This week, Governor Gavin Newsom proposed that California climate laws SB 253 and 251 should be amended. If approved, this would mean that implementation is postponed by two years.
What are SB 253 and 251?
These climate policies were signed into law in October 2023. Known to be some of the most stringent climate disclosure mandates, they require both public and private companies doing business in California to report on their climate risks and Scope 1,2, and 3 emissions.
SB 253 calls for companies with more than $1 billion annual revenue (around 5,000 companies) to disclose Scope 1 and 2 emissions in 2026 and Scope 3 the following year. SB 261 calls for companies with more than $500 million annual revenue (around 10,000 companies) to report on climate risks starting in 2026 and continuing every year from then onwards.
Ongoing Trend for Greater Disclosure
As there is a greater focus on global efforts to mitigate the effects of climate change and work towards the Paris Agreement, there is increasing pressure on businesses to be more accountable when it comes to climate and environmental practices.
This has led to more importance placed on ESG reporting and the publication of sustainability reports. Since 2020, these reports have become common in both public and private companies; however, they have lacked standardization of content.
Now, there are national and international regulations which companies need to increasingly comply with, encompassing multiple factors such as Scope 1, 2 and 3 emissions disclosure.
What Would the Delay Mean?
If the proposed amendments go ahead, they would delay Scope 1 and 2 disclosures until 2028 and Scope 3 until 2029. This additional time would also give the California Air Resources Board (CARB) more time and flexibility with the rules. CARB would also have the option to work with a third-party reporting agency and have more flexibility in bringing in Scope 3 reporting.
Delays have not come as a surprise. CARB was due to finalize the rules in January 2025 and SB 253 and 261 are currently under litigation.
In fact, Governor Newsom himself expressed some doubts about the timelines, saying “The implementation deadlines in this bill are likely infeasible, and the reporting protocol specified could result in inconsistent reporting across businesses subject to the measure.”
Conclusion
The proposed amendments have led companies to question when and how they will have to do mandatory climate reporting. The proposed delays are likely to be negotiated up until the deadline of August 31st.
Story originally published here.
