California’s ESG reporting push is poised to spur building decarbonization

With California’s Climate Accountability Package now in effect, the state is in a new age of corporate sustainability — and like so much California regulatory policy, it has implications for the whole country. 

Consisting of two landmark disclosure bills, the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, the CAP aims to build on landmark federal policy wins by requiring emissions disclosure to encourage true corporate policy change. California-based companies exceeding $500 million in revenue are now required to disclose climate-related financial risks. In 2026, those with revenues exceeding $1 billion will have to report on their carbon footprint, beginning with scope 1 and 2 emissions from onsite activities and purchased electricity.

The compliance window is shorter than many realize and will require businesses to quickly leverage deep decarbonization technologies. This could be a massive win for companies that offer services in distributed energy resources, energy storage, energy efficiency, consulting engineering, MEP contracting, and other related sectors.

And this potential demand isn't limited to California's borders. The state's embrace of ESG reporting sends a clear signal to private markets across the U.S. and even beyond; where California goes, other states tend to follow. Back in 2007, California’s government was one of the first to implement an energy efficiency program, the passage of which had an immediate national effect as lawmakers sought to replicate its model.

A number of the largest U.S. market players, including Apple, Microsoft, Adobe, and IKEA, were already taking steps to improve the sustainability of their operations. Now, however, the primary commercial market of decarbonization services is shifting from early adopters of climate action to the early majority — and California’s CAP is accelerating this change.

In my experience, scope 1 and 2 emissions are often most businesses’ first priority, as they’re subject to more stringent time constraints and can quickly deliver an outsized impact on emissions. Their on-site facilities, for example, are one of the larger sources of pollution across the country, accounting for 40% of all U.S. emissions. Commercial sites represent almost half this number, a consequence of outdated technologies that lead to significant energy waste. 

Companies that offer easy, cost-effective ways for businesses to access emissions-reducing upgrades can change this — and there are a lot of them, spanning all sections of the built environment. 

Mechanical, electrical, and plumbing, or MEP, upgrades, for instance, are highly impactful to building performance and include both new construction and retrofits of existing equipment. Building owners and operators could, for example, replace gas-fired boilers with high-efficiency condensing units, improving internal air quality while saving on costs. If a retrofit makes more sense, equipping gas boilers with low-nitrogen oxide emission systems can help mitigate scope 1 emissions and comply with various air quality controls, district rules and regulations.

Replacing standard efficiency pumps with variable speed drives is another way of making buildings more sustainable, as they can optimize energy consumption while extending the lifespan of system equipment. Beyond these common MEP measures, building owners might also consider incorporating oxygen and trim controls as well as parallel positioning fuel-to-air ratio burner management systems that refine heating combustion processes for improved efficiency and lower emissions.

With so many upgrades available, building owners benefit the most from integrated support that can minimize multi-party complexity and costs. Access to financing is also important for the more costly, higher-impact upgrades that pay for themselves over time, like solar PV, on-site storage, or new high-efficiency HVAC systems. 

Depending on a business’s needs, the most effective efficiency upgrades may differ — though even small ones go a long way when applied at scale, such as LED lighting systems, which use 90% less energy use and have 15 times the lifespan of traditional incandescent bulbs. 

Decarbonizing the built environment won’t only prove lucrative for clean technology providers, but will help save massive sums of money in the long run — and businesses increasingly recognize this.

Building on the success of previous climate legislation, the CAP represents another important milestone in the clean energy transition and doubles as a catalyst for substantial industry economic growth. Its passage represents an urgent call to action and opportunity — not only for the corporations being compelled to take their emissions footprint seriously, but also for clean technology companies that can take advantage of the new demand for decarbonization services. 

Jeff Sprau is the CEO of Legence. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.