California Climate Disclosure Laws Receive Strong Public Support

News Summary

California’s new climate disclosure laws, requiring companies to report greenhouse gas emissions, have garnered overwhelming public support with 59% in favor. The California Air Resources Board is set to implement these regulations by 2026. They aim to promote transparency in corporate sustainability practices. Public feedback highlighted concerns about aligning with international standards and defining jurisdiction. With legal challenges ahead, California’s proactive approach could influence other states in adopting similar laws.

California Climate Disclosure Laws Receive Strong Public Support Ahead of Implementation

A new analysis shows overwhelming public support for California’s climate disclosure laws as the California Air Resources Board (CARB) gears up for their implementation. The analysis, conducted by sustainability nonprofit Ceres, has revealed that 59% of public commenters are in favor of the new regulations, while only 9% oppose them.

New Regulations Mandate Emission Reporting

The climate disclosure laws, passed in 2023, require companies doing business in California to report their greenhouse gas (GHG) emissions and disclose associated climate-related financial risks. The legislation encompasses two main components: the California Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261).

Under SB 253, companies with over $1 billion in revenue will need to provide annual public emissions disclosures starting in 2026. Meanwhile, SB 261 targets firms with revenues exceeding $500 million, mandating that they report on climate-related financial risks every two years beginning in January 2026. All companies are required to disclose Scope 1, 2, and 3 emissions data, with Scope 1 and 2 disclosures set to begin in 2026 and Scope 3 disclosures in 2027.

Public Feedback Highlights Key Concerns

Ceres analyzed 245 unique submissions to CARB, with 199 responses coming from various institutions including investors, businesses, and advocacy groups. Commenters expressed several areas of concern regarding the implementation of the laws:

1. Global Alignment: Many stakeholders urged CARB to ensure that the new rules align with international standards, particularly those set by the International Sustainability Standards Board (ISSB) and the EU’s Corporate Sustainability Reporting Directive.
2. Defining ‘Doing Business in California’: Commenters requested clearer criteria for determining which companies fall under the law’s jurisdiction, suggesting California’s Revenue & Tax Code as a potential guideline.
3. Reporting Rules for Corporate Groups: There was a call for clearer guidelines specifically for multinational corporations with complex structures, including recommendations for consolidated reporting from parent companies covering their subsidiaries.

Ceres advocates for enhanced corporate transparency regarding climate risks, highlighting that companies must adapt to improved reporting standards based on the feedback received.

Regulations and Compliance Penalties

CARB must finalize the implementing regulations by July 1, 2025, to provide clarity on what constitutes “doing business in California.” Noncompliance with SB 253 could lead to penalties of up to $500,000 for each reporting year, while SB 261 comes with penalties of up to $50,000 per year for failure to comply.

Legal Challenges and Broader Implications

Despite facing legal challenges from business groups claiming violations of the First Amendment and federal regulations, California’s climate disclosure laws continue to progress. While the SEC’s climate disclosure rules encounter implementation difficulties, California is moving forward with its own framework.

Other states, including New York, Illinois, Colorado, and New Jersey, are observing California’s legislative developments and may model their own laws after these regulations. Ceres emphasizes the urgent need for predictable regulations, which can assist affected businesses in preparing for compliance with the new laws.

Industry Readiness

Recent feedback from over 100 experts at Ceres’ roundtables indicates a general readiness among companies to fulfill these emerging climate disclosure requirements, reflecting a significant shift towards greater transparency and accountability in corporate sustainability practices.

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