California Moves to Enforce Corporate Emissions Reporting

News Summary

California Attorney General Rob Bonta is advocating for the enforcement of the state’s SB 253 emissions reporting law amidst legal challenges. This statute requires companies earning over $1 billion to report greenhouse gas emissions, aiming to bolster environmental accountability. The law is part of California’s Climate Corporate Data Accountability Act, and the first reports on Scope 1 and 2 emissions are due in 2026, while Scope 3 emissions will be reported in 2027. The ongoing legal battle may influence other states to adopt similar regulations.

California – The California Attorney General, Rob Bonta, is advocating for the enforcement of the state’s corporate emissions reporting statute, following a legal challenge launched by a business group aimed at overturning the law. The statute, known as SB 253, mandates that companies provide factual emissions data, and Bonta’s legal team argues that enforcing it would not result in irreparable harm to the corporations involved during the ongoing litigation.

The U.S. Chamber of Commerce had initiated a lawsuit against the state in 2024, asserting that SB 253 violates First Amendment rights. The law, which falls under California’s Climate Corporate Data Accountability Act (CCDAA), requires public and private companies in the U.S. with more than $1 billion in annual revenue that operate in California to report their Scope 1, 2, and 3 greenhouse gas (GHG) emissions.

Scope 1 covers direct emissions from company-owned and controlled resources; Scope 2 focuses on indirect emissions from the generation of purchased energy; while Scope 3 pertains to all other indirect emissions that occur in a company’s value chain, including both upstream and downstream emissions. Companies are required to submit their first reports on Scope 1 and 2 emissions by January 2026, which will cover data from the previous fiscal year, 2025. Reports on Scope 3 emissions are expected in 2027.

In an effort to ease the transition to compliance, California’s Air Resources Board (CARB) announced that it would not impose penalties for incomplete or inaccurate reporting during the inaugural reporting cycle, as long as companies make a good faith effort to comply. Following concerns regarding the timing of implementation raised by Governor Gavin Newsom when SB 253 was passed, the California legislature enacted SB 219. This amendment extends CARB’s deadline to finalize regulations from January 1, 2025, to July 1, 2025, but does not alter the deadlines for reporting compliance.

Under the current regulations, CARB stated it will exercise enforcement discretion for the first emissions reports due in 2026. Companies must submit data that is consistent with the information they already possess or can gather by the time they receive the Enforcement Notice. Noncompliance could result in penalties as high as $500,000 for companies that fail to report their prior fiscal year emissions.

An additional requirement of the new law is that businesses must undergo third-party assurance assessments to validate the credibility of their emissions reports. This obligation aims to bolster the reliability of the data that companies submit, thereby offering clearer insight into their environmental impact.

As businesses prepare to meet these regulatory demands, it is critical for them to assess whether their revenues meet the threshold set by SB 253 or SB 261 and to establish robust systems for tracking their GHG emissions.

The developments surrounding California’s corporate emissions laws could potentially influence other states, such as New York and New Jersey, to consider similar climate accountability initiatives. These climate disclosure laws are designed to enhance corporate transparency concerning emissions and the financial risks associated with climate change, marking a significant step towards more comprehensive environmental accountability in the corporate sphere.

In summary, the legal battle surrounding California’s SB 253 is ongoing, but the state is determined to move forward with enforcement to ensure that companies take responsibility for their emissions reporting. This legislative framework reflects California’s commitment to fighting climate change and promoting sustainable business practices that are mindful of environmental impact.

Deeper Dive: News & Info About This Topic

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• Supply Chain Brain: Podcast: A Plan of Action for Complying with California’s Emissions Reporting Bill
• Wikipedia: Greenhouse Gas Emissions
• Inside Energy and Environment: California Climate Disclosure Laws Compliance Timeline Remains Stable
• Google Search: California Climate Disclosure Law