AB405 - Fashion Environmental Accountability Act of 2025.

Amended IN Assembly May 01, 2025 Amended IN Assembly April 21, 2025 Amended IN Assembly April 10, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 405 Introduced by Assembly Member Addis February 04, 2025 An act to amend Section 38532 of, to add Section 38534.5 to, and to add Chapter 10 (commencing with Section 119500) to Part 15 of Division 104 of, the Health and Safety Code, relating to environmental accountability. LEGISLATIVE COUNSEL'S DIGEST AB 405, as amended, Addis. Fashion Environmental Accountability Act of 2025. Existing law requires the State Air Resources Board, on or before July 1, 2025, to develop and adopt regulations requiring specified partnerships, corporations, limited liability companies, and other business entities with total annual revenues in excess of $1,000,000,000 and that do business in California, defined as “reporting entities,” to publicly disclose starting in 2026 or on a date to be determined by the state board, and annually thereafter, their scope 1 and scope 2 greenhouse gas emissions, as defined, and, starting in 2027 and annually thereafter, their scope 3 greenhouse gas emissions, as defined, for the reporting entity’s prior fiscal year, as provided. Existing law prescribes additional duties on specific industries for a variety of purposes, including those that promote the public health, safety, and welfare relating to issues that are unique to that industry. Existing law, for example, requires any tanning device used by a tanning facility to comply with all applicable federal laws and regulations. This bill would enact the Fashion Environmental Accountability Act of 2025 and would require fashion sellers to carry out effective environmental due diligence, as provided. The bill would vest the Department of Toxic Substances Control with jurisdiction over fashion sellers’ compliance with ensuring that a fashion seller’s covered fashion products, as defined, do not contain any regulated chemicals, as defined, above thresholds the act would establish, as provided. The bill would authorize the department to adopt regulations to implement, enforce, interpret, or make specific portions of the act under its jurisdiction, as provided. The bill would vest the state board with jurisdiction over a fashion seller’s environmental due diligence under the act pertaining to emissions of greenhouse gases. The bill would require a fashion seller, in carrying out its effective environmental due diligence, to comply with certain environmental guidelines that, at a minimum, require the fashion seller to, among other things, embed responsible business conduct in its policies and management systems, identify areas of significant risks of societal and ecological harms from its own activities and its supply chain relationships, identify, prioritize, and assess the significant potential and actual adverse impacts of those risks, and cease, prevent, or mitigate those risks, as provided. The bill would require a fashion seller, beginning July 1, 2027, and annually thereafter, to submit to the department and the state board an Environmental Due Diligence Report pertaining to the effective environmental due diligence performed by the fashion seller for the prior calendar year, as provided. The bill would specify that fashion sellers are reporting entities for purposes of above-described public disclosure requirement for emissions of greenhouse gases and would require the disclosure be reported on their Environmental Due Diligence Report. The bill would require a fashion seller, in carrying out its environmental due diligence, to establish establish, on or before July 1, 2027, a quantitative baseline for their emissions of greenhouse gases and targets for reductions in the emissions of greenhouse gases in the near-term and long-term covering their scopes 1, 2, and 3 emissions, as provided. The bill would require a fashion seller to include in its Environmental Due Diligence Report certain information related to its greenhouse gas emissions. The bill would require a fashion seller, on or before January 1, 2027, to ensure that their covered fashion products do not contain any regulated chemicals above the act’s thresholds, as provided. The bill would prohibit, on and after January 1, 2028, a person from manufacturing, selling, or distributing in commerce any covered fashion product that contains any regulated chemicals above those thresholds, as specified. The bill would authorize the department or the Attorney General to enforce the act’s thresholds, as specified, and would punish violations of the threshold requirements and of the act that are enforced by the department with an administrative or civil penalty not to exceed $5,000 for a first violation, and not to exceed $10,000 for each subsequent violation, as specified. The bill would subject a fashion seller in violation of the act to a civil penalty of up to 2% of its annual revenue penalty, as provided, for violations enforced by the state board. The bill would authorize the department and the state board, as appropriate, to seek appropriate equitable remedies for a violation of the act. The bill would require the civil penalties collected by the state board to be deposited into the Fashion Environmental Remediation Fund, which the bill would establish in the General Fund. The bill would require moneys in the fund, upon appropriation by the Legislature, to be expended for purposes of implementing the act and one or more environmental benefit or environmental remediation projects that directly and verifiably benefit the communities directly impacted, to the extent practicable, at the location the injury has occurred. projects. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. This act shall be known, and may be cited, as the Fashion Environmental Accountability Act of 2025. SEC. 2. Section 38532 of the Health and Safety Code is amended to read: 38532. (a) This section shall be known, and may be cited, as the Climate Corporate Data Accountability Act. (b) For purposes of this section, the following terms have the following definitions: (1) “Emissions reporting organization” means a nonprofit emissions reporting organization contracted by the state board pursuant to paragraph (3) of subdivision (c) that both: (A) Currently operates a greenhouse gas emission reporting organization for organizations operating in the United States. (B) Has experience with greenhouse gas emissions disclosure by entities operating in California. (2) (A) “Reporting entity” means a partnership, corporation, limited liability company, or other business entity formed under the laws of this state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States with total annual revenues in excess of one billion dollars ($1,000,000,000) and that does business in California. Applicability shall be determined based on the reporting entity’s revenue for the prior fiscal year. (B) “Reporting entity” includes a fashion seller as defined in Section 119500. (3) “Scope 1 emissions” means all direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities. (4) “Scope 2 emissions” means indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location. (5) “Scope 3 emissions” means indirect upstream and downstream greenhouse gas emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products. (c) (1) On or before July 1, 2025, the state board shall develop and adopt regulations to require a reporting entity to annually disclose all of the reporting entity’s scope 1 emissions, scope 2 emissions, and scope 3 emissions, and obtain an assurance engagement performed by an independent third-party assurance provider. Those regulations shall require the reporting entity to make the annual disclosure to either of the following: (A) The emissions reporting organization, if contracted for services. (B) The state board. (2) The state board shall ensure that the regulations adopted pursuant to this subdivision require all of the following: (A) (i) (I) That a reporting entity, starting in 2026 on or by a date to be determined by the state board, and annually thereafter on or by that date, publicly disclose to the emissions reporting organization, if contracted for services, or the state board, all of the reporting entity’s scope 1 emissions and scope 2 emissions for the reporting entity’s prior fiscal year. (II) That a reporting entity, starting in 2027 and annually thereafter, publicly disclose its scope 3 emissions on a schedule specified by the state board as part of the regulations developed pursuant to this subdivision for the prior fiscal year. (ii) A reporting entity shall, beginning in 2026, measure and report its emissions of greenhouse gases in conformance with the Greenhouse Gas Protocol standards and guidance, including the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard developed by the World Resources Institute and the World Business Council for Sustainable Development, including guidance for scope 3 emissions calculations that detail acceptable use of both primary and secondary data sources, including the use of industry average data, proxy data, and other generic data in its scope 3 emissions calculations. (iii) Reports may be consolidated at the parent company level. If a subsidiary of a parent company qualifies as a reporting entity pursuant to paragraph (2) of subdivision (b), the subsidiary is not required to prepare a separate report. (iv) (I) Starting in 2033, the state board may survey and assess currently available greenhouse gas accounting and reporting standards. At the conclusion of this assessment the state board may adopt a globally recognized alternative accounting and reporting standard if it determines its use would more effectively further the goals of this section. This review process shall include consultation with the stakeholders identified in paragraph (5). (II) If the state board adopts an alternative accounting and reporting standard, the state board shall develop and adopt new regulations, pursuant to paragraph (1), to ensure full conformance with the new standard and reporting of scope 1 emissions, scope 2 emissions, and scope 3 emissions and other requirements of this section. (v) During 2029 the state board shall review, and on or before January 1, 2030, the state board shall update as necessary, the public disclosure deadlines established pursuant to clause (i) to evaluate trends in scope 3 emissions reporting and consider changes to the disclosure deadlines to ensure that scope 3 emissions data is disclosed to the emissions reporting organization, if contracted for services, or the state board, as close in time as practicable to the deadline for reporting entities to disclose scope 1 emissions and scope 2 emissions data. (vi) The reporting timelines shall consider industry stakeholder input and shall take into account the timelines by which reporting entities typically receive scope 1 emissions, scope 2 emissions, and scope 3 emissions data, as well as the capacity for an independent assurance engagement to be performed by a third-party assurance provider. (B) That a reporting entity’s public disclosure maximizes access for consumers, investors, and other stakeholders to comprehensive and detailed greenhouse gas emissions data across scope 1 emissions, scope 2 emissions, and scope 3 emissions, as defined by this section, and is made in a manner that is easily understandable and accessible. (C) That a reporting entity’s public disclosure includes the name of the reporting entity and any fictitious names, trade names, assumed names, and logos used by the reporting entity. (D) (i) That the emissions reporting is structured in a way that minimizes duplication of effort and allows a reporting entity to submit to the emissions reporting organization, if contracted for services, or the state board, reports prepared to meet other national and international reporting requirements, including any reports required by the federal government, as long as those reports satisfy all of the requirements of this section. (ii) Reporting entities that are required to report mandatory industrial emissions pursuant to regulations adopted pursuant to Section 38530 may provide that data with the disclosure required pursuant to this section. (E) That a reporting entity’s disclosure takes into account acquisitions, divestments, mergers, and other structural changes that can affect the greenhouse gas emissions reporting, and is disclosed in a manner consistent with the Greenhouse Gas Protocol standards and guidance or an alternative standard, if one is adopted after 2033. (F) (i) That a reporting entity obtains an assurance engagement, performed by an independent third-party assurance provider, of their public disclosure. The reporting entity shall ensure that a copy of the complete assurance provider’s report on the greenhouse gas emissions inventory, including the name of the third-party assurance provider, is provided to the emissions reporting organization, if contracted for services, or the state board, as part of or in connection with the reporting entity’s public disclosure. (ii) The assurance engagement for scope 1 emissions and scope 2 emissions shall be performed at a limited assurance level beginning in 2026 and at a reasonable assurance level beginning in 2030. (iii) During 2026, the state board shall review and evaluate trends in third-party assurance requirements for scope 3 emissions. On or before January 1, 2027, the state board may establish an assurance requirement for third-party assurance engagements of scope 3 emissions. The assurance engagement for scope 3 emissions shall be performed at a limited assurance level beginning in 2030. (iv) A third-party assurance provider shall have significant experience in measuring, analyzing, reporting, or attesting to the emission of greenhouse gasses and sufficient competence and capabilities necessary to perform engagements in accordance with professional standards and applicable legal and regulatory requirements. The assurance provider shall be able to issue reports that are appropriate under the circumstances and independent with respect to the reporting entity, and any of the reporting entity’s affiliates for [Text truncated for display. Full text available on Congress.gov.]