Mandatory Climate Reporting for Companies Now Guided by California's FAQ Release
The California Air Resources Board (CARB) has announced a new timeline for large companies to report their emissions and climate-related financial risks, marking a significant step towards increased transparency and accountability in the fight against climate change.
Under the Climate Corporate Data Accountability Act (SB 253), large companies operating in California will be required to report their Scope 1 and 2 emissions from 2026 onwards, based on data from the previous fiscal year. Scope 3 emissions reporting, which covers indirect emissions from a company's supply chain and other activities, will begin in 2027.
Limited assurance is required for Scope 1 and 2 reports up to 2029, with reasonable assurance mandated from 2030. The assurance requirements for Scope 3 emissions have yet to be determined.
Meanwhile, the Climate-Related Financial Risk Act (SB 261) requires companies with revenues over $500 million doing business in California to submit biennial public reports on climate-related financial risks and mitigation strategies. The first report is due on January 1, 2026, using 2025 data, and then every two years thereafter.
These requirements apply to large companies operating in California, particularly those with over $1 billion in revenue for emissions reporting, and over $500 million for financial risk reporting. CARB expects companies to align their disclosures with established frameworks such as the Greenhouse Gas Protocol for emissions and TCFD or ISSB standards for climate risks.
In a new publication of frequently asked questions (FAQ), CARB provides guidance on what information should be included in the climate-related risk reports, focusing on material risks based on financial outcomes due to physical and transition risks.
The new regulations effectively introduce climate reporting obligations for most large businesses in the U.S. that do business in California. The first climate-related risk reports are expected to cover risks from January 1, 2024 to December 31, 2024. Reporting for the Climate Corporate Data Accountability Act is expected to begin in 2026, covering the previous fiscal year.
The FAQ serves as a guide for companies to understand the requirements for climate reporting under the new regulations. The CARB FAQ also provides a timeline for companies to obtain independent third-party assurance for their greenhouse gas emissions disclosures under the new regulations.
Sources: [1] California Air Resources Board (CARB) - Frequently Asked Questions (FAQ) on Climate Reporting for Large Companies [2] California Senate Bill 253 (Climate Corporate Data Accountability Act) [3] California Senate Bill 261 (Climate-Related Financial Risk Act) [4] California Health and Safety Code Section 38532 and Section 38533
- The new regulations introduced by the California Air Resources Board (CARB) have expanded climate reporting requirements for businesses, mandating large companies to report their climate-related financial risks, in line with the Climate-Related Financial Risk Act (SB 261).
- Under the Climate Corporate Data Accountability Act (SB 253), large companies in California will be required to report their emissions, including Scope 1, 2, and 3, using science-based environmental-science methodologies, such as the Greenhouse Gas Protocol.
- Businesses in California are expected to align their climate disclosures with established frameworks, not just for emissions but also for climate risks, such as the Task Force on Climate-related Financial Disclosures (TCFD) or the International Sustainability Standards Board (ISSB) standards, demonstrating their commitment towards transparency and accountability in the fight against climate-change.
