California Climate Disclosure Laws’ Compliance Timeline Remains Stable While New Amendments Give State Regulator More Time and Flexibility

Companies that do business in California and meet certain revenue thresholds should continue to prepare to comply with the state's landmark climate disclosure laws that impose reporting deadlines starting in 2026, even as a newly enacted state law gives California regulators more time and flexibility in promulgating implementing regulations.

California Governor Gavin Newsom signedSenate Bill 219 (SB 219) into law on September 27, 2024, making modest amendments to California's two signature climate disclosure laws, SB 253 and SB 261, enacted in October 2023. SB 253, or the Climate Corporate Data Accountability Act, requires reporting entities to publicly disclose their greenhouse gas (GHG) emissions beginning in 2026 for Scope 1 and 2 emissions, and 2027 for Scope 3. SB 261, the Climate-Related Financial Risk Act, requires covered entities to publish biennial reports, beginning in January 2026, that disclose climate-related financial risk and measures adopted to reduce and adapt to that risk.

Recently at Climate Week in New York, Covington hosted Senators Scott Wiener and Henry Stern, lead authors of these laws, for a candid discussion on implementation with corporate leaders. The California Senators reinforced their commitment to maintaining the current compliance dates, notwithstanding present litigation challenging the two laws in federal court, and encouraged regulated companies to engage with the California Air Resources Board (CARB) to identify high priority areas for additional regulatory clarity, including maximizing opportunities to further harmonize reporting requirements across California, the European Union (EU), and other jurisdictions.

SB 219 did not eliminate or alter substantive reporting requirements under either of the California climate disclosure laws. Nor did SB 219 delay the years in which reporting requirements begin. However, the new law did modify the 2023 statutes in several respects that are relevant for companies that will be subject to the climate disclosure laws. Regulated entities should therefore begin planning for compliance, while monitoring ongoing federal litigation challenging the laws.

For more details on key provisions and deadlines associated with each of the climate disclosure laws, please read our previous alert on preparing for compliance with California's climate disclosure laws and our posts spotlighting SB 253 and SB 261, published when the California legislature originally passed them.

Amendments to SB 253 and SB 261

SB 219 made the following notable changes to SB 253:

• Six-month CARB rulemaking extension: Previously, SB 253 required CARB to develop and adopt implementing regulations by January 1, 2025. SB 219 extended the deadline by which CARB must promulgate those regulations to July 1, 2025. Even so, the new law did not alter the years in which covered entities will be required to disclose emissions; it merely provided the agency with more time to propose and finalize implementing regulations.
• Marginal change to timing of Scope 3 emissions disclosures: Under SB 253 as enacted in 2023, disclosure of Scope 3 emissions was required no later than 180 days after Scope 1 and 2 emissions were disclosed. SB 219 altered this by giving CARB discretion to prepare a schedule for disclosure of Scope 3 emissions. However, the SB 219 amendments did not change the language stating that public disclosure of Scope 3 emissions will begin in 2027.
• Consolidated reporting at the parent level: SB 219 clarified that SB 253's required GHG emission reports may be consolidated at the parent company level. This affords more flexibility to regulated entities. For example, a subsidiary of a parent company that qualifies as a reporting entity need not file a separate report and could instead elect to file at the parent company level.

SB 219 made additional, minor changes to SB 253, such as providing more time (90 days) for CARB or an emissions reporting organization it chooses to contract with to publish GHG emission reports on a public digital platform.

With respect to SB 261, the amendments were more minor. For instance, SB 261 originally required CARB to contract with a climate reporting organization to prepare a biennial public report on climate-related financial risk disclosures; SB 219 makes that optional. SB 219 also removed from both laws the requirement that a fee be paid "upon filing [a] disclosure." However, the new law did not eliminate annual fee requirements themselves.

The consolidated reporting clarifications that SB 219 made to SB 253 were not necessary for SB 261 because even prior to SB 219, SB 261 expressly allowed climate-related financial risk reports to be consolidated at the parent company level. SB 261 also allows covered entities to satisfy reporting obligations through compliance with equivalent reporting requirements in other jurisdictions.

Practical Effect and Preparing for Compliance

Overall, the changes that SB 219 made to the 2023 climate disclosure laws do not significantly alter relevant obligations. Rather, the amendments primarily afford CARB more time and flexibility in crafting implementing regulations and provide some additional clarity to regulated parties regarding consolidated reporting under SB 253.

The extended deadline provided to CARB could be a double-edged sword: On one hand, covered entities now have more time to prepare strategies to engage with CARB and to consider how California's implementing regulations can best harmonize with other reporting regimes, such as the Corporate Sustainability Reporting Directive (CSRD) in the EU. On the other hand, there may now be less time between the date CARB finalizes its regulations and the date covered entities must begin to make disclosures. With this in mind, it is important that covered entities begin preparing for compliance now and consider strategies for engagement with CARB.

Companies should also monitor and consider engaging in the ongoing updates to the GHG Protocol. New draft standards and guidance are anticipated in 2025, with opportunities for public engagement, and final updates are expected in 2026. SB 253 requires reporting entities to measure and report emissions in conformance with the GHG Protocol. These updates are thus closely linked to mandatory climate disclosure obligations in California and other jurisdictions.

Covington's Carbon Management and Climate Mitigation practice has extensive experience and capabilities advising on climate mitigation strategies, regulatory frameworks, and agency engagement. Our global team is ready to assist clients as they engage with regulatory agencies and prepare to comply with climate reporting rules in California, the EU, and other jurisdictions.

Public link

Please use the above public link if you want to share this noodl on another website.