As previously reported, California may soon pass the most stringent Environmental, Social, and Governance (“ESG”) disclosure requirements in the nation, surpassing even the current U.S. Securities and Exchange Commission (“SEC”) proposed rules.
Since the California Climate Corporate Data Accountability Act (aka “SB 253”) was introduced by Senator Scott Wiener, it has undergone several changes. SB 253 will now delay Scope 3 emissions reporting to one year after companies must disclose Scope 1 and Scope 2 emissions. Meaning
Scope 1 and 2 disclosures will begin in 2026, while Scope 3 discloses will begin in 2027.
- Scope 1 emissions include direct emissions such as fuel burned.
- Scope 2 emissions include indirect emissions such as greenhouse gas emissions from electricity used to cool builds.
- Scope 3 emissions include full value chain emissions such as emissions from upstream suppliers.
SB 253 reporting requirements will apply to all companies earning at least $1 billion in annual revenue who do business in California.
Exact reporting dates will be determined by the California Air Resources Board. Additionally, SB 253 will now allow reporting companies to estimate their emissions, rather than reporting actual emissions data.
SB 253 passed the Senate and moved to the state assembly, where it is currently pending in the Assembly Natural Resources Committee. We are monitoring SB 253 as it proceeds through the state legislature. The last day for the Assembly to pass SB 253 is September 14, 2023. Future updates will be provided as we analyze SB 253’s significance for California businesses and how its requirements compare with potential US Securities Exchange Commission regulations for publicly traded companies, as well as analogous reporting standards in the EU, the UK and other jurisdictions.