On October 7, 2023, California Governor Gavin Newsom signed two bills -- the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) -- that will require public and private companies “doing business” in California to make climate-related disclosures and to comply with certain financial reporting obligations. As defined, “doing business” in California means actively engaging in any transaction for the purpose of financial or pecuniary gain or profit within California, regardless of whether the company is domiciled in the state. If you have operations in California, you may be subject to these new requirements, which are briefly described below.
- SB 253 requires U.S.-based entities with annual revenues greater than $1 billion doing business in California to report: (a) beginning in 2026, direct greenhouse gas (“GHG”) emissions from operations (Scope 1 emissions) and indirect GHG emissions from energy use (Scope 2 emissions), and (b) beginning in 2027, indirect upstream and downstream supply-chain GHG emissions (Scope 3 emissions). Reporting entities must obtain an “assurance engagement” performed by a qualified independent third-party assurance provider with respect to such reports.
- SB 261 requires U.S.-based entities with annual revenues greater than $500 million doing business in California to bi-annually disclose climate-related financial risks and the mitigation measures taken in response to those risks. The first report must be made available to the public on the company's website by no later than January 1, 2026.
“U.S.-based entities” includes partnerships, corporations, limited liability companies, and other business entities formed under the laws of California or any other U.S. state or the District of Columbia or under an act of the U.S. Congress.
Please direct any questions or observations to Gunster securities law and corporate governance attorney Christopher Seifter.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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