Company Preparation Needed for California’s New Climate Disclosure Laws
Authored by: Peter R. Kelso & Drew Howard, MEM
The California Air Resource Board (CARB) announced recently that initial disclosures of greenhouse gas (GHG) emissions and climate risk financial reporting will begin in 2026. Following a public meeting in May, CARB issued an announcement on July 9 that reaffirmed the reporting deadline of Jan. 1, 2026 for climate-related financial risk reports under California Senate Bill 261 and indicated that final rulemaking for Senate Bill 253, which mandates the disclosure of Scope 1 and 2 GHG emissions, will be completed in 2025 and reporting will take place in 2026.
The legislation impacts both private and public companies that may or may not have headquarters or operations in the state, but that conduct business in California; those impacted must assess whether they meet the criteria of a reporting entity and if so, begin to collect GHG and other emissions data. Timely understanding of the reporting criteria, deadlines, and disclosures are crucial in order to avoid fines.
The two bills outline new regulations that mandate the reporting and disclosure of corporate energy usage and emissions, as well as financial risks related to climate change. SB 253 applies to companies with over $1 billion in annual revenue operating in California while SB 261 applies to companies with at least $500 million in annual revenue that have operations in the state. Companies that don’t meet the financial threshold under the legislation may still need to collect environmental and emissions data to report to clients in their value chain that may need the metrics for their own reporting. Depending on applicability, companies will be required to disclose information on governance, strategy, risk management, sustainability strategies, and future goals; as well as Scope 1, 2, and 3 GHG emissions.
In light of the recent announcement by CARB, companies that conduct business in California should begin to collect GHG and other emissions data to prepare public disclosures mandated by the legislation and reports they can provide to clients in their supply chain. Additionally, companies will need to partner with a third-party environmental firm like Roux that can attest to the accuracy of the public disclosures and advise companies on reporting requirements so they can avoid fines.
Roux’s Environmental, Social, & Governance (ESG) practice provides advisory and technical services to corporate and institutional clients doing business in California, aligning climate considerations into their corporate strategy to meet the state’s new disclosure and regulatory requirements. These services include:
- Environmental compliance audits
- Environmental data collection and management
- Calculation of Scope 1, 2, and 3 emissions
- Climate-related financial disclosures under the Task Force on Climate-related Financial Disclosures (TCFD)
- Climate risk management and resiliency planning
- Disclosure and reporting assurance services
Please contact us below if you’d like further explanation of the California Senate Bills and their impact, as well as Roux’s environmental assurance and advisory services.
