The Voluntary Carbon Market Disclosures Act (VCMDA) is a California law designed to increase transparency in companies' use of carbon offsets. It requires organizations to publicly disclose detailed information about the carbon offset projects they are involved in. The VCMDA outlines specific disclosure requirements, including Business Identification, Project Details, Validation Protocols, and Third-Party Verification.
Any statements or disclosures related to carbon neutrality or emission reductions must include these parameters, methodology, and extent of evaluation for accuracy. These disclosures are necessary regardless of whether an offset purchase is involved. Third-party verification can serve as evidence alongside the entity or product's emissions disclosure.
An entity that is marketing or selling voluntary carbon offsets or an entity that (i) purchases or uses VCOs and (ii) makes climate-related emissions claims within California.
The primary goal of the VCMDA is to enhance transparency and accountability in corporate climate claims by requiring detailed disclosures. The law seeks to prevent greenwashing by ensuring companies back their environmental statements with verifiable data and methodologies. It aims to inform stakeholders—consumers, investors, and the public—by providing accurate information about corporate climate performance and progress toward stated goals. Additionally, AB 1305 promotes the standardization of reporting, making it easier to understand and compare different companies’ environmental efforts. Ultimately, the legislation encourages responsible communication about corporate climate actions and commitments, fostering trust and accountability.
Despite receiving less attention than its counterparts (SB253 and SB261), AB 1305 will likely impact a broader range of business entities. The law does not clearly define key terms such as “operate in the state,” “make claims within the state,” or “significant reductions” of greenhouse gas (GHG) emissions. If interpreted broadly, AB 1305 could apply to any company conducting business in California or with Californians, provided it has stated carbon reduction goals on its website or in sustainability reports. Non-compliance with AB 1305 could result in statutory penalties of up to $500,000.
Penalties for violating AB 1305 may vary based on factors such as the severity of the violation, the size of the company, and whether the violation was intentional or negligent. In addition to monetary fines, companies in violation could face reputational damage and potential legal action from consumers or investors who relied on false or misleading climate claims. AB 1305 authorizes civil penalties to be obtained for violations of not more than $2,500 per day, with a maximum of $500,000 per violation.
| October 2023 | Voluntary Carbon Market Disclosures Act becomes state law |
|---|---|
| January 2025 | Disclosure obligations begin and full enforcement by state and/or local government entities will start in 2025. |
Cosmetic brands, labs, and supplier companies must invest in regulatory compliance programs, overhaul their safety testing processes, and even change their ingredients, formulations, or labels to align with AB 1305. Adapting to the bill's provisions can require significant resources, but it’s a step forward in increasing consumer confidence in cosmetic safety.
Ingredient Review and Compliance
Update Labeling and Reporting