California’s recent enactment of corporate climate accountability laws has placed the state under the international spotlight.
In a recent post by Position Green, the company shone a light on on SB 253 and SB 261, which are California’s new climate laws.
With its economy ranking fifth globally, California’s legislative steps towards environmental sustainability are drawing wide interest from various sectors. The introduction of SB 253 and SB 261 marks a significant milestone in the state’s environmental legislation, targeting companies operating within its borders. These laws compel thousands of firms to unveil their Scope 1, 2, and 3 greenhouse gas emissions alongside climate-related financial risks.
SB 261, in particular, builds upon the groundwork laid by the Task Force on Climate-related Financial Disclosures (TCFD). It mandates the publication of biennial qualitative reports that detail the financial risks posed by climate change and the strategies companies are deploying to mitigate and adapt to these risks. This move is part of a larger global trend aimed at enhancing climate reporting regulations, mirroring initiatives like the Securities and Exchange Commission’s (SEC) proposed climate disclosure rule in the United States and the Corporate Sustainability Reporting Directive (CSRD) in the European Union.
Unlike other jurisdictions that may limit their reporting requirements to firms based within their geographic boundaries, California’s approach is more inclusive. It requires any company that conducts business in the state to make these disclosures. This broad reach ensures that over 5,000 companies will be affected by SB 253, while SB 261 will extend its impact to more than 10,000 businesses. These entities are now tasked with not only disclosing their greenhouse gas emissions across all three scopes but also meeting assurance requirements for these disclosures, especially for Scope 1 and 2 emissions, and potentially Scope 3.
The adoption of TCFD-aligned disclosure requirements for climate-related financial risks represents a pivotal step in California’s climate policy. By aligning with international frameworks, the state not only enhances the transparency of climate risks but also promotes a proactive approach among businesses towards environmental sustainability. This legislative initiative reflects a significant shift towards accountability and action in the face of climate change, setting a precedent for other regions to follow.
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