California’s Strong Support for Climate Disclosure Laws

News Summary

California is seeing significant public support for its new climate disclosure laws, with 59% of public commenters backing the measures. These laws, aimed at reporting greenhouse gas emissions and financial risks associated with climate change, require companies operating in the state to enhance transparency. The California Air Resources Board is preparing for implementation, with compliance requirements outlined for businesses. Despite facing legal challenges, the framework is influencing similar initiatives across other states.

California is witnessing robust public support for its newly enacted climate disclosure laws, as the California Air Resources Board (CARB) gears up for their implementation. An analysis from the sustainability nonprofit Ceres indicates a significant majority of 59% of public commenters are in favor of these laws, while only 9% oppose them. This strong backing highlights a growing consensus among stakeholders about the importance of transparency regarding climate-related business practices.

The climate disclosure laws, passed in 2023, mandate companies operating in California to report their greenhouse gas (GHG) emissions and outline their financial risks associated with climate change. The legislation enforces rigorous data collection and reporting requirements, which aim to enhance the overall accountability of businesses concerning their environmental impact.

Key Findings from Analysis

The analysis by Ceres gathered a total of 245 unique submissions directed to CARB, with 199 responses from various institutions, including investors, businesses, and advocacy groups. A few important areas of concern were highlighted by commenters:

• Global Alignment: The majority of respondents urged CARB to align California’s climate disclosure rules with international standards such as those set out by the International Sustainability Standards Board (ISSB) and the EU’s Corporate Sustainability Reporting Directive.
• Defining “Doing Business in California”: There was a call for clearer criteria regarding which companies fall under the laws’ purview, with suggestions to utilize California’s Revenue & Tax Code as a reference point.
• Reporting Rules for Corporate Groups: Commenters sought clearer guidelines for multinational corporations that have intricate structures. Suggestions included the possibility of consolidated reporting required from parent companies covering their subsidiaries.

Ceres is advocating for these improvements in corporate climate risk transparency based on the comprehensive feedback it has received from stakeholders. This move is expected to advance efforts to standardize the disclosures of companies’ climate-related financial risks effectively.

Details of the Legislation

The legislation includes two primary acts. The California Climate Corporate Data Accountability Act (SB 253) applies to companies generating over $1 billion in revenue doing business in California and necessitates annual public disclosures of emissions starting in 2026. The Climate-Related Financial Risk Act (SB 261) pertains to companies with revenues exceeding $500 million and mandates biennial reporting of climate-related financial risks beginning January 2026.

Companies covered under these laws will be required to disclose three types of emissions data, known as Scope 1, 2, and 3 emissions. Disclosures for Scope 1 and 2 emissions are set to commence in 2026, while Scope 3 disclosures will follow in 2027. CARB is tasked with finalizing the implementing regulations by July 1, 2025, to provide clarity on which entities qualify as “doing business in California.”

Compliance and Penalties

Failing to comply with the reporting requirements can lead to significant penalties. For SB 253, noncompliance could incur fines of up to $500,000 per reporting year, whereas violations of SB 261 may result in penalties of up to $50,000 annually.

Legal Challenges and National Influence

However, the climate disclosure laws in California are facing legal challenges from various business groups contending that the statutes infringe upon the First Amendment and conflict with federal regulations. Despite these challenges, California’s climate disclosure framework continues to advance, in contrast to the stricter implementation hurdles facing the SEC’s climate disclosure rules.

Moreover, other states are following California’s example, with similar legislative initiatives being considered or implemented in New York, Illinois, Colorado, and New Jersey.

Conclusion

Ceres emphasizes the urgent necessity for clear and predictable regulations that will aid businesses in their compliance efforts concerning these emerging climate disclosure requirements. Feedback from over 100 experts through Ceres’s roundtable discussions indicates that there is a widespread readiness among firms to adapt to the demands of these new laws.

Deeper Dive: News & Info About This Topic

• Daily Journal: Red Tape or Green Future?
• Solar Quarter: Strong Public Support for California’s Emissions Disclosure Laws
• ESG Dive: CARB Asked to Implement California Climate Disclosure Laws
• KPMG: Focus on 2026 Reporting for California Climate Laws
• Wolters Kluwer: California Climate Disclosure Laws
• Wikipedia: Climate Change in California
• Google Search: California Climate Disclosure Laws
• Google Scholar: California Climate Disclosure Laws
• Encyclopedia Britannica: Climate Change
• Google News: California Climate Disclosure Laws