California continues to be at the forefront of climate-related disclosure regulations. On September 27, 2024, California Gov. Gavin Newsom signed into law Senate Bill 219, Greenhouse Gases: Climate Corporate Accountability: Climate-Related Financial Risk (SB 219). SB 219 amends certain climate disclosure requirements under Senate Bill 253, Climate Corporate Data Accountability Act (SB 253) and Senate Bill 261, Greenhouse Gases: Climate-Related Financial Risk (SB 261).1 The bills require companies with significant revenues in California that are “doing business in California”2 to publicly disclose greenhouse gas (GHG) emissions data and climate-related financial risk reports.
The third California climate bill, Assembly Bill 1305, Voluntary Carbon Market Disclosures Act (AB 1305), was not amended.
Highlights of the recent amendments are summarized below, and the chart at the end of this alert provides an overview of each bill, as amended.
SB 253: Climate Corporate Data Accountability Act
SB 219 amends SB 253, which requires reporting entities3 with more than $1 billion in total annual revenues that are “doing business” in the state of California to annually disclose:
- Scopes 1 and 2 GHG emissions. SB 219 requires the California Air Resources Board (CARB) to adopt regulations by July 1, 2025, governing the disclosure of these emissions, which delayed the original adoption deadline by six months. The amendment, however, did not delay the compliance date for regulated entities; these disclosures remain due “starting in 2026 on or by a date to be determined by CARB.”
- Scope 3 emissions. SB 219 requires CARB to specify a schedule for reporting entities to publicly disclose their scope 3 emissions. Previously, the bill required reporting entities to disclose their scope 3 emissions no later than 180 days after publicly disclosing their scope 1 and 2 emissions.
GHG emissions data reports can be consolidated at the parent company level if a subsidiary qualifies as a reporting entity. In addition, CARB is authorized (but not required) to contract with an emissions reporting organization to develop a reporting program.
SB 261: Greenhouse Gases: Climate-Related Financial Risk
SB 261 requires covered entities with more than $500 million in total annual revenues that do business in California to biennially prepare and disclose a climate-related financial risk report. Similar to provisions in SB 253, CARB is authorized, but not required, to contract with a climate reporting organization to develop a reporting program.
As amended, neither bill requires reporting entities to pay an annual fee to the state of California upon filing their climate-related disclosures.
Status of California Litigation
The U.S. Chamber of Commerce, the California Chamber of Commerce and other business groups have sued in the federal district court for the Central District of California, challenging the constitutionality of SB 253 and SB 261 on the grounds that they force speech on climate change in violation of the First Amendment and violate the Supremacy Clause. Dispositive motions have been fully briefed, and in early October 2024, the court indicated that it would decide the motions without oral argument, which was originally scheduled for October 15, 2024.
Next Steps
Companies subject to the California climate disclosure rules should begin to prepare for the upcoming compliance and reporting deadlines. The delay given to CARB to adopt regulations will now give companies a shorter timeline to comply with their first reports in 2026.
Annex: Summary of California Climate Disclosure Rules
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1 For more information, see our September 26, 2023, client alert “California Poised To Adopt Sweeping Climate Disclosure Rules.”
2 While the bills do not define “doing business in California,” this phrase could be interpreted to have broad applicability.
3 For the purposes of the bills, a “reporting entity” includes a partnership, corporation, limited liability company or other business entity formed under the laws of any U.S. state or the District of Columbia, or under an act of the Congress, with total annual revenues in excess of $1 billion that does business in California.
