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Dive Brief:
- California Governor Gavin Newsom signed two climate-related bills into law who are pushing for more climate transparency from big companies on Saturday.
- Senate Bill 253 would require business entities operating in California with more than $1 billion in annual revenue to report their greenhouse emissions each year, while Senate Bill 261 would require business entities with more than $500 million in revenue to publicly disclose their climate-related financial risks and countermeasures.
- Although signed, the execution of the accounts may be delayed as Newsom expressed concerns beyond implementation timelines and the “total economic impact” the bills would have on businesses across California.
Dive Insight:
Both SB 253 and SB 261 were passed by the California Senate and Assembly in mid-September and presented to Newsom to be signed or vetoed by Oct. 14 — a proposal the California governor moved to act on last week.
The signing of the two bills is in line with the efforts of federal regulators to demand more transparency from companies on carbon emissions and climate risk and to curb greenwashing practices.
Under SB 253, California would adopt regulations by 2025 that would require companies with more than $1 billion in revenue to publicly disclose their Tier 1 and Tier 2 emissions to a reporting agency in 2026. Beginning in 2027, companies they should begin reporting Scope 3 emissions. The bill also requires companies to report greenhouse gas emissions in a “manner that is readily understandable and accessible to state residents” and requires such public disclosures to be independently verified by a third-party auditor. The the bill would affect an estimate for more than 5,300 companies operating in California.
The legislation received support from major corporations such as Microsoft, Ikea USA, Patagonia and, more recently, Apple.
SB 261 focuses on climate-related financial risks created by companies’ operations. Those generating more than $500 million in revenue will have to prepare biennial reports on climate-related financial risks and risk management strategies starting no later than January 1, 2026. The legislation provides expected to affect more than 10,000 companies doing business in Californiaaccording to a Senate floor analysis from last month.
Despite signing the bills and supporting California’s “bold responses to the climate crisis,” Newsom expressed concerns about the deadlines outlined in the bills and the financial impact the legislation could have on businesses.
“The implementation deadlines in this bill are likely unattainable, and the reporting protocol established could result in inconsistent reporting across businesses subject to the measure,” Newsom said in a press statement about SB 253.
“I give instructions [the California Air Resources Board] closely monitor the cost impact as it implements this new bill and make recommendations to streamline the program,” he added.
The governor of California reflects this sentiment and on SB 261 and said his administration will work with the authors of both bills and the Legislature to address these issues next year.
“Given the scope of California’s new rules, the message for any business … meeting the stated revenue thresholds is the same: start building — or leveraging — the institutional capacity to make climate-related emissions and disclosures,” Bessie Daschbach, partner at Hinshaw & Culbertson focused on sustainability and litigation, told ESG Dive.
“For those firms that may have hoped to wait for the SEC to finalize disclosure rules, there is no longer room to do so,” he added. “California’s rules have accelerated the trajectory.”