Two climate disclosure laws in California have entered the implementation stage. The state government completed the implementation procedures for SB 253 and SB 261 by Oct. 16. SB 253 is the law on greenhouse gas emissions disclosure, and SB 261 is the law on reporting climate-related financial risk. It is the first system in the United States to make emissions disclosure mandatory at the state level.
The first disclosure date is Nov. 10. That is 25 days after Oct. 16.
Regulation in the first year is loose. To ease the burden on companies, the California Air Resources Board (CARB) will defer penalties for deficient disclosures for the first year of disclosure only. Companies that have not finished preparing their disclosures will be exempt from the first-year requirement.
The actual scale of disclosure depends on the exemption criteria. Depending on which companies CARB considers "not prepared," the number of companies filing reports on Nov. 10 could vary widely. If the penalty deferral applies only to deficient disclosures and does not cover non-disclosure, companies that do not receive an exemption and fail to file a report will face the risk of sanctions even in the first year.
The International Sustainability Standards Board (ISSB) is building a global baseline that requires companies to disclose sustainability-related risks and opportunities that could affect their financial performance. The state laws and the international standard-setting work are proceeding at the same time.
Companies doing business in California must confirm whether they meet the first-year exemption requirements by the first disclosure date of Nov. 10. If they do not qualify, they must decide how complete to make their first report on the assumption of the penalty deferral.
