Alice Roberts, Amy Malick, Abby Kirchofer
October 10, 2023
California climate legislation: a primer for companies doing business in California
California has a long history of shaping US and global public policy, particularly in the areas of environmental and climate policy. The state’s recent climate legislation is expected to also extend far beyond its borders – affecting companies globally, galvanizing other states to take similar action, and inspiring more ambitious climate action at the national level.
- The SEC’s rule only applies to public companies, while SB 253 applies to both public and private companies.
- While the SEC’s proposed scope 3 emissions reporting requirements are dependent on a materiality test and/or whether scope 3 targets have already been set, there is no materiality test for SB 253’s scope 3 emissions requirement.
- The SEC’s rule also exempts smaller reporting companies from scope 3 emissions disclosure requirements, while SB 253 would require all reporting entities to report scope 3 emissions.
- Both SB 253 and the SEC proposed rule include a phase-in period for disclosure of scope 3 emissions. The SEC’s proposed rule also allows for a phase-in period for independent assurance for scopes 1 and 2, with reasonable assurance required in later years; however, no assurance is required for scope 3.8
- Financial disclosure of material risks are required by the SEC’s proposed rule similar to SB 261, however, reporting transition plans, scenario analysis, and climate-related opportunities are optional and dependent on a company’s strategy and prior disclosures,9 whereas these items are included in the TCFD framework used by SB 261.10
- Monitor and stay up to date with California’s climate change legislation developments
- Understand interoperability (ability to use material prepared for one disclosure to satisfy the requirements of another) with various disclosure requirements
- Engage with stakeholders including employees, customers, and investors to develop climate initiatives
- Conduct a comprehensive assessment of your organization’s current operational and value chain emissions and climate-related risks and identify areas for improvement
- Implement robust data collection systems to track emissions, energy usage, and other key performance indicators that are auditable
- Establish climate goals and targets that align with California’s climate objectives
- Publish annual sustainability reports that disclose your progress toward meeting climate goals and compliance with climate legislation, and demonstrate your commitment to environmental stewardship and corporate responsibility
Want to know more?
Alice Roberts
Managing Consultant
Amy Malick
Principal
+1 415-796-1940
Abby Kirchofer
Principal
+1 415-426-5013