News Summary
California is set to implement comprehensive climate disclosure laws following strong public support. The new regulations require companies to disclose GHG emissions and climate-related financial risks. The California Air Resources Board is finalizing the requirements, with significant penalties for noncompliance. As more states consider similar measures, clarity in regulations is essential for impacted businesses to ensure compliance and transparency regarding their environmental impact.
California is poised to implement new climate disclosure laws after a recent analysis revealed strong public support for the measures. Conducted by sustainability nonprofit Ceres, the analysis found that 59% of public commenters backed the climate disclosure laws, while only 9% opposed them. The California Air Resources Board (CARB) is preparing to finalize the regulations necessary for these laws, which were passed in 2023.
The new legislation mandates that companies operating in California disclose their greenhouse gas (GHG) emissions and the financial risks associated with climate change. Specifically, the California Climate Corporate Data Accountability Act (SB 253) requires companies with over $1 billion in revenue to submit annual public emissions disclosures starting in 2026. Meanwhile, the Climate-Related Financial Risk Act (SB 261) targets firms with revenues exceeding $500 million, requiring them to report climate-related financial risks every two years, beginning in January 2026.
The CARB must finalize the implementing regulations by July 1, 2025, to provide clarity on what constitutes “doing business in California.” There are significant penalties for noncompliance, including potential fines of up to $500,000 per reporting year for SB 253 and up to $50,000 per year under SB 261.
Public Engagement and Support
The analysis by Ceres assessed a total of 245 unique submissions to CARB concerning the new climate disclosure laws. Out of these, 199 responses originated from institutions such as investors, businesses, and advocacy organizations. The overwhelming majority of commenters emphasized the importance of aligning California’s laws with global transparency standards, particularly those set by the International Sustainability Standards Board (ISSB) and the European Union’s Corporate Sustainability Reporting Directive.
Commenters also highlighted the need for clear definitions regarding which companies qualify under the law, with suggestions to reference California’s Revenue & Tax Code. Additionally, there were requests for clearer guidelines specifically for multinational corporations, advocating for consolidated reporting by parent companies that cover their subsidiaries.
Importance of Climate Transparency
Ceres advocates for enhanced corporate climate risk transparency based on the insights gathered from stakeholders in the industry. The aim is to create standardized, high-quality disclosures that inform investors and the public about companies’ climate-related financial risks. The interest in developing a comprehensive climate disclosure framework is underscored by feedback from over 100 experts during Ceres’ roundtables, who indicated a general readiness among companies to comply with these emerging requirements.
Challenges and Legal Considerations
Despite strong public backing, California’s climate disclosure laws have faced legal challenges from business groups claiming the legislation infringes upon the First Amendment and federal regulations. Additionally, while the Securities and Exchange Commission (SEC) is navigating its own implementation challenges regarding climate disclosure rules, California’s framework appears to be advancing steadily.
Other states are taking notice of California’s initiative and are beginning to model similar legislation. New York, Illinois, Colorado, and New Jersey are among the states exploring their own climate disclosure requirements, indicating a growing trend toward increased corporate transparency related to environmental impact.
Next Steps for Companies
As California prepares to implement these new climate disclosure laws, Ceres underscores the urgent need for clear and predictable regulations. Businesses affected by these requirements will need to navigate complex systems to ensure compliance while also effectively communicating their climate-related risks and emissions data. The finalization of regulations by CARB in the coming years will be crucial to help businesses prepare adequately for adherence to these new standards.
Deeper Dive: News & Info About This Topic
- Daily Journal: California’s Climate Disclosure Laws
- ESG Dive: CARB and 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
