Mandatory U.S. greenhouse gas emissions reporting clears another hurdle – Will California be first to the finish line?

Last week, an amended version of California SB-253, known as the Climate Corporate Data Accountability Act, was approved by the State Assembly’s Committee on Natural Resources. 

The Act would require U.S. companies with total annual revenues in excess of $1 billion that do business in California to annually report on greenhouse gas emissions, starting as soon as 2026 (2025 data). 

According to Politico, approximately 5,400 companies doing business in California would be required to make disclosures under the Act.  In some respects, the California Act is broader than the SEC's climate disclosure proposal.

The Committee made the following significant amendments to SB-253, all of which would be beneficial to reporting entities:

• Scope 3 emissions reporting would not phase in until the second reporting year, 2027 (2026 data). The bill still contemplates a reporting lag between scope 1 and 2 and scope 3 emissions data, allowing for up to an additional 180 days to report on scope 3 emissions.
• Reporting entities would be able to submit reports prepared to meet other national and international reporting requirements, as long as they satisfy the reporting requirements of the Act. 
• The third-party assurance requirement has been scaled back. Scope 1 and 2 emissions would be required to be audited at a limited assurance level beginning in 2026 and at a reasonable assurance level beginning in 2030. During 2026, the California State Air Resources Board would be required to review and evaluate trends in third-party verification requirements for scope 3 emissions data. On or before January 1, 2027, the state board may establish an assurance requirement for third-party audits of scope 3 emissions. Scope 3 emissions would be required to be audited at a limited assurance level beginning in 2030.
• Liability for scope 3 emissions disclosures has been scaled back, with the introduction of a safe harbor. Under the amended bill, a reporting entity would not be subject to an administrative penalty for misstatements regarding scope 3 emissions disclosures made with a reasonable basis and disclosed in good faith.

SB-253 has now moved to the Assembly Committee on Appropriations for its consideration. SB-253 followed on the heels of the Climate Corporate Accountability Act (SB-260), which narrowly failed to pass the California Assembly last year. The initial version of SB-253 introduced in the Senate in January was almost identical to the bill that failed to pass last year. The amended bill addresses many of the concerns of the detractors of the original version of SB-253 introduced in the Senate and SB-260, substantially increasing the likelihood of SB-253’s passage.

For a further discussion of SB-253, see our earlier Alert.  Also see our Q&A with Watershed.  

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