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California Senate Considers Delaying the Implementation of Climate Disclosure Law

This blog was originally posted on 4th September, 2024. Further regulatory developments may have occurred after publication. To keep up-to-date with the latest compliance news, sign up to our newsletter.

AUTHORED BY CELIA LE LIEVRE, SENIOR REGULATORY COMPLIANCE SPECIALIST, COMPLIANCE & RISKS

Introduction

On 13 August 2024, California Senator Scott Wiener proposed, and the Assembly approved, an amendment to Senate Bill 219, delaying the implementation of Senate Bill 253 (Climate Corporate Accountability Act) by six months to give the California Air Resources Board more time to adopt climate disclosure rules.

In this blog, we outline the requirements of this Act and the implications of the delay.

Overview

As enacted, the Climate Corporate Accountability Act requires the California Air Resources Board (state board) to adopt new regulations to implement the requirements of the Act by January 1, 2025. Under Wiener’s proposal, the Board would have until 1st July 2025 [instead of 1st January 2025] to adopt regulations to require covered entities to annually disclose to the emissions reporting organization.

The delay would not alter the substance of the Act. Businesses with a total annual revenue greater than US$ 1 billion and operating in California would still be required to annually disclose their scope 1, 2 and 3 emissions. The reporting obligations will be phased in between 2026 and 2030. Beginning in 2026, companies will thus have to disclose their scope 1 and 2 emissions for the prior fiscal year and provide ‘limited’ assurance for this information. Mandatory reporting of scope 3 emissions is due to kick off in 2027.

However, unlike the existing law, the proposal would delay the requirement that the state board adopt regulations until July 1, 2025. It would also require reporting entities to publicly disclose their scope 3 emissions on a schedule specified by the state board, rather than no later than 180 days after disclosing their scope 1 and scope 2 emissions. Weiner’s bill would also authorize reports to be consolidated at the parent company level and would delete the requirement that the annual fee be paid upon filing the disclosure.

Senate Bill 219 also proposes to amend SB 261 (Climate-Related Financial Risk Act) which compels businesses with total annual revenues over US$500 million and operating in California, to prepare biannual climate-related financial risk reports from January 2026. The Act also requires the state board to contract with a climate reporting organization to prepare a biennial public report on the climate-related financial risk disclosures and to carry out other actions, including monitoring federal regulatory actions. The language of the bill would authorize (rather than require) the state board to contract with a climate reporting organization to carry out the above-described actions that the state board deems appropriate. The bill would also delete the requirement that the entity’s fee be paid upon filing its disclosure.

Wiener’s proposal was introduced shortly after Newsom’s administration proposed, in a trailer budget bill, to delay the implementation of SB 253 and SB 261 by two years (until 2028).

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