In a significant move addressing climate change, California has recently enacted two far-reaching and unprecedented laws. These new regulations will mandate almost all large-scale enterprises, irrespective of their business sector, to unveil both their direct and indirect greenhouse gas (GHG) emissions (S.B. 253), and the potential financial risks they face due to climate change (S.B. 261).
This report from Dorsey & Whitney LLP provides an incisive overview of this transition.
With their broad and inclusive purview, these laws herald a change for businesses of practically any scale that operate in California. Not only do these regulations spotlight the companies’ carbon footprint, but they also compel them to assess climate change’s potential impact on their financial stability.
S.B. 253 is aimed at disclosing GHG emissions. The law’s rigorous disclosure requirements apply not just to direct, but also to indirect emissions. This provision includes emissions from purchased electricity, business travels, and other sources that are not directly controlled by the firm but are indirectly linked to its activities.
On the other hand, S.B. 261 prioritizes understanding financial risks linked to climate change. Companies will now have to illustrate the kind of risks climate change presents to their operations, showing transparency and a keen understanding of the broad concerns associated with global warming.
Without a doubt, these new laws represent a significant push towards holding corporations accountable for their environmental footprint. Large-scale corporations and law firms alike should be proactive in adapting to these changes and delivering the necessary disclosures.