By Allen Campbell, JD, MBA
Last year, California enacted two major pieces of climate legislation: SB-253, the Climate Corporate Data Accountability Act and SB-261, the Climate-Related Financial Risk Act. (See https://mcalan.com/momentous-california-climate-accountability-laws-await-governors-signature.) However, in January Governor Newsome’s proposed 2024-2025 budget did not include funding for their enforcement. That led to consternation and questioning by many environmentalists of the Governor’s commitment to those laws and indeed to the cause of halting climate change.
Those worries can probably be laid to rest. Last Friday, the Governor issued an updated, revised budget which includes funding that is needed for the California Air Resources Board (CARB) to implement them. In his press briefing, the Governor said that the laws were “funded in the budget” and that CARB “should have the resources” to implement them.
The two laws mandate corporate disclosure of greenhouse gas emissions and climate-related financial risks. SB 253 requires businesses operating in California with annual revenues over $1 billion to report their greenhouse emissions each year, whereas SB 261 requires businesses with revenues above $500 million to publicly disclose their climate-related financial risks and countermeasures.
These two laws, in combination with the European Union Corporate Sustainability Reporting Directive (CSRD), place very heavy reporting burdens on many companies that are not incorporated or headquartred in California or the EU. (See https://mcalan.com/mandatory-reporting-opportunities.)
On top of all that, companies that are registered with the US Securities and Exchange Commission are now subject to the SEC’s new climate change rules. (See https://mcalan.com/sec-adopts-final-climate-disclosure-rules.) While the SEC has placed those rules on hold, pending the outcome of litigation, they are still on the books. (See https://mcalan.com/sec-puts-its-own-climate-related-disclosure-rules-on-hold.)
As we have often noted, the rules of the global economy are changing. Already part of the worldwide business eco-system, sustainability is becoming ever more important and more complex. Companies need to learn the new rules of the game and adjust their strategies and practices accordingly.