A PDF version of this publication is attached here: California's not waiting for the SEC's climate disclosure rules (PDF 711kb)

This publication has also been distributed under the title "California climate disclosure laws will have global impact."

In the last days of its legislative session that ended September 14, 2023, the California Legislature approved two landmark climate disclosure bills that are poised to change the landscape of climate reporting in the United States. If the bills are not vetoed by the California Governor prior to October 14, 2023, they will become law and over 10,000 US companies — including both public and private companies as well as subsidiaries of non-US headquartered companies — would be subject to climate disclosure requirements in the near term, with reporting beginning in 2026 on 2025 information.

The California State Senate (California Senate) Climate Accountability Package includes bills that would require (1) greenhouse gas (GHG) emissions reporting in compliance with the Greenhouse Gas Protocol (GHG Protocol) and (2) climate-related financial risk reporting in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). ¹ Both the GHG 1 Protocol and TCFD requirements should be familiar to companies given their reference in the Securities and Exchange Commission’s climate disclosure proposal, the European Sustainability Reporting Standards (ESRS), and IFRS ® Sustainability Disclosure Standards. The number of entities in scope of these bills, however, would go well beyond that of the SEC’s climate disclosure proposal because the requirements would apply to both public and private companies that meet certain revenue thresholds and that are “doing business” in California.

The proposed bills are brief — only a few pages each — and lack answers to some questions regarding how and when to apply the requirements. In the case of the GHG disclosures, the California Air Resources Board (CARB) is required to adopt regulations prior to January 1, 2025 which may provide more detailed application guidance. Given that the bills would apply to fiscal 2025 information, however, we recommend that companies evaluate applicability and reporting requirements based on what is known now, to prepare for what may be a company’s first foray into mandatory climate-related disclosures.