Thousands of companies doing business in California will be required to disclose their greenhouse gas (GHG) emissions and climate-related financial risk under the state’s three new climate disclosure bills.
- Corporate Data Accountability Act (Senate Bill 253): Effective 2026
- Climate-Related Financial Risk Act (Senate Bill 261): Effective 2026
- Voluntary Carbon Market Disclosures Act (Assembly Bill 1306): Effective 2024
This is the first step towards mandatory GHG reporting in the United States. There is growing pressure from shareholders, investors, and consumers for companies to disclose their impact on the environment. Current climate disclosure regulations in the United States are limited in scope and vary widely by region and industry. The Securities and Exchange Commission (SEC) is expected to release national climate reporting regulations for public companies in early 2024.
Companies should determine if the following laws apply to their business and understand their obligation to prepare climate reports. If a company already publishes these reports, they should assess if their current system satisfies the regulations below. For those companies yet to start reporting, it would be best to begin the process and establish the necessary infrastructure/partnerships to meet the first reporting deadline in January 2026. Burton Energy Group has a team of experts ready to help your company with existing reporting efforts or partner with your company to create a reporting framework and perform the necessary emissions calculations. Contact us here.
Corporate Climate Data Accountability Act (SB 253)
Who? All public and private companies doing business in California with over $1 billion total annual revenue. According to the bill, “doing business” in CA refers to any company “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit within California.”
What? This act requires public disclosure of scope 1, 2, and 3 GHG emissions in accordance with the Greenhouse Gas Protocol standards. The Greenhouse Gas Protocol is a globally standardized framework to measure GHG emissions from private and public sector operations, value chains, and mitigation actions.
When? Scope 1 and 2 annual reporting requirements start in 2026, scope 3 reporting requirements start in 2027. Scope 1 and 2 disclosures are also required to show limited assurance from an independent third party starting in 2026.
Penalty? Up to $500,000 in a reporting year for violations. Between 2027-2030, penalties related to scope 3 emissions reporting may only occur for non-filing.
Climate-Related Financial Risk Act (SB 261)
Who? All public and private companies doing business in California with over $500 million total annual revenue.
What? SB 261 requires disclosure of climate-related financial risk in accordance with the recommended framework and disclosures published by the Task Force on Climate-related Financial Disclosures (TCFD) or an equivalent requirement. Additionally, this Act requires disclosure of the measures adopted to reduce and adapt to the published climate-related financial risk.
When? Initial reports are to be published on company websites by January 1, 2026, with biennial disclosures thereafter. Reporting may be consolidated at the parent company level.
Penalty? Up to $50,000 per reporting year for violations.
Voluntary Carbon Market Disclosures Act (AB 1305)
Who? Any entity that purchases or uses voluntary carbon offsets and makes claims:
- Regarding the achievement of net zero emissions
- That the entity or a product is carbon neutral
- Implying the entity or a product does not add net CO2 or GHG to the atmosphere or has made significant reductions to its CO2 or GHG emissions
Requirements will not apply to an entity that does not operate within California, does not purchase or use carbon offsets sold within the state, and/or does not make claims within the state.
What? Requires disclosure of the following on the company website for each applicable project or program:
Any entity making claims toward the bullets above will also be required to disclose on its website all information documents how a carbon neutral or net zero emission claim was determined to be accurate or accomplished. This information may include but is not limited to disclosure of independent third-party verification of GHG emissions, identification of the entity’s Science-Based Targets (SBTi), and disclosure of the relevant sector methodology and third-party verification used for the SBTi.
When? Disclosures will need to be updated at least annually starting in 2024.
Penalty? Violations are subject to a per-violation civil penalty of up to $2,500 per day that information is not available or inaccurate on the company’s website. The maximum penalty is capped at $500,000 per violation.