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What you'll learn
Transcript:
SAIF: Hello and welcome to another episode of the State of Sustainability. I'm your host Saif Hameed, founder and CEO of Altruistiq. Today we're going to talk about new legislation coming out of New York State — what it means, how it contrasts with other legislation in California and the EU, and how to prepare for it. But before we get into that, I just wanted to say that if you're keen to join us in person, I'm going to be in Chicago on April 15th hosting the State of Sustainability Summit. Please feel free to drop me a note on LinkedIn or by email at saif@altruistiq.com if you want to attend or just meet up while I'm in Chicago.
With that, let's get into the show.
Today we're going to talk about regulation and laws. Longtime listeners will know that is one of my least favourite topics, but I'm going to try and do it justice. In particular, we want to talk about New York climate rules and regulations.
One of the reasons this came to mind is that there's been a bunch of recent announcements — we'll get into those. But I was also speaking with one of our angel investors at Altruistiq, and he was asking me what the regulatory landscape looks like. I think there's an expectation in my community that almost all regulation applying to climate change mitigation has been rolled back and that it's now a pretty sparse field. I actually think the opposite is true. The regulatory burden on this topic is net-net much higher than it was five years ago. If you look at the fairly seismic impact of CSRD and the broader package of European regulation, and then what California has done, we're miles ahead of where we were five years ago in terms of what's in practice.
I was actually at an event several months ago with Anthony Scaramucci — for anyone following The Rest Is Politics US version or the Prof G podcast ecosystem. In between his comments on my hair and a couple of other very strange questions, I put a much more fact-based question to him: do you actually think the US trajectory on climate regulation is going to net-net move back, or forward? What he said was: the ball is in the territory of the states now. It doesn't really matter too much what happens at the federal level, because you're going to be captured by state law. You have California and you have New York, and that's basically a pincer movement. If you want to do business meaningfully in either of those two jurisdictions, you're going to be captured. The New York legislation was being debated at the time, and now one piece has been passed and one is imminent. That pincer is really coming to pass, and I think it's a really interesting story to dig into.
The Two-Track Reality of Climate Reporting in New York
Track A — The Micro Track (Part 253)
Track A is already finalised. It targets physical assets — factories, smokestacks, fuel suppliers, electricity importers, all the bread-and-butter engineering hardware. This law is about controlling actual emissions volumes going into the air in New York State, and requiring companies with physical assets and operations in the state to disclose and report the scale of their emissions. I'm calling this the micro track because it's very specifically about whether you have facilities and manufacturing in the state.
Track B — The Macro Track (S9072A)
This one is, I think, actually much more interesting and will have a bigger impact on the reporting side. The macro track says: if you are a billion-dollar-revenue-plus business doing meaningful business in New York State, you're going to have to disclose your emissions across Scope 1, 2, and 3. But the fun stuff is really in the details — specifically, how New York State defines "meaningful business."
The bar is pretty low. If you're doing a million dollars of revenue in New York State, that qualifies. If you have a reasonable share of credit cards issued or a certain number of ATMs in the state, you're captured — regardless of where your headquarters are. A direct-to-consumer retailer based in Texas doing a million dollars of sales in New York State is very likely captured. A large conglomerate with a subsidiary might find the whole conglomerate pulled into the reporting requirements. The exposure can be very small, but you're still caught within the reporting loop.
And if you think about California and New York together — if you're an American business not doing a million dollars in either of those two states, what are you really doing at scale in the US? The Scaramucci pincer is really coming home. Whatever happens at the federal level — the step back on SEC regulations, for example — starts to become a bit moot.
The macro track is not yet final, but it has cleared the Senate and is now moving to the state assembly. Its passage is widely expected — New York is a heavily blue state and the governor has indicated support for climate regulation. It is more or less a lift-and-shift of equivalent legislation in California.
One really interesting structural point: the legislation is designed so that if it's ever watered down, citizens can take legal action against the government. That's a significant poison pill for any subsequent administration that might want to roll it back — on top of the fact that New York's electorate is heavily in favour of climate regulation.
How New York and California Compare to the EU
Scope 1, 2, and 3 reporting is required under all three — New York, California, and CSRD. Third-party audit and assurance is also required across all of them. But there are some key differences.
Revenue threshold: The CSRD threshold is much lower — around €50 million in turnover or €25 million in assets — which is why the original pre-Omnibus assessment put around 48,000 companies in scope. The New York and California threshold of a billion dollars in revenue is a much higher bar, meaning fewer but larger companies are captured.
Breadth: California and New York focus purely on greenhouse gas emissions. The CSRD was much broader from an ESG perspective — covering a vast range of metrics across environmental, social, and governance topics. I think that breadth became one of its Achilles heels.
Why CSRD faced backlash and New York won't
The low threshold in Europe meant the CSRD effectively became an everyman law — hitting a farming cooperative in the Netherlands, a mid-size automotive supplier in Germany, the bread and butter of European business. And the cost of compliance doesn't scale down proportionally for smaller businesses. The cost of getting your emissions reports audited by a third party isn't a tenth of the cost just because you're a hundred-million-euro business versus a billion-euro one. I actually read the impact assessment the European Commission ran before passing the CSRD — I will never get those hours of my life back — and it costed the average compliance burden in the millions. I did some back-of-the-envelope maths at a conference once and worked out that a small farming business supplying a CSRD-covered company and being asked for upstream data would probably face costs of a few thousand in cash and a similar amount in time. Having owned and run a small farming business, I know your EBITDA might be €30,000 to €40,000 for a successful operation. That means 10% of your profit goes on reporting. That doesn't sound right.
So you started getting backlash — particularly from farmers in the Netherlands and Belgium, which are very vocal, politically active communities that can sway elections. And as the law was expected to be localised, you started to see step-backs.
The second problem in the EU is fragmentation. Legislation doesn't just have to navigate the gauntlet of internal EU policymaking — it then has to go through each member state to be transposed into national law. For legislation to survive that process, stay in practice, not be watered down, and follow through all the way to the finish line takes years and carries a lot of risk.
In California and New York, by comparison, it's a single state controlled often by a single party. They may have both the upper and lower houses and the governorship. It's much more legislatively resilient.
A Note on Legislation Moving Too Fast
One of our investors asked me whether I was optimistic about more legislation coming through in the coming years. My answer probably seemed surprising: I'm kind of hoping more legislation doesn't come through. I hope it stays where it is and nothing new comes through the door.
That sounds like an odd statement given I'm literally in the climate change mitigation business. But my reason is that we as a community have much more to lose from green lash and step-backs than from a period of consolidation. It is actually better for us if legislation comes through, is well socialised, is just about palatable to the stakeholders it covers — never cheap, never easy, but something everyone can live with, and we raise the bar slightly and move on.
Most of the big wins on climate change mitigation have been relatively unnoticed by the average individual or business — they've just happened. The UK transitioning from coal to natural gas over the course of the 1990s had a massive impact on the UK's emissions profile. But if you ask most people living through the mid-to-late 90s whether that was something disturbing their sleep at night, they wouldn't have noticed — it happened seamlessly in the background. Same with the US moving towards shale gas and away from coal, or the solar power build-out in Texas driven by plentiful sunlight and space. A lot of that has just happened without causing anyone much pain.
Sometimes I think legislation can go a little too far, a little too fast, and trigger a massive step-back that leaves you worse than where you started. Look at DEI — diversity, equity, and inclusion has now become a bad word. You cannot walk into boardrooms and talk about DEI and expect to be invited back. This was not the case seven, eight, or nine years ago. I think it became the case because a lot of this entered the mainstream political debate in the context of government overreach and triggered a massive backlash — when actually people were much more ready to discuss it and act on it than the backlash suggests. Sometimes the step-back does more harm than good.
What to Expect Next
I think the New York and California legislation is here to stay. Two things I expect to see:
A cascade of Scope 3 data requests. Because Scope 3 is captured — on a best-efforts basis, not a fully accurate basis — and because the bar to be captured by this legislation is so low at a million dollars of revenue, you're going to see a trickle-down effect. Large companies in the US, and frankly any large company globally doing meaningful business in New York, will be sending data requests and collaboration requests down their supply chains. And once this data is out in the public space, no one wants to be reporting rising emissions year after year when disclosure is mandatory. I think we're going to see a big cascade — not quick, but big. It'll take several years, since this legislation doesn't fully come into effect for the next couple of years, but it's a really significant gathering tide.
A shift in data quality driven by third-party audit requirements. From watching how this played out in Europe, I know that third-party audit requirements drive a lot of focus and rigour on how data is treated, gathered, and calculated. It's triggered a massive shift from spend-based calculations — which used to be the norm — towards weights, activities, and locations. We're going to see that now hit a massive wave of mainstream American business in a big way.
And there's an overall point worth making: it is still a globalised world, despite the anti-globalisation forces around us. If every large business has to cater to the highest bar of regulation anywhere it does sizable business, then actually I think we're going to see the whole threshold move up permanently. Business practice on this topic will shift over the next several years regardless of whether any one piece of legislation is less resilient than others.
It's going to be an interesting time to watch this space play out.
That's my rundown of the new legislation coming out of New York. If you have a suggestion for new content, or if you want to know what my responses were to the Mooch when I met him, feel free to drop me a message on LinkedIn. Till next time — if you enjoyed this episode, please hit follow, and it never hurts to share it with a friend.
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