California Sets the Pace for Climate Regulations

In October, California passed three climate reporting laws applicable to all public and private US companies doing business in the state: 

• SB 253 - the Climate Corporate Data Accountability Act requires all companies with over $1 billion in annual revenue to publish their total carbon emissions.
• SB 261 - the Climate-Related Financial Risk Act states that businesses with annual revenue exceeding $500 million must disclose their climate-related financial risks, as well as any measures they are taking to mitigate those risks.
• AB 1305 requires companies to disclose information about voluntary carbon offsets and marketing claims.

However, recent challenges could impact implementation of two of the three laws. The US Chamber of Commerce is suing the state over the climate laws, and California Governor Gavin Newsom excluded funding for implementation from a recent budget. Until there is more clarity resulting from the lawsuit, the regulations are considered in effect, and many businesses are closely monitoring California’s budget cycle, which will be updated in May.

As written, the laws require businesses to start disclosing GHG reduction claims as of 2025; their climate-related financial risks along with Scope 1 and 2 emissions for FY 2025 by 2026; and their Scope 3 emissions for FY 2026 by 2027.

The laws don’t give businesses much time to put processes in place to comply, which is why organizations shouldn’t put off preparation.