Two bills have recently been approved by the California State Senate and State Assembly, respectively known as Senate Bill 253 and Senate Bill 261. These proposed legal requirements target companies conducting business within California, which number in the thousands. Each of these companies could find themselves obligated to disclose their greenhouse gas (“GHG”) emissions and any financial risks they may face due to climate-related issues, if the bills are signed into law by California’s governor.
According to a report by White & Case LLP that details these bills, reportage of these data may begin as early as 2026. With California being a significant player in the global economy, the potential impact on international businesses is of import. Such adjustments in legal requirements can have far-reaching implications for companies not only in relation to operational compliance but also potential financial implications associated with GHG emissions territory.
As per the proposed legislation, the mandatory public disclosure of a company’s GHG emissions could increase transparency and pressure businesses to reduce their carbon footprint, in a bid to align with increasingly pressing global climate-change goals. The climate-related financial risk reporting, on the other hand, stands to increase awareness amongst stakeholders on the financial viability of businesses in the face of catastrophic climate events, which are predicted to become more frequent and severe in light of global warming.
The important takeaway for legal professionals is that, should these bills become law, it would represent a significant increase in climate-related disclosure obligations for businesses operating in California. Consequently, it may be a prudent move for businesses, along with their legal and financial advisors, to start anticipating and planning for these potential obligations well in advance.
As things currently stand, the expectation is that California’s governor will sign both bills into law, making it a matter of increasing urgency for companies who conduct business within the state.