As previously covered in Trinity’s EHS Quarterly publication titled, “The New Climate Era in California: What It Means for Your Business Model” (December 2023), California Governor Newsom signed California’s Climate Accountability bills, such as the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261), into laws on October 7, 2023.
Under SB 253, any partnership, corporation, limited liability company, or other U.S. business entity with total global annual revenues over one billion dollars ($1B) that does business in California is subject to the disclosure requirements that include publicly and annually disclosing their scopes 1, 2, and 3 GHG emissions on the specified schedule per regulations.
SB 261 requires a “covered entity,” defined as any partnership, corporation, limited liability company, or other U.S. business entity with total global annual revenues over five hundred million dollars ($500M) that does business in California – to prepare a climate-related financial risk report every two years. The report must disclose (1) the business’ climate-related financial risk, following the recommended framework and disclosures outlined in the Final Report of Recommendations of the Task Force on Climate-Related Financial Disclosures (June 2017) or any later updates, and (2) the actions taken to mitigate and adapt to the identified climate-related financial risks.
When signing the bills, Governor Newsom expressed concern that the implementation deadlines in these bills are too short and likely infeasible by CARB. To address the concern, the Governor proposed delaying the deadlines by two years through a budget trailer bill, but the legislature did not vote on it before the session ended, effectively shelving the proposal. Instead, the legislature passed SB 219, which makes small but significant amendments to SB 253 and SB 261.
Small But Significant Amendments Under “SB 219”
Notable amendments enacted under SB 219 and their possible implications to corporations and reporting entities are outlined below, assuming they become the official law signed by the Governor before the end of September 2024.
| SB 253 Requirements (Original) | SB 253 Requirements (Amended per SB 219) | Implications to Subject Entities |
| Regulation Development and Implementation Deadline |
| Mandates CARB to develop and adopt regulations governing SB 253 by January 1, 2025. | Grants CARB to develop and adopt regulations governing SB 253 by July 1, 2025 (a six-month extension). | CARB is given a six-month extension to develop and adopt regulations governing SB 253, but this extension effectively does not impact the reporter entities’ deadline for reporting. |
| Scope 1 and Scope 2 GHG Emissions Reporting |
| Beginning in 2026, Corporations with total annual revenues exceeding one billion dollars ($1B) and conducting business in California are to publicly disclose their Scope 1 and 2 GHG emissions on an annual basis for the entity’s prior fiscal year. | No substantive change | Reporting entities must prepare and begin tracking their enterprise-wide Scope 1 and Scope 2 GHG emissions, starting FY 2025, while CARB’s rulemaking process continues in the first half of 2025. |
| Scope 3 GHG Emissions Reporting |
| Beginning in 2027, and annually thereafter, publicly disclose its scope 3 GHG emissions “no later than 180 days” after it discloses its scope 1 and scope 2 GHG emissions for the prior fiscal year. | Beginning in 2027, Scope 3 disclosure is required “on a schedule specified by the state board.” | CARB may exercise its discretion to delay Scope 3 disclosure past the original 180-day timeframe. In such cases, reporting entities may have more than 180 days after reporting Scope 1 and Scope 2 emissions to prepare and report for Scope 3 emissions. |
| Consolidated Reporting at Parent Company Level |
| It is not explicit whether the consolidated reporting at the parent company level is feasible under the original SB 253. | Allows GHG emission reports, including Scope 1, Scope 2, and Scope 3 emissions, to be consolidated at the parent company level | Since SB 261 already permitted covered entities to rely upon consolidated parent company-level reporting of climate-related risks, the amendment eliminates the need for covered subsidiaries to file separate SB 253 disclosures. |
| Annual Filing Fee |
| An annual fee is required at the time of filing the report under the original SB 253. | The annual fee will no longer be due when filing the report. While the fee is still required, the payment date is now unspecified. | Reporting entities have some flexibility on the date of the annual fee payment, as opposed to having to pay the annual fee at the time of filing the report. |
| SB 261 Requirements (Original) | SB 261 Requirements (Amended per SB 219) | Implications to Subject Entities |
| Reporting Requirements |
| By January 1, 2026, SB 261 requires a “covered entity,” which means any partnership, corporation, limited liability company, or other U.S. business entity with total global annual revenues over five hundred million dollars that does business in California – to prepare a climate-related financial risk report biennially. | No substantive change | Companies must prepare in advance to make this report publicly available on their own website on or before January 1, 2026, and update it biennially thereafter. |
| Annual Filing Fee |
| An annual fee is required at the time of filing the required disclosures under the original SB 261. | The annual fee will no longer be due when filing the report. While the fee is still required, the payment date is now unspecified. | Disclosing entities have some flexibility on the date of the annual fee payment, as opposed to having to pay the annual fee at the time of filing the report. |
Essential Preparation Steps and Recommendations
Although SB 253 and SB 261 currently face legal challenges, their implementation of laws has not been stayed. Therefore, companies subject to one or both laws are encouraged to begin preparing for compliance, even without regulatory guidance from CARB. Collecting, managing, and validating climate-related data for reporting requires substantial time and resources, making early preparation essential.
Here are essential preparation steps recommended for companies potentially affected by the evolving California climate laws (SB 219, SB 253, and SB 261) and corresponding regulations:
- Evaluate Applicability: Multinational companies should assess whether they fall under the scope of California legislation, noting similarities and differences between regulations like those in the U.S. and E.U. as applicable.
- Stay Informed: Monitor the development of relevant regulations, including California’s Climate Accountability Package and similar laws in other states. Participate in rulemaking processes, such as public workshops.
- Prepare Data Systems: Ensure systems are in place to track and report accurate climate data, as many companies may need to collect new types of information.
- Engage the Value Chain: Collaborate with supply chain partners to secure necessary data, including Scope 3 emissions, potentially through contractual agreements.
The Trinity team has deep expertise in ESG and climate data disclosures and can help companies across various industries prepare for company-wide reporting requirements in line with current and upcoming corporate climate accountability laws and standards.
In addition, Trinity’s EHS Digital Solutions team is ideally suited to provide cost-effective solutions to the industry’s challenging EHS data management requirements, considering the evolving landscape of corporate climate disclosure regulations and standards. Our EHS Digital Solutions team advises clients across a variety of technologies, from mobile software to custom desktop solutions that serve a single user or enterprise-wide. For inquiries, please contact Trinity at 800.229.6655 or email Charles Lee, Ph.D.
