Alert
California Senate Passes Bill Requiring Climate Disclosures of Big Corporations
This article was updated August 14, 2024.
The SEC issued a final rule March 6, 2024, requiring registrants to disclose climate-related information in their registration statements and annual reports.
The Climate Corporate Data Accountability Act, or Senate Bill (SB) 253, cleared California senate on May 30, 2023. The proposed bill will go to the California State Assembly for another vote. If the proposed bill becomes final, the public, investors, and others will have a more transparent view of carbon emissions from corporations. This act is an effort toward meeting California’s climate goals and combating corporate greenwashing.
Expected Impacts
The act requires all large corporations that do business in California to publicly disclose their greenhouse gas (GHG) emissions in line with the GHG Protocol’s definitions of Scope 1, Scope 2, and Scope 3, briefly outlined below.
- Scope 1: Direct emissions from owned or controlled sources
- Scope 2:Indirect emissions from purchased energy
- Scope 3:Indirect non-Scope 2 emissions in the value chain of reporting company
The act applies to specified partnerships, corporations, limited liability companies, and other business entities that conduct business in California with a total annual revenue of more than $1 billion.
Subject companies will measure and report GHG emissions in conformance with the GHG Protocol Corporate Accounting and Reporting Standard and the GHG Protocol Corporate Value Chain (Scope 3) Standard.
Looking Forward
SB 253 requires the California State Air Resources Board to develop and adopt regulations requiring subject companies to publicly disclose GHG emissions to an emissions registry by January 1, 2025. Annual reporting for Scope 1 and Scope 2 GHG emissions would commence in 2026, by a date to be determined by the State Air Resources Board, for the prior calendar year. Scope 1 emissions and Scope 2 emissions would be subject to a third-party assurance requirement beginning in 2026.
Reporting of Scope 3 GHG emissions starts in 2027 and is required annually thereafter. The act would require the state board to review these deadlines and evaluate trends in Scope 3 emissions reporting during 2029. The board would update or change deadlines as necessary on or before January 1, 2030. The board may also establish an assurance requirement for Scope 3 emissions on or before January 1, 2027.
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To learn more about how these standards could impact you or your business, contact your Moss Adams professional.