On October 7, 2023, California Governor Gavin Newsom has signed into law two comprehensive climate disclosure acts: SB 253 and SB 261. These legal frameworks will corroborate California’s position as a pioneer in championing environmental protection and could lay the blueprint for future regulations in other regions.
The SB 253 legislation, also known as the Climate Corporate Data Accountability Act, mandates thousands of firms conducting business in the “Golden State” to report their Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased energy), and Scope 3 emissions (all other indirect emissions), on an annual basis. It is an unprecedented move to instigate corporate transparency regarding carbon footprints and will potentially aid in the identification of key areas for carbon reduction.
Simultaneously, SB 261 imposes a biennial requirement on companies to disclose climate-related financial risks. Titled “Greenhouse Gases: Climate-Related Financial Risk”, this regulation aims to present a distinct picture of how firms are being financially impacted by climate change, whilst identifying potential risks and opportunities within their operational paradigm.
While these laws squarely fall within the ambit of state legislation, they can nevertheless have far-reaching consequences in shaping corporate behavior not just in California, but around the world. The move could encourage other jurisdictions to adopt similar measures, fostering a global climate of corporate transparency and accountability around climate protection.
The broader implications of these acts will take some time to transpire, and it remains to be seen how corporations adapt to these new disclosure requirements. What is clear, however, is that the climate disclosure landscape has become more complex and demanding, calling for robust data handling capabilities and rigorous monitoring within firms.
For detailed insights on these new laws, you can check the full article at JD Supra by renowned law firm, Perkins Coie.