Episode Notes 

In October 2023 California’s Climate Corporate Data Accountability Act (SB 253), which directs the State Air Resources Board to develop regulations requiring corporations that do business in California, with annual revenues over $1 billion, to publicly disclose their GHG emissions, was signed into law. 

In this episode, we discuss what this legislation means for product managers and individual products. Are we going to start to see product-level impacts become enterprise-level reporting? And what steps can product managers take to align product-level impacts and reporting to corporate goals? 

Listen to find out more.

In This Episode

In a moment we're going to look at California's new Climate Corporate Data Accountability Act which includes scope 3 greenhouse gas reporting starting in 2027. But first, I want to explore the difference between corporate level reporting and the environmental impact reduction and reporting that happens at the product level. [00:05 ]  

• Neil: A good frame to do this is the what, the who and the why. And if you look at how companies take raw materials, create products and sell it, there's many standards and different aspects you need to report on that are covered by the Sustainable Development Goals. You have standards like the GRI and SASB and so on that are out there that help create the construct on how to report on the operations of business. [00:51 ]  


• To understand who's the audience for these kinds of reports, it is typically governments where you're reporting into a kind of platform when it's regulated. Investors that look at these reports when you're looking at investor reports or sustainability reports and NGOs take particular interest in too. Customers, indirectly, through the brand that you create and how you position yourself as a company in terms of being sustainable. [01:25 ]  


• The reason why companies do this is it provides a platform to operate. Sometimes - it is around regulations - if you did not report you would not be able to operate in that particular jurisdiction. It’s a way to control how businesses operate in a jurisdiction. [02:05 ]


• On the product side of things though, it becomes very direct. If you look at what a company is, it is about making products and making them better than competition and selling them for a price that customers will buy. And in this case a product level declaration from a sustainability perspective addresses that product and how it can be positioned against competition in a better way. [02:25 ] 


• If you're looking at who's the customer, there isn't any regulation to date that covers product regulations. I think there are some. When you're looking at the digital product passport in Europe, the recycle content in packaging in several places in the US. But there's nothing broad that operates at the scale that you typically see corporate reporting standards and regulations. They are very dedicated to customers. They're creating a differentiation against competition so that customers choose your product as opposed to others. Therefore reporting in terms of EPDs or lifecycle assessments or ecolabels are a key differentiator there. [02:46 ]


• I think it is important to keep in mind that for the vast part, product managers have never had to worry about corporate level reporting because this is something that sustainability teams and investor relations teams take care of. Whereas a product manager needs to care about product level reporting, because typically this comes out of their budgets and their accountability. [03:34 ]  

Jim, do you have anything to add to that? [03:58 ]  

• Jim: I think there are different purposes. The purpose of corporate reporting is really to look at the overall carbon footprint or broader perspective to comply with regulations or stakeholder brands. There is a lot of interest in the investment community now in some of that. [04:01 ]


• But when you get into the actual individual product, you're dealing with collecting early information, in this case greenhouse gases on the entire product footprint from raw materials, acquisition through use and some kind of end-of-life management. So, there is an entirely different focus between the two activities which as Neil said, is not really tied back to a reporting requirement. But it is tied back to customer and consumer expectations in terms of what are they looking for in the products they buy based on a reduced carbon footprint. [04:18 ]


• There are differences. Both are important. And as things evolve, we're going to see them come closer and closer together, where the product manager and the activities in the innovation and stage gate process are going to have a greater role to play in helping the company at the enterprise level meet their corporate greenhouse gas reduction targets. [04:48 ]


• The product component and the product manager's role are pivotal to help the company meet their greenhouse gas reduction targets in some of these requirements that we're seeing but also lay the foundation for improving the overall performance of the company. So that's what I see between the product and the enterprise level. [05:32 ] 


• Neil: To add to that, traditionally scope reporting has been about the operations, and if you look at GHG, there's a GHG protocol that breaks this down into scope 1 and 2. So, scope 1 is things that you burn gas on in a CHP to produce electricity and heat. Scope 2 is you're using electricity to make something. So, you're buying energy from someone else who does that burning of fuel for you. And then there is scope 3, which is all the materials that you buy; the non-energy related stuff you're buying like steel, copper, plastics. [05:52 ] 


• This is where scope 3 comes in and where product and corporate start meeting is this realm of scope 3 because your scope 3 impacts are primarily determined by the products that you make. And this is where you see the bridge coming back between product and corporate. [06:36 ]  


• Jim: Scope 3 has both upstream and downstream, but the upstream is your suppliers. When a product manager and the product manager's team lay out a new footprint for a product, they're going to have to pick materials and then suppliers. So now procurement is going play a key role in helping the company understand their whole greenhouse gas emissions on scope 3. But even more importantly from the product level is that product goals are going to be based cradle-to-cradle, cradle-to-grave lifecycles. [06:54 ] 


• Neil: And even if you didn't care so much about the materials that you're using, scope 3 has got 15 categories and one of them is largely driven by your products and how they're used in the world. If you're oil and gas producer, there's no real impact in extracting oil from the ground because the major impact actually comes from burning that. And now scope 3 plays into that because you need to now report on it. And this is where product managers and their role in creating products that are more energy efficient and have lower impacts also becomes public information through scope 3 reporting at the corporate level. [07:35 ] 

Let's look at this in the lens of the new legislation that California just passed. In October of this year, California introduced the Climate Corporate Data Accountability Act, essentially requiring businesses with over revenue of 1 billion to report their greenhouse gas emissions, starting with scope 1 and 2 emissions in 2026 and adding scope 3 emissions in 2027. What is the relevance of this legislation for product managers and individual products? [08:18 ]  

• Jim: The significance is that now you've got a requirement in the state of California that says to do business in my state, you have to report and meet these requirements. And I think that's impactful. But people have always said when we work internationally in Europe or in other places around the world or even in other states, is the influence California has had in laying the foundation or setting the stage for environmental or sustainability directions by these other states or countries. They've never adopted California's rules by any means. But what California does sets a vision and leadership perspective. It has an impact in leading as an example, as a benchmark for other countries to look at to tighten their own environmental or emissions rules. So, with greenhouse gas emissions reporting now coming out of California, I think other countries are going to see that and certainly other states are going to see that, and maybe we call it the California effect - it is going to have a major impact across the US and across the world. [08:44 ]  


• Neil: It's not to be underestimated what 5000 companies mean. That's a significant portion of the most powerful companies that operate from outside the world but operate in California. And so whether the rest of the world follows or not, or the rest of the states follow or not, it doesn't matter. The fact is they will have to comply with these regulations if they do enough business in California. [10:28 ] 


• But I think it's important to keep in mind why this is so serious. There have been sc