09 October 2024

Mandatory climate disclosure move forward in California

3 minute read

Climate risks & opportunities Net zero Corporate climate action

Erin Moran Consultant, Climate Risks and Opportunities, North America

SB 219, the Climate Accountability Package, is signed into law

On September 27, 2024, Governor Newsom signed Senate Bill (SB) 219 into law, reaffirming the reporting timelines for 2026 under both the Climate Corporate Data Accountability Act (previously SB 253) and the Climate-Related Financial Risk Act (previously SB 261), now collectively known as the Climate Accountability Package. This move reaffirms strong support for US mandatory climate disclosures, even as momentum around such regulations has slowed.

The ongoing Chamber of Commerce of the United States of America v. California Air Resources Board lawsuit, which seeks to block these requirements, adds legal uncertainty. However, companies are urged to continue preparing, as the regulatory framework progresses despite this challenge.

As Q4 2024 progresses and the window for preparation shrinks, companies must act now to ensure readiness.

Key changes to understand

While there are some minor updates from SB 253 and SB 261 to SB 219, the core requirements of the bills remain largely unchanged.

	SB 219, Climate Accountability Package	SB 253, Climate Corporate Data Accountability Act	SB 261, Climate-Related Financial Risk Act
Who?	No change from SB 253 and SB 261	Businesses with revenue exceeding $1 billion and operating in California	Businesses with revenues exceeding $500 million and operating in California
Deadlines	Changes made only from SB 253 (Scope 3 emissions): The Scope 3 reporting deadline, previously set for 180 days after Scope 1 and 2 disclosures, will now be determined by a schedule established by CARB. CARB will establish Scope 3 assurance standards in 2027	Scope 1 and 2 emissions: Report Scope 1 and 2 emissions starting in 2026 on FY2025 data with limited assurance Obtain reasonable assurance for Scope 1 and 2 emissions in 2030 Scope 3 emissions: Scope 3 emissions starting in 2027, 180 days after Scope 1 and 2 emission disclosure Obtain limited assurance for Scope 3 emissions in 2030	Publish first climate-related financial risk report on or before January 1st, 2026
Frequency	No change from SB 253 and SB 261	Annually	Biennially
Reporting changes	Change made only from SB 253: Permits entities the option to consolidate GHG emissions disclosures at the parent- company level	Option to consolidate reporting at the parent company-level was not specified.	Permits entities to consolidate reporting at the parent company-level

Other minor changes in the bill focus on providing greater flexibility to the California Air Resources Board (CARB).

Implementation regulation: SB 219 gives CARB an additional six months to develop and adopt implementation regulation, but reporting deadlines remain the same.
Collaboration with third-parties:

CARB now has the option, rather than the requirement, to contract with an emissions reporting organization to develop a reporting program for receiving and publicly sharing required disclosures.
CARB has more leeway to collaborate with third-party climate reporting organizations to produce the biennial statewide public climate-related risk report, which will assess the state's systemic and sector-wide climate-related financial risks based on companies' publicly available climate-related risk reports.

Filing fees: SB 219 eliminates the requirement for filing fees to be paid at the time of submission, although the fees themselves remain unchanged.

SB 219 compliance timeline

Preparing for California’s Climate Accountability Package

To comply with California's climate disclosure regulations, companies must first assess if they qualify as ‘doing business in California’ to determine if reporting is required. Those within scope should spend the rest of the year identifying compliance gaps and preparing a 2025 plan to meet 2026 reporting requirements for Scope 1 and 2 emissions, as well as climate-related financial risks. This plan should include calculating emissions and possibly conducting a Scope 3 screening for the 2027 disclosure.

To address climate-related financial risks, companies should start with a climate risk screening and follow up with a climate scenario analysis to assess potential climate-related financial impacts. Based on this, they can then develop strategies to mitigate and adapt to the identified climate risks.

Getting ahead of regulatory compliance

Companies operating across jurisdictions should align with all relevant climate disclosure regulations simultaneously to streamline reporting and close compliance gaps. This approach is particularly efficient given the overlap between SB 219, the Corporate Sustainability Reporting Directive (CSRD), and IFRS S2 standards. South Pole’s climate reporting experts can help your business navigate global regulations and create a tailored regulatory readiness roadmap.