The recent enactment of a new law in California, SB 219, is poised to compel corporations, especially those operating globally, to reassess their climate disclosure practices. This law, which modifies the requirements for greenhouse gas emissions reporting to become effective in 2026, is a significant development for companies conducting business in California. The law requires particular attention as it aligns itself with ongoing regulatory developments in the UK and Europe.
SB 219 introduces several noteworthy changes, including a delayed timeline for Scope 3 emissions disclosure and increased authority given to the California Air Resources Board. Moreover, it allows parent-level consolidated reporting for scope emissions. Companies must evaluate if they fall under the law’s broad applicability criteria—revenue thresholds set at over $1 billion for public companies and $500 million for private ones—and whether they are “doing business” in California, a term defined broadly by the state to include entities with substantial sales, property, or payroll, regardless of physical presence in the state. More detailed information is available here.
With the annual revenue threshold for ‘doing business’ set at $711,538, an extensive array of companies may be subject to this legislation. As companies assess potential impacts, it’s crucial to remember that regulatory guidance from California is not anticipated until July 2025. Thus, despite the uncertainty regarding detailed requirements, corporations are encouraged to begin evaluating their positions and prepare for possible changes.
Consistency in disclosures across jurisdictions is critical as both the California Climate Accountability Package and the European Corporate Sustainability Reporting Directive have overlapping but distinct requirements. The latter addresses ten sustainability topics, necessitating broader reporting beyond emissions alone, making awareness of cross-jurisdictional obligations essential for companies. The integration of these varied frameworks will require careful planning and strategic alignment to avoid misstatements, which could invite significant legal penalties.
With the UK already mandating climate-related risk disclosures for large corporations and limited liability partnerships, organizations should preemptively assess their compliance status, especially given the pending California regulations. Further insights on the UK’s reporting mandates can be explored here.
In preparation, companies should conduct a meticulous applicability assessment across reporting regimes, identify gaps in compliance, and develop attuned strategies for reporting obligations at various levels of their corporate structures. Understanding the differences in definitions and expectations between European and Californian regulations is essential for accurate and cohesive disclosures that resonate well across jurisdictions.