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California’s recent climate disclosure laws have gained strong public support, with 59% of commenters backing the legislation. Set to be implemented by the California Air Resources Board (CARB), these laws require businesses to disclose greenhouse gas emissions and climate-related financial risks. The 2023 regulations aim for greater corporate transparency regarding climate risks, aligning with international standards. Despite legal challenges from business groups, California’s framework continues to progress, potentially influencing similar measures in other states.

California is moving forward with new climate disclosure laws that have gained substantial public support ahead of their implementation by the California Air Resources Board (CARB). An analysis from sustainability nonprofit Ceres shows that 59% of public commenters favor the legislation, while only 9% oppose it.

The climate disclosure laws, which were enacted in 2023, require businesses operating in California to disclose their greenhouse gas (GHG) emissions and report on climate-related financial risks. This legislation aims to enhance corporate climate risk transparency, aligning with international standards for sustainability and financial reporting.

Ceres reviewed a total of 245 unique public submissions made to CARB, finding that the majority of responses came from institutional stakeholders, including investors and advocacy groups. This level of engagement underscores a pivotal consensus among various sectors regarding the necessity for standardized reporting on climate risks.

One of the key themes emerging from the public comments includes a strong push for global alignment of the climate disclosure rules. Commenters expressed the importance of synchronizing California’s legislation with international frameworks, such as those created by the International Sustainability Standards Board (ISSB) and the European Union’s Corporate Sustainability Reporting Directive.

Another area of concern raised was the definition of “doing business in California.” Many respondents urged for clearer criteria to distinctly identify which companies would fall under these laws, proposing the use of California’s Revenue & Tax Code as a reference point. Similarly, there were calls for more explicit guidelines concerning the reporting requirements for multinational corporations that have intricate corporate structures. Suggestions were made for these entities to adopt consolidated reporting practices by parent companies that would encompass their subsidiaries.

The new laws are comprised of two separate acts: the California Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). SB 253 mandates that companies with revenue exceeding $1 billion disclose their emissions data annually beginning in 2026. Meanwhile, SB 261 requires firms with revenues surpassing $500 million to report on climate-related financial risks every two years starting in January 2026. Notably, these regulations will necessitate the disclosure of Scope 1, 2, and 3 emissions data, with the first two scopes being reported in 2026 and Scope 3 beginning in 2027.

CARB is tasked with finalizing the implementing regulations by July 1, 2025, particularly to clarify what constitutes “doing business in California.” Noncompliance with SB 253 could result in fines reaching up to $500,000 per reporting year, while penalties for violations of SB 261 could amount to $50,000 annually.

Despite facing legal challenges from business groups that argue the laws infringe on First Amendment rights and federal regulations, California’s framework for climate disclosures remains steadfast. While there may be obstacles in implementing similar climate disclosure rules at the federal level, California’s laws continue to progress.

Moreover, there is a notable trend in other states, such as New York, Illinois, Colorado, and New Jersey, contemplating similar climate disclosure legislation. The analysis from Ceres indicates there is an urgent requirement for clear and consistent regulations to support businesses as they prepare for these compliance measures.

Feedback from over 100 experts participating in Ceres’ roundtables has shown that there is a widespread readiness among companies to adapt to these emerging climate disclosure requirements. This points to a significant shift in corporate transparency and accountability regarding climate risks in California, potentially setting a benchmark for other states and jurisdictions to follow as they develop their own reporting mandates.

California Advances New Climate Disclosure Regulations

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Author: HERE Huntington Beach