California's New Climate Disclosure Laws: What US Companies Need to Know

Key Points

Governor Gavin Newsom has officially signed SB 219 into law, which amends the previously approved SB 253 and SB 261. This new legislation maintains the original start date of 2026 for climate disclosure reporting, despite earlier concerns regarding its feasibility. As a result, large companies operating in California will now be mandated to disclose their value chain emissions as well as any climate-related financial risks they face.

Who is Affected?

The new regulations specifically target companies with revenues exceeding $1 billion that conduct business in California. These companies will be required to report on their Scope 1, Scope 2, and Scope 3 emissions annually. Additionally, US companies with revenues over $500 million that operate within California must also disclose their climate-related financial risks and the measures they are taking to mitigate these risks.

Timeline and Requirements

The timeline for reporting is set to begin in 2026 for most disclosures, with a notable exception for Scope 3 emissions reporting, which is scheduled to start in 2027. The specific schedule for these disclosures will be determined by the California Air Resources Board (CARB).

SB-219 is basically a consolidation of SB-253 and SB-261, which does not change the company's policy for dealing with the issue, but adds flexibility and timeframes.

Changes from Previous Versions

The predominant theme of the amendments to SB 253 and SB 261 by SB 219 center around the provision of additional time for the promulgation of related regulations while by and large maintaining the same reporting deadlines. Consequently, this will likely reduce the amount of time subject companies will have to prepare these disclosures with the benefit of interpretative regulations. Principal substantive changes between SB 219 and SB 253/SB 261 include:

• Providing an additional six-month delay for the publication of regulations for scope emissions disclosures. SB 219 extends the rulemaking deadline for CARB for scopes 1, 2, and 3 emissions by an additional six months, from January 1, 2025, to July 1, 2025.
• Changing the timeline of scope 3 emissions disclosure. SB 219 permits CARB to prepare a schedule for disclosure of scope 3 emissions rather than the previous timeline requiring scope 3 emissions disclosure no later than 180 days after scopes 1 and 2 emissions disclosure.
• Providing CARB with greater permissive authority. SB 219 provides CARB with far greater permissive authority. For example, under both SB 253 and SB 261, CARB was required to engage a “climate reporting organization” to perform certain responsibilities, such as receiving GHG emissions disclosures. SB 219 now permits CARB, at its option, to assume these duties rather than engaging a third party to perform them.
• Permitting consolidated reporting at the parent level for scope emissions. The law clarifies that for purposes of the scopes 1, 2, and 3 emissions disclosures, consolidated reports at the parent company level would be acceptable, which in effect relieves a subsidiary from having to generate a separate report. This change aligns SB 253 with SB 261, the latter of which already permitted entities to rely on consolidated parent-level reporting.
• Eliminating the payment at filing requirements. SB 219 eliminates the requirement that reporting entities pay a filing fee when filing their disclosure reports for SB 253 and SB 261. Meaning while the time period for when an entity pays the fee has changed, the fee itself has not.

Implications

This case in California could spread across the country, as New York, Illinois, Minnesota, and Washington are already considering similar legislation. With these requirements in place, it is crucial for companies to begin preparing now to ensure compliance by the 2026 reporting deadline.

Next Steps for Companies

To effectively navigate these new regulations, companies should start by assessing their current emissions levels and identifying any climate-related financial risks they may face. Developing robust systems and processes for tracking and reporting the required information will be essential. It is also important for businesses to stay informed about CARB's upcoming regulations and guidance to ensure they meet all necessary. Identifying, measuring, and disclosing your company’s carbon footprint is thus a strategic investment to anchor your sustainability plan.

Contact our US team today to learn more about how we can support your journey toward a sustainable and profitable future: Seiichiro (Ichiro) Tanigaki, Colin Connors, Chan Lee, Yukinori Kamiya, Shingo Yanai.

Article by Euisung Lee, Asuene Global Business team. Asuene Global Business team, the global sustainability intelligence team at Asuene, acts as the guidepost through the evolving landscape of corporate sustainability. The Asuene Global Business team identifies emerging trends and regulations in decarbonization, climate policy, and broader ESG matters. This knowledge is translated into actionable insights through white papers, articles, webinars, and regular updates on our website and social media.