This story is also available in Spanish.
California, often at the forefront of progressive environmental initiatives, has once again taken a significant step toward combating climate change. In 2023, Governor Gavin Newsom signed Senate Bill 253 into law. This groundbreaking legislation mandates large California businesses — including Blue Shield of California — to disclose carbon emissions starting in 2026. The mandate is aimed at enhancing transparency and corporate accountability, which in turn will provide long-term benefits to public health.
SB 253 includes reporting on three areas of emissions as defined by the GHG Protocol Corporate Standard:
- Scope 1 emissions are direct emissions from owned or controlled sources, including facilities.
- Scope 2 emissions are indirect emissions from the generation of purchased energy.
- Scope 3 emissions include all indirect emissions not covered in Scope 2, including emissions produced by supply chain vendors that provide goods and services.
Under SB 253, large companies must disclose Scope 1 and 2 emissions annually starting in 2026. By 2027, they must report Scope 3 emissions, including emissions stemming from supply chains.
Making supply chains more sustainable
As Blue Shield of California joins in efforts to reduce its carbon footprint, the supply chain has emerged as an area with the most significant potential impact. According to Pradip Khemani, Blue Shield of California’s vice president of Business Solutions and Strategic Alliances, we are working with suppliers of all sizes to help them more effectively measure, report and reduce emissions.
“To mitigate the climate crisis in communities we serve, we not only want to reach the governor’s goals, but we want to bring other companies along on this journey,” said Khemani. “The climate crisis is a healthcare crisis. Marginalized communities get hit the hardest, so reducing our environmental impact is our responsibility as an organization advancing health equity. We also have a fiduciary responsibility to our members and from a business standpoint — being more climate resilient also equates to reduced costs and affordability in the long-term.”
The Business Council on Climate Change (BC3), a nonprofit dedicated to incubating, scaling and sharing world-leading solutions to address climate change, has been facilitating cross-industry collaboration for over 15 years. According to Maura McKnight, executive director of BC3, Blue Shield of California’s efforts have not gone unnoticed.
“California is the fifth largest economy in the world, and we often set the tone on environmental practices in the U.S.,” McKnight said. “Blue Shield understands the very real connection between climate change and health and has been working across companies and industries to lead in this space, ahead of the state’s deadline.”
Practical tips for suppliers
For businesses looking to comply with the new law, McKnight recommends:
- Start now: Measuring and reporting emissions is a long-term journey. Companies doing business in Europe and California are already facing mandatory reporting requirements. Just this month, the Securities and Exchange Commission announced new rules to enhance and standardize climate-related disclosures by public companies and in public offerings. These requests from customers, investors and regulators will continue to increase.
- Begin with manageable steps: Collaborate with stakeholders and establish measurable goals for continuous improvement.
- Gather the troops and the resources: Assign financial resources and dedicated staff to lead your sustainability measurement and reporting efforts. Each company addresses this in different ways — building out sustainability teams, hiring a consultant to help measure emissions, assigning a lead in your procurement department to collect supply chain emissions data, hiring an Environmental Social Governance controller — all are actions companies of various sizes are taking.
- Collect the data: Begin measuring your company emissions, starting with Scopes 1 and 2. Companies often require outside help to measure Scope 3 emissions.
- Reach out to customers: Your largest customers may be a good source of advice on what data to collect and report, as they are likely setting their own climate targets and measuring emissions, and may be eager to receive data from your team.
- Set a greenhouse gas reduction target: Ideally one that is aligned with limiting global warming to 1.5°C above pre-industrial levels. The Environmental Protection Agency and Science Based Targets initiative (SBTi) provide resources for companies to start and continue their efforts to measure and report emissions.
“My biggest tip is to gather troops internally within your company and find champions who will be ambassadors for change,” said McKnight. “Then make the business case to your suppliers and make them aware of the risks of inaction.”
Blue Shield’s Supplier Sustainability Program forges ahead
Blue Shield launched its Supplier Sustainability Program in 2021 with an analysis of how each supplier contributes to Blue Shield’s overall carbon footprint. The program brings suppliers together to learn, share best practices about emissions measurement and reporting, and provide resources to guide suppliers through the steps of assessing their current emissions and setting future goals for reductions.
“When it comes to climate impact, we are all on this journey together,” Khemani said.
Blue Shield’s Supplier Sustainability Program has achieved some wins already: In 2023, 41 suppliers were engaged to disclose their emissions to CDP (formerly Carbon Disclosure Project), an essential first step for decarbonization action. These suppliers account for 67% of Blue Shield’s supply chain emissions. And 90% (37 of the 41) disclosed their environmental impact, an increase from previous years. Blue Shield also revised its Supplier Code of Conduct, requesting high-emitting suppliers to disclose their greenhouse gas emissions and sustainability practices.
Looking ahead, Khemani said his team and peers are being more selective when engaging suppliers: “We are being more assertive about environmental impacts and action by our suppliers. If we do not see progress, we need to make hard decisions and switch to like-minded suppliers who are committed to addressing the climate crisis with us."
BC3’s McKnight concludes, “The actions we take over the next decade will determine the future quality of life on this planet. Blue Shield of California is taking action to address the climate crisis, and as more companies follow suit, we have the opportunity to make an outsized impact on the future. It’s the biggest task we’ve faced collectively as a human race, and the time to act is now.”
To learn more about Blue Shield of California’s sustainability and corporate citizenship efforts, visit citizenship.blueshieldca.com
Blue Shield of California’s Supplier Sustainability Program was recently distinguished with an “A-” Supplier Engagement Rating by the Carbon Disclosure Project (CDP), a globally recognized benchmark for environmental transparency and accountability. The Supplier Engagement Rating evaluates how effectively companies are engaging their suppliers on climate change. To learn more about Blue Shield of California’s supplier program and opportunities, click here.