Governor Gavin Newsom, a Democrat, has signed two bills on a Saturday October 7th, that will compel large corporations operating within the state to divulge both their carbon emissions and their financial exposure to climate-related risks, commencing in the year 2026.
In the background, these two bills, SB 253 sponsored by Senator Scott Wiener (D-San Francisco) and SB 261 introduced by Senator Henry Stern (D-Sherman Oaks), represent the most ambitious climate-related legislation to emerge from deeply progressive California in the current year.
Notably, these laws encountered substantial opposition from organizations such as the California Chamber of Commerce and the Western States Petroleum Association. To garner support, the bill authors made late-session amendments that deferred implementation and reduced penalties for corporate noncompliance, especially notable in the case of SB 253. These changes encouraged companies like Google and Apple to endorse the legislation, ultimately securing enough support from Assembly Democrats to bring it to Governor Newsom’s desk.
It is important to note that both bills failed in the Assembly during the previous year.
In the broader context, these laws will transform the landscape of corporate disclosure practices. They mark a historic shift in the United States, as large publicly traded and privately held corporations conducting business in California will, for the first time, be obligated to publicly disclose both their environmental impact, including Scope 3 emissions (those generated throughout a company’s value chain), and the financial ramifications of climate change on their operations.
These state laws surpass the proposed federal climate disclosure regulations, which would only apply to publicly traded companies and would not require comprehensive Scope 3 reporting.
Looking ahead, the California Air Resources Board will be responsible for implementing these laws. The board is expected to establish regulations by January 1, 2025, with corporations commencing the filing of disclosures in 2026.
