California’s Climate Corporate Data Accountability Act (SB 253) was approved by the state assembly’s Committee on Natural Resources in July 2023.
If passed into law, it will require U.S. companies doing business in California with annual revenues exceeding $1 billion to annually report on greenhouse gas (GHG) emissions, including supply chain disclosures, beginning with reporting 2025 data in 2026.
“According to Politico, approximately 5,400 companies doing business in California would be required to make disclosures under the Act,” Ropes & Gray LLP says in a Lexology article. “In some respects, the [SB 253] is broader than the SEC’s climate disclosure proposal.”
The bill was introduced last year but failed in the state’s second legislative chamber. It was reintroduced this year by Senator Scott Weiner (D-San Francisco), Senator Lena Gonzalez (D-Long Beach), and Senator Henry Stern (D-Los Angeles) as part of the “Climate Accountability Package, a suite of bills that work together to improve transparency, standardize disclosures, align public investments with climate goals, and raise the bar on corporate action to address the climate crisis,” according to Weiner’s news release.
Industry benefits of the proposed act include the following, summarized by Ropes & Gray:
- “Scope 3 emissions reporting would not phase in until the second reporting year, 2027 (2026 data). The bill still contemplates a reporting lag between scope 1 and 2 and scope 3 emissions data, allowing for up to an additional 180 days to report on scope 3 emissions.”
- “Reporting entities would be able to submit reports prepared to meet other national and international reporting requirements, as long as they satisfy the reporting requirements of the Act.”
- “The third-party assurance requirement has been scaled back. Scope 1 and 2 emissions would be required to be audited at a limited assurance level beginning in 2026 and at a reasonable assurance level beginning in 2030. During 2026, the California State Air Resources Board would be required to review and evaluate trends in third-party verification requirements for scope 3 emissions data. On or before January 1, 2027, the state board may establish an assurance requirement for third-party audits of scope 3 emissions. Scope 3 emissions would be required to be audited at a limited assurance level beginning in 2030.”
- “Liability for scope 3 emissions disclosures has been scaled back, with the introduction of a safe harbor. Under the amended bill, a reporting entity would not be subject to an administrative penalty for misstatements regarding scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith.”
Environmental groups support the proposed act, according to a fact sheet published by California Environmental Voters. Corporate supporters include:
- Patagonia
- IKEA USA
- Sierra Nevada Brewing Co.
- Everlane
“Public access to this critical corporate climate pollution data would enable informed decision making when purchasing from and patronizing these companies,” the fact sheet says. “Data disclosure can also inform future regulation and lead to the creation of market-based incentives that encourage innovative approaches to carbon reduction. Transparent emissions reports would enable communities and regulators to take action to more effectively target corporate reduce polluters that are currently under-reporting or not reporting at all.”