California’s Landmark Climate Disclosure Laws: Preparing Now for Far-Reaching Impact on Public and Private Companies

Description

On Oct. 12, 2023, California enacted two climate disclosure bills that will significantly impact thousands of major companies, both public and private, doing business in California with requirements that go beyond the SEC's proposed climate disclosures. The laws may affect the SEC's pending rule, providing the agency with incentive to push for more aggressive measures in its final climate disclosure rule. And given the size of the state's economy, the laws may have sweeping implications beyond California's borders.

Beginning in 2026, SB 253 "Climate Corporate Data Accountability Act" requires U.S.-based companies with $1 billion or more in annual revenues that do business in California to file annual reports publicly disclosing (and verifying) their direct GHG emissions from operations (Scope 1 emissions) and indirect GHG emissions from energy use (Scope 2 emissions). Beginning in 2027, reporting entities will also have to report Scope 3 emissions which include the direct and indirect emissions of employees, suppliers, and customers, which will be significantly difficult to calculate.

Additionally, SB 261 "Greenhouse Gases: Climate-Related Financial Risk" requires U.S.-based companies (other than insurers) with $500 million or more in annual revenues that do business in California to prepare biennial reports disclosing climate-related financial risk and measures they have adopted to reduce and adapt to that risk. The first report will be due Jan. 1, 2026.

Given the scope of these disclosure requirements and the significant penalties for noncompliance, counsel and their clients should clearly understand the requirements so that they can begin to equip themselves to respond.

Listen as our expert panel guides practitioners through each groundbreaking law and discusses best practices as counsel and clients prepare for compliance.