission reduction targets, and reassess the steps that can be taken to ensure those goals are met in the future.
- Ensure Accuracy – Any organization claiming that the offset helped them to achieve carbon neutrality or net-zero emissions must disclose the legitimacy of these labels via verified third party information.
👉 Overall, AB 1305 is a bill and disclosure in California that is aimed to ensure businesses across the state take accountability for the impact of their activities on the environment and do not loosely rely on or refer to the use of voluntary carbon offsets.
Why did AB 1305 start?
AB 1305 started as a result of newfound concern regarding the voluntary carbon market, and was developed in hopes of helping to regulate much of the activity that has occurred undisclosed thus far.
💡 A good example of this is with Delta, who was accused of selling low-quality carbon credits – confirmed skeptics’ criticism of the voluntary market and how it may allow for some companies to seem more eco-friendly than they actually are.
As a result, greenwashing allegations such as these fueled the need for greater transparency and accountability when it came to companies seeking out the use of carbon credits or carbon offset projects to aid in their emission reduction efforts.
More specifically, California has always paved the way for more stringent climate legislation – having passed the California Climate Accountability Package which includes SB253, SB261, and SB252.
👉 Ultimately, by requiring companies to provide greater detail regarding their involvement with the voluntary carbon market, AB 1305 can help companies from broadcasting false environmental claims and ensure that businesses use the highest-quality offsets possible to support their already-existing emission reduction strategies.
The table below will further explain the the timeline for AB 1305, SB253, and and SB261.
| Legislation | Effective Date | Key Compliance Requirements |
|---|---|---|
| AB 1305 | January 1, 2024 (enforcement begins January 1, 2025) | Requires businesses selling or marketing voluntary carbon offsets to disclose details about their offset projects, including third-party verification and updates on claims like carbon neutrality. |
| SB 253 | January 1, 2026 | Large corporations must publicly report their Scope 1, 2, and 3 greenhouse gas emissions annually, with mandatory assurance and verification starting in 2027. |
| SB 261 | January 1, 2024 | Companies with over $500 million in annual revenue must disclose climate-related financial risk reports starting in 2024, including strategies to mitigate those risks. |
What is the main goal of AB 1305?
The main goal of AB 1305 is to require companies across California to justify their ecological promises and verify their sustainability claims.
💡 Usually, many people will fall guilty to believing that any company or individual that refers to the voluntary carbon offset market is simply reducing the rest of the emissions they were unable to on their own – but this simply isn’t the case. AB 1305 will help hold companies accountable for their true environmental efforts and decrease dependency on carbon offsets and credits.
“ AB 1305 is important because it will require companies to be transparent regarding not only their actions with the voluntary carbon market, but also with their own efforts to reduce emissions and demonstrate environmental commitment. ”
A perfect example is with Taylor Swift and her private jet, which garnered unwavering media attention in the midst of her globally successful Eras Tour. Many people presumed that since Swift was reported to have purchased carbon credits to offset the emissions of her tour, it meant the excess emissions from her private jet were compensated for – but in reality, this isn’t the case.
This is because it is often difficult to ensure if the carbon credits or carbon offsets purchased meet the relevant criteria, in this case – Swift’s excessive air travel. AB 1305 will attempt to accomplish the same motif by verifying the extent in which companies engage with the voluntary carbon market.
Here are some other reasons why AB 1305 is important:
- Address Criticism of Voluntary Carbon Market – Many critics refer to the current set of the of voluntary carbon market as flawed, but a bill and disclosure such as AB 1305 can help to prevent companies from using carbon credits and offsets to brag about their commitment to environmental reform.
- Reduce False Net-Zero Claims – It’s easy to subscribe to the notion of carbon credits and believe it balances everything out, but this isn’t the case – in the same way that eating a whole cake and then going to the gym for 3 hours doesn’t make you a healthy person. AB 1305 will play a role in helping to reduce false claims on behalf of companies too lazy to develop a robust climate strategy.
- Greater Trust & Accountability – Standardized disclosures such as AB 1305 can help businesses to improve communication with their stakeholders and gain credibility for future partnered projects. In addition to this, companies will be forced to re-evaluate their current emission reduction strategies.
- Provide Consumers with More Information – The public disclosures required under AB 1305 will help customers to better understand the true sustainability of the company in question via the use of reliable data required under the law.
👉 Companies subject to report under AB 1305 will need to validate their engagement with the voluntary carbon market, which in turn – will provide indispensable information regarding a company’s environmental integrity and prevent potential greenwashing behavior from being swept under the rug.
When does AB 1305 go into effect?
Technically, AB 1305 went into effect on January 1, 2024 – but all businesses within the state will be expected to comply one year later on January 1, 2025.
💡 Although AB 1305 already went into effect at the start of 2024, the bill never specified which date the first set of disclosure should be made. This was later clarified by Jesse Gabriel, who served as an assembly member for AB 1305 – who then confirmed the first disclosures should take place on January 1, 2025 and every year after that.
However, it is important to remember that AB 1305 is already in effect – meaning that businesses that fail to comply may face legal fines up to $2,500 per day for non-compliance if they do not take the steps to comply by the time enforcement kicks in at the start of 2025.
👉 Therefore, it is important for companies that have yet to take action to ensure compliance with AB 1305 act sooner than later – as the deadline for the first annual disclosure under AB 1305 is fast approaching.
How can companies comply with AB 1305?
Businesses in California can start preparing to comply with AB 1305 by taking note of the current carbon credits they have purchased or carbon offsets they have used.
“ Prior to publicly disclosing information about their activity in the voluntary carbon market, companies should review all of their current marketing campaigns in search for potential claims that could be considered as greenwashing – and adjust them accordingly with information that can be backed up under AB 1305 and other future required disclosures. ”
Here are some of the ways that companies in California can make sure they comply with AB 1305:
- Refresh Your Knowledge of the Law – California may be a standout for its progressive climate legislation, such as by working to ban the sale of new electric vehicles by 2035 – but it also means businesses across the state will have a lot to remember. Therefore, refreshing your company’s knowledge of current protocols in California could be worthwhile before trying to tackle compliance under AB 1305.
- Strengthen Internal Communication – Letting your employees and internal stakeholders know the ins-and-outs of AB 1305 can help to make sure everyone does their part to make sure the disclosure is precise and on-time.
- Improve Data Collection – Not only can this help your company to improve upon other areas such as collecting information from suppliers and develop a more advanced carbon emission reduction plan, but it can help to gather all the details needed to comply with AB 1305.
- Make Claims More Carefully – If your company wants to constitute itself as carbon neutral or net-zero, you’ll need clear documentation on how your company measures, monitors, and manages your progress on your individual goals in addition to your carbon offset projects.
- Assign Clear Roles Within the Company – Letting everyone within your organization know now what they are responsible for, such as to collect the appropriate data or to update the website – you can avoid late compliance fines under AB 1305.
👉 Overall, AB 1305 is aimed to encourage companies to take a look at their current carbon emission reduction schemes – and make sure those who want to label themselves as a carbon neutral or net-zero company have earned it.
What About Greenly?
If reading this article about bill AB 1305 has made you interested in reducing your carbon emissions to further fight against climate change – Greenly can help you!
Trying to switch your company over to the values of a green business can be overwhelming, but don’t worry – Greenly is here to help. Click here to schedule a demo to see how Greenly can help you find ways to improve energy efficiency and decrease the dependency on fossil fuels in your own company.
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
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