California governor Gavin Newsom (D) has signed into law legislation that will require companies to regularly disclose their greenhouse gas (GHG) emissions and financial risks related to climate change, despite concerns about the implementation schedules for each.
Newsom on 7 October signed SB 253, authored by state senator Scott Wiener (D), which requires companies conducting business within the state with total revenues over $1bn/yr, to annually report their GHG emissions data to the California Air Resources Board (CARB). He also signed SB 261, which requires companies with revenues of more than $500mn/yr to publicly report immediate and long-term climate-related financial risks.
But Newsom cited some concerns with both in terms of how much time they give companies and CARB to prepare, calling the SB 253 deadline "infeasible" and questioned the potential financial impacts on businesses.
The bill requires covered companies to begin providing data on their Scope 1 and Scope 2 emissions for their prior fiscal year starting in 2026, subject to third-party verification starting at a limited level, with more detailed audits of data and sources starting in 2030.
Reporting of Scope 3 emissions would begin within 180 days after the disclosure of Scope 1 and 2 emissions the following year, but third-party verification standards are not set for discussion until 2026.
The governor said his administration will work with lawmakers to improve the bill's deadlines, while CARB has been directed to "closely monitor the cost impact."
Senator Wiener did not respond to a request for comment.
Scope 1 emissions are direct GHG emissions from a company's operations, while Scope 2 come from electricity purchases. Scope 3 covers indirect upstream and downstream GHG emissions, such as from the supply chain, and often represent the majority of an company's total GHG emissions.
For SB 261, the climate risk bill, Newsom said it does not give "sufficient time" to CARB to produce a biennial report on the submitted data and its implications for the state. But overall, he agreed the reporting mandate is good for the state.
"This policy will illustrate the real risks of climate change for businesses operating in California and will encourage them to adopt practices that seek to minimize and avoid these risks," Newsom said.
The bill requires affected companies to biennially report, starting in 2026, the immediate and long-term financial risks, such as those to capital and financial investments, risks to provision of goods and services and economic health within their operations and supply chain. The bill exempts insurance companies, as the National Association of Insurance Commissioners adopted reporting standards for the industry last year.
In addition, companies regulated by the bill will need to relay what measures they have taken to reduce or adapt against these risks. All GHG emissions and reductions in emissions claimed in these reports must be independently verified by a third party.
SB 261 was authored by state senators Henry Stern (D), Josh Becker (D), Lena Gonzalez (D), and Wiener.
