Governor Newsom signs amended law, abandoning prior bid to provide additional time for implementation.
Takeaways
- Despite efforts by California Governor Gavin Newsom to provide more time for businesses to comply with the new disclosure requirements, the controversial reporting deadline established by Senate Bills SB 253 and SB 261 remains set for January 1, 2026.
- Regulated companies should consider getting involved in the rulemaking process and submitting comments to the California Air Resources Board (CARB).
- Companies also should continue to monitor the legal challenges while preparing to begin collecting data for initial reporting in 2026.
California is set to launch its first-in-the-nation mandatory climate disclosure framework next year as provided in the 2023 Climate Accountability Package, Senate Bills SB 253 and SB 261. (For more information on the Climate Accountability Package, see Pillsbury’s prior reporting here and here.) But the bills have not come without some lingering controversy over the ability of businesses to meet the aggressive January 1, 2026, deadline to report their carbon footprints and submit climate risk assessments to the California Air Resources Board (CARB), as well as CARB’s ability to adopt implementing regulations by this coming January 1. A proposal by California Governor Gavin Newsom to provide relief through two-year extensions for compliance arrived back in the form of a bill from the Legislature—SB 219—for his signature, but it was stripped of those extensions and only granted an additional six months for CARB to adopt regulations. On September 27, Newsom acquiesced and signed SB 219 into law. The development confirms the need for businesses to continue preparing for mandated climate disclosures by January 1, 2026, and to consider participating in the CARB rulemaking to emphasize the implementation concerns recognized by Newsom.
When he signed SB 253 and SB 261 into law in October of last year, Newsom’s signing statements made clear that the implementation deadlines for businesses to report carbon emissions “are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure.” He added that the SB 261 deadlines for CARB regulations “fall short in providing [CARB] with sufficient time to adequately carry out the requirements in this bill.” Attempting to address these concerns, this past summer Newsom proposed a draft budget trailer bill that would have adopted two-year extensions for businesses to come into compliance with the ambitious new climate laws, and for CARB to adopt implementing regulations.
But by August, it was clear that his proposal was getting a cold reception in the Legislature. Democrats in the Senate, led by the authors of SB 253 (Sen. Scott Wiener (D-San Francisco)) and SB 261 (Sen. Henry Stern (D-Los Angeles)), rejected Newsom’s proposed trailer bill and instead introduced SB 219, eliminating the proposed two-year extensions for implementation but retaining a six-month extension (to July 1, 2025) for CARB to adopt implementing regulations. This will effectively give affected companies less time to prepare the first round of reports by the January 1, 2026, deadline with the guidance of interpretive regulations.
The other notable change made by SB 219 is that, while annual Scope 3 emissions reporting still is required to begin in 2027, it is no longer required to occur within 180 days after first disclosure of Scope 1 and 2 emissions. Instead, CARB is now directed to adopt a schedule for Scope 3 emissions reporting in the regulations it adopts. Conceivably, then, CARB may be authorized to specify a different reporting start date for Scope 3 emissions in 2027 than January 1, but whether it does so remains to be seen.
Additional changes SB 219 made to the climate disclosure requirements include:
- Consolidated reporting. To relieve companies from having to submit separate reports for each of its subsidiaries that individually trigger the thresholds for reporting, SB 219 now authorizes companies reporting under SB 253 to consolidate emissions disclosures reports at the parent company level. In practice, this may make reporting easier, especially considering the delta in reporting thresholds under SB 253 ($1 billion in total annual revenue) and SB 261 ($500 million in total annual revenue). But importantly, this amendment does not change the fact that eligibility is tested separately for each individual company, and not attributed to the parent for purposes of triggering the $1 billion annual revenue threshold.
- Reporting to CARB or reporting organization. Companies now have the option to disclose their emissions either to CARB or to an emissions reporting organization if contracted. CARB is permitted, but no longer required, to contract with an emissions reporting organization, giving it discretion over how best to manage data reporting. Additionally, the requirement for companies to pay an annual fee upon filing has been eliminated.
- Filing fee. The annual fee will no longer be due at the time of filing the required disclosure, but will be due starting January 1, 2027, and annually thereafter.
Despite these changes, California’s original climate disclosure bills, SB 253 and SB 261, continue to be litigated in the U.S. District Court for the Central District of California. Their fate, including whether these implementation deadlines will ultimately be maintained, are yet to be determined. So far, implementation deadlines have not been stayed by the litigation.
In the meantime, CARB will be on a tight schedule to introduce and finalize regulations to implement SB 253 and SB 261 by July 1, 2025. In light of the implementation and timing concerns raised by Newsom, regulated companies may well consider getting involved in the rulemaking process and submitting comments on the potential challenges in implementing these new requirements in a little over a year. Should CARB adopt burdensome or objectionable reporting procedures, it will be important for those seeking to challenge CARB’s regulations in court to have comments in the CARB rulemaking raising those objections. Companies also should continue to monitor the legal challenges while preparing to begin collecting data for initial reporting in 2026. Indeed, early planning is key to navigating these evolving requirements and avoiding regulatory conflicts.
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