The bills, SB-253—Climate Corporate Data Accountability Act and SB-261—Greenhouse Gases: Climate-Related Financial Risk, will establish the first industry-agnostic US regulations that mandate the corporate reporting of greenhouse gas (GHG) emissions and climate risks in the United States.

Requirements

The bills apply to both public and private US-based companies, depending on their total annual revenue. In addition, companies subject to the bills must provide Scope 3 GHG emission disclosures regardless of materiality as well as limited assurance for Scope 1 and Scope 2 GHG emissions in their first year of reporting. Limited assurance for Scope 3 GHG emissions may be required starting in 2030.

The requirements introduced by the bills can be summarised as follows:

• SB-253: Leveraging the GHG Protocol reporting guidance, SB-253 will require companies within its scope to provide annual quantitative disclosures of Scope 1, Scope 2 and Scope 3 GHG emissions applying the GHG Protocol reporting guidance, with limited assurance required initially for disclosures of Scope 1 and Scope 2 GHG emissions. Scope 3 GHG emission reporting, reasonable assurance for Scope 1 and Scope 2 GHG emission disclosures, and potential limited assurance for Scope 3 GHG emission disclosures will be phased-in between 2027 and 2030 (see ‘Effective date’ below).
• SB-261: Leveraging the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD), SB-261 will require companies to prepare and make publicly available on their company websites biennial (i.e. every two years) qualitative reporting on climate-related financial risk and measures taken to reduce and adapt to that risk applying the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD). No assurance is required for this qualitative reporting. Successor or equivalent reporting standards, including the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), are also an acceptable framework for reporting under SB-261.

Scope

Application of the California legislation depends on a US-based company’s total annual revenue, regardless of whether the company is publicly or privately held. Therefore, private companies could be required to provide disclosures under the California regulations if they meet the revenue thresholds outlined in the bills and do business in California. The bills, as written, do not clearly define what “doing business in California” means. However, on the basis of the “doing business in California” concept under California tax law, early indications are that the threshold for doing business in the state might be quite low.

In addition, both bills apply to US-based companies doing business in California. There is no specific exception for groups with non-US parents, and therefore foreign companies with US-based subsidiaries doing business in California would fall within the scope of the requirements.

Effective date

Entities are required to apply the bills for initial requirements for disclosure as follows:

• 2026—By 1 January, the first biennial climate risk report will be required for companies with revenue exceeding $500m
• 2026—Disclosure of Scope 1 and Scope 2 GHG emissions for 2025 with limited assurance will be required for companies with revenue exceeding $1b
• 2027—Scope 3 GHG emissions for 2026 will be required for companies with revenue exceeding $1b up to 180 days after the 2027 reporting of Scope 1 and Scope 2 GHG emissions
• 2030—Reasonable assurance for Scope 1 and Scope 2 GHG emissions (with possible limited assurance for Scope 3 GHG emissions) will be required for companies with revenue exceeding $1b

Additional information

Please click for:

• SB-253—Climate Corporate Data Accountability Act
• SB-261—Greenhouse Gases: Climate-Related Financial Risk
• Our iGAAP in Focus newsletter explaining the content of the two bills
• US Heads Up—#DeloitteESGNow—The Sweeping Impacts of California’s Climate Legislation