The California Air Resources Board (CARB) has announced that it will not take enforcement action during the first reporting year against companies that fail to make complete greenhouse gas (GHG) emissions disclosure as required under California Senate Bill 253. In an Enforcement Notice issued on December 5, 2024, CARB stated that it will “exercise its enforcement discretion such that, for the first report due in 2026, reporting entities may submit scope 1 and scope 2 emissions from ‘the reporting entity’s prior fiscal year’ that can be determined from information the reporting entity already possesses or is already collecting at the time this Notice was issued.” This relief is conditioned on a reporting entity’s demonstration of good faith efforts to comply with the law. CARB says its objective is to support entities actively working toward full compliance.
Senate Bill 253, the Climate Corporate Data Accountability Act, requires U.S. public or private entities with annual global revenue exceeding $1 billion that do business in California to report their Scope 1, Scope 2, and Scope 3 GHG emissions. See California Outflanks the SEC on Climate Disclosure, October 2023 Update. The first reports are due in 2026 (on a date yet to be established by CARB) and cover Scope 1 and Scope 2 emissions during the reporting entity’s 2025 fiscal year. Last Fall, the California legislature made minor changes to the law but declined Governor Newsom’s request to postpone the reporting deadline. See California Tweaks its Climate Disclosure Law But Reporting Deadlines are Unchanged, November 2024 Update.
A second California law, the Climate-Related Financial Risk Act, requires U.S. public or private entities with annual global revenue exceeding $500 million that do business in California to disclose their climate-related financial risks and the measures they have adopted to reduce and adapt to those risks. The first reports under this law are due on or before January 1, 2026, That deadline has not been extended.
Audit committees that have not already done so should discuss with management whether the company is subject to the California climate disclosure requirements and, if so, whether it has processes in place to collect the information needed to comply. Audit committees and managements of companies subject to the GHG emissions disclosure requirement should also consider whether the company can fully report Scope 1 and 2 GHG emissions for FY 2025 and, if not, how it would demonstrate good faith efforts to work toward full compliance.
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