Don’t Be Caught Off-Guard: California’s Climate-Related Disclosure Deadlines Are Fast Approaching

Don’t Be Caught Off-Guard: California’s Climate-Related Disclosure Deadlines Are Fast Approaching

Last month, Governor Newsom signed another climate-related bill into law in California – Senate Bill (SB) 219, which will require firms to make certain climate-related disclosures in just over a year. Specifically, firms will have to disclose their climate-related financial risks by January 1, 2026, and disclose and obtain limited assurance for Scope 1 and 2 emissions later that year.

Although SB 219 is a new bill, the content of the legislation largely reflects two climate-related bills passed in 2023, known as SB 253 and SB 261. There were several concerns about the future of SBs 253 and 261, and SB 219 seeks to provide some clarity. SB 219 has several key elements consistent with the previous legislation, including:

• Similar implementation timelines. The new bill still requires climate-related disclosures in 2026, despite Governor Newsom’s request to delay reporting deadlines by two years (with reporting not required until 2028).
  
  
• Consistent applicability determinations. SB 219 has the same requirements as to which firms are subject to disclosures.
  
  
• Comparable assurance requirements. Under SB 219, firms will still have to obtain limited assurance on Scope 1 and 2 emissions in 2026, moving to reasonable assurance by 2030.
  
  

However, SB 219 does include several modifications to SBs 253 and 261, including:

• Additional time for CARB to implement the legislation. Under SB 219, the California Air Resources Board (CARB) has until July 1, 2025 to develop and adopt regulations governing carbon emissions disclosures – a six-month delay from the requirements in SB 253.
  
  
• More relaxed timeframes on Scope 3 emissions reporting. SB 219 indicates that firms will be required to disclose their Scope 3 emissions in 2027, but on a schedule to be determined by CARB. By contrast, SB 253 initially required Scope 3 emissions to be reported within 180 days of Scope 1 and 2 disclosures.
  
  
• Ability for firms to consolidate reports at the parent company. Unlike the prior legislation, SB 219 gives firms the option to consolidate these reports at the parent company level, which could reduce the financial burden for reporting firms.
  
  

By passing SB 219, the California Senate and Governor Newsom are signalling that they are pushing ahead with an aggressive climate-related agenda, as part of their attempts to ‘Trump-proof’ their climate policies – as the ‘New York Times’ has described it – given the uncertainty surrounding the upcoming US elections. However, legal challenges have been brought against SB 253 and 261, and it is likely that SB 219 will face similar hurdles. Nevertheless, firms that have not yet prepared for these regulations will need to scramble in 2025 to comply. As a first step, they should work to establish appropriate internal governance structures and data collection processes, while also considering investment in both software and services. 

Verdantix will continue to follow climate and sustainability-related updates coming out of the US, including the evolution of SB 219 and other implications of the November 2024 election.