CA Climate Laws: GHG Emissions and Risk Reporting

KPMG Regulatory Insight

• State Activity: Expect other states to adapt/adopt
• Legal Action: Anticpate legal/litigation challenges
• Timing: May change with final regulations
  
• Move to Measure: Companies must build measurement/reporting

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October 2023

California Climate Disclosure Laws

California becomes “first-in-the-nation” to adopt broad climate reporting laws that will require large businesses to report on greenhouse gas (GHG) emissions and climate-related financial risk. These laws join a suite of sustainability reporting relative to GHG emissions and climate-related financial risks and may shape climate reporting in other states and/or nationally.

The CA laws include:

• Climate Corporate Data Accountability Act (SB-253)
  
• Greenhouse Gasses: Climate-Related Financial Risk (SB-261)

SB-253 requires “reporting entities” to publicly disclose their GHG emissions on an annual basis. “Reporting entities” is defined to include i) a business (e.g., a corporation, partnership, limited liability company, or other business entity) formed under the laws of CA, any other U.S. state, or the District of Columbia, or through an act of Congress, ii) with total annual revenues in excess of $1 billion, and iii) that does business in California.

SB-261 requires “covered entities” to publicly disclose their climate-related financial risk and the measures adopted to reduce and adapt to those risks. “Covered entities” is defined in the same manner as “reporting entities” under SB-253 with the exception of a $500 million annual revenue threshold.

Key features of the bills are summarized in the table below. 

1. Scope 3 disclosures required no later than 180 days after disclosure of Scopes 1 and 2.
2. No Administrative penalty for misstatements in Scope 3 disclosures made with a reasonable basis and disclosed in good faith.

Note: In signing the bills, the CA Governor noted some concerns that would be addressed by the state Administration and the legislature. These included:

• For SB-253: questions as to whether i) the implementation deadlines are “likely infeasible,” and ii) the reporting protocol could result in inconsistent reporting across businesses subject to the measure.
• For SB-261: a concern that implementation deadlines do not provide the California Air Resources Board (CARB) with sufficient time to implement requirements.