Recently, California enacted two climate-related reporting statutes, making it the first state in the U.S. to impose requirements on companies to disclose and report their emissions. The Climate Corporate Data Accountability Act (SB 253, Chapter 382, Statutes of 2023)) and the Climate-Related Financial Risk Act (SB 261, Chapter 383, Statutes of 2023)) require certain public and private entities doing business in California to make public disclosures of their scope greenhouse gas emissions and publicly report their climate-related risks and efforts to address them. These statutes expand the scope of companies covered by their requirement beyond those covered by the current Securities and Exchange Commission (SEC) proposed disclosure standards. The California Air Resources Board (CARB) must promulgate regulations implementing SB 253 by January 1, 2025, and reporting obligations under both statutes will begin in 2026.
The new California laws impose unprecedented reporting requirements on large U.S. public and private companies doing business in California, including disclosure of Scope 1 and Scope 2 greenhouse gas emissions beginning in 2026 and Scope 3 GHG emissions in 2027, submission of biennial climate-related financial risk reports to CARB beginning in 2026, and obtaining third-party assurance of disclosures. The California Climate Accountability Package requires both public and private U.S. companies doing business in California and generating over $1 billion in gross annual revenue to disclose their Scope 1, Scope 2, and Scope 3 GHG emissions to the state of California on an annual basis.
The California legislature’s stated purpose in adopting this legislation is to address the impact of climate change on the state’s residents and economy, increase corporate transparency and informed decision making, standardize climate-related disclosure, and increase corporate accountability in the effort to move toward a net-zero carbon economy.