What's Happening?
California has released a preliminary list of over 4,000 companies that may be subject to new climate-disclosure laws, SB 253 and SB 261. These laws require companies to report greenhouse gas emissions and climate-related financial risks. The list includes
companies from various sectors such as apparel, beauty, automotive, and luxury retail. The California Air Resources Board (CARB) has emphasized that the list is not exhaustive and does not guarantee coverage, nor does omission mean exemption. The first deadline for SB 261 climate-risk reports is January 1, 2026, with subsequent reports due every two years. CARB has begun releasing compliance materials, including a draft checklist for climate-related financial risk reports and a proposed template for Scope 1 and 2 emissions reporting. The list is derived from California Secretary of State data and revenue indicators, serving as a starting point for companies to determine their compliance obligations.
Why It's Important?
The release of this list marks a significant step in California's efforts to enforce climate-related disclosures, potentially setting a precedent for other states. Companies included in the list face substantial compliance obligations, requiring robust internal tracking and third-party verification. This move places California at the forefront of climate reporting, encouraging companies to align early with the new requirements to manage risks effectively. The laws target companies with significant global revenue, impacting major players in various industries. Early preparation is crucial for companies to meet these requirements and mitigate potential risks associated with non-compliance.
What's Next?
CARB plans to release proposed regulations on October 14, opening a formal comment window for stakeholders. Companies are encouraged to treat the list as a prompt to act, with early preparation being critical despite ongoing uncertainties. The laws necessitate strategic planning and robust internal tracking, especially for private companies new to mandatory climate disclosures. Companies that align early will be best positioned to meet the requirements and manage associated risks.
Beyond the Headlines
The implications of California's climate disclosure laws extend beyond immediate compliance. They may influence national policy and encourage other states to adopt similar measures, potentially leading to a broader shift in corporate climate accountability. The laws also highlight the growing importance of environmental, social, and governance (ESG) factors in business operations, pushing companies to integrate sustainability into their core strategies.
