California Passes New Climate Disclosure Law
Overview:
California Governor Gavin Newsom has signed a landmark climate disclosure bill into law, requiring large companies to report their greenhouse gas emissions and climate-related financial risks starting in 2026. This legislation aims to enhance transparency and accountability in corporate environmental practices.
Key Provisions of the Bill
SB 219 introduces several critical requirements for large corporations:
Emissions Reporting: Companies with revenues exceeding $1 billion must report their Scope 1, 2, and 3 emissions. This includes direct emissions, emissions from electricity use, and indirect emissions from supply chains, business travel, and more.
Climate-Related Financial Risk: Companies with revenues over $500 million must disclose their climate-related financial risks and outline measures to mitigate these risks.
Amendments and Flexibility
While the core requirements remain stringent, SB 219 includes amendments to provide some flexibility:
Scope 3 Emissions Reporting: The timeline for reporting Scope 3 emissions has been slightly eased, with the California Air Resources Board (CARB) setting the schedule.
Consolidated Reporting: Parent companies can now consolidate climate reporting for their subsidiaries, simplifying the process.
Fee Waivers: Companies are no longer required to pay fees upon filing their disclosures.
Implementation Timeline
July 1, 2025: CARB to adopt implementing regulations
2026 and annually thereafter: Reporting of scopes 1 and 2 emissions
2026 and annually thereafter: Limited assurance of scopes 1 and 2
2026 and biannually thereafter: Climate risk disclosure
2027 and annually thereafter: Reporting of scope 3 emissions
2030 and annually thereafter: Reasonable assurance of scopes 1 and 2
2030 and annually thereafter: Limited assurance of scope 3
Implications for Businesses
This legislation is expected to have a broad impact, affecting many large U.S. companies due to California’s significant economic influence. Businesses will need to prepare for comprehensive emissions tracking and climate risk reporting, which could drive more sustainable practices and greater accountability.
California’s new climate disclosure law marks a pivotal step in the fight against climate change, setting a precedent for corporate environmental responsibility. As companies gear up to meet these new requirements, the hope is that increased transparency will lead to more sustainable business practices and a healthier planet.
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