On September 27, California Governor Gavin Newsom yielded to political pressure to provide workable frameworks for the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) when he signed into law a bill amending both provisions, SB 219. We summarized the impact of the California climate disclosure legislation package in a previous issue of ESG Collaborative Update. SB 219 is a moderate version of the amendments Governor Newsom proposed in June 2024, which were rejected by the California legislature. Whether his efforts to keep the legislation package on track will be successful remains unclear, as litigation challenges against both SB 253 and SB 261 continue in the U.S. District Court for the Central District of California (U.S. Chamber, et al., C.D. Cal., Case 2:24-cv-00801 (Jan. 30, 2024). Later this month, the court will hear oral argument on dispositive motions in the case.
Despite the litigation uncertainty, the key takeaway is that the first reporting deadlines will still begin in 2026. Entities that do business and sell products in California would be wise to begin preparing now to comply with the nation’s most extensive mandatory disclosure reporting requirements on greenhouse gas emissions.
The following tables summarize the key changes implemented by SB 219.
| Requirement | SB 253 | As Amended by SB 219 |
|---|---|---|
| Deadline for promulgation of CARB regulations | Original deadline was January 1, 2025 | CARB will now have until July 1, 2025 |
| Reporting of Scope 1 and 2 emissions | Set to begin in 2026 on or by a date to be determined by CARB, then annually thereafter | No change |
| Reporting of Scope 3 emissions | Set to begin in 2027 and annually thereafter; no later than 180 days after an entity’s reporting of Scope 1 and 2 emissions | Reporting will still begin in 2027, but CARB is now tasked with developing a phased-in schedule |
| Consolidated disclosures | N/A | Exempts subsidiaries of covered entities from separate reporting; can file a consolidated report at the parent company level |
| Limited/reasonable assurances for Scope 1 and 2 emissions | Beginning in 2026 and 2030, respectively | No change |
| Payment of filing fee | Amount undisclosed, but due at time of filing disclosure | Amount still undisclosed, but no longer due at time of filing; no deadline is specified |
| Requirement | SB 261 | As Amended by SB 219 |
|---|---|---|
| Publication of climate-related financial risk report | Must be published on the covered entity’s website, on or before January 1, 2026, and biennially thereafter | No change |
| Consolidated disclosures | Allows subsidiaries of regulated entities to submit consolidated reporting at parent company level | No change |
| Climate reporting organization | CARB will contract with a climate reporting organization to prepare reports on climate-related financial risk disclosures | CARB can choose to assume these duties or engage a third party to perform them |
| Payment of fee | Due on or before January 1, 2026, and biennially thereafter, upon filing disclosure | No longer due at time of filing of disclosure, but due on or before January 1, 2026, and biennially thereafter |
To comply with these requirements, covered entities will need to assess and develop internal controls around accounting, planning, operations, and governance practices to ensure successful and accurate disclosures. We previously provided some practical suggestions for ensuring ESG disclosures are specific and accurate. Careful planning and review of ESG disclosures will be central to minimizing compliance and litigation risks associated with ESG-related litigation.
Members of our ESG Collaborative will continue to follow developments in the California climate disclosure litigation and legislative developments related to pending climate accountability legislation in other states.
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