In recent years, California and New York have taken significant strides in climate legislation, mandating corporations to disclose greenhouse gas (GHG) emissions and assess climate-related financial risks. These regulations aim to enhance transparency and accountability in corporate environmental impacts.
California's Climate Disclosure Requirements
In October 2023, California Governor Gavin Newsom signed into law Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261), collectively known as the Climate Corporate Data Accountability Act.
- SB 253: Mandates that large businesses operating in California disclose their direct and indirect GHG emissions.
- SB 261: Requires the reporting of climate-related financial risks.
Key Timelines:
- July 1, 2025: The California Air Resources Board (CARB) must adopt regulations for GHG emissions reporting.
- 2026: Companies with over $1 billion in annual revenue must begin reporting Scope 1 and Scope 2 emissions.
- 2027: Reporting of Scope 3 emissions commences.
- 2026: Entities with revenues exceeding $500 million must disclose climate-related financial risks biennially.
New York's Climate Disclosure Initiatives
In early 2025, New York introduced Senate Bills 3456 and 3697, aiming to enhance corporate accountability regarding climate-related disclosures.
- SB 3456: Establishes the Climate Corporate Data Accountability Act, requiring certain business entities within the state to annually disclose Scope 1, Scope 2, and Scope 3 emissions.
- SB 3697: Requires reporting of climate-related financial risk by certain entities; defines climate-related financial risk to mean material harm to financial outcomes of the entity due to physical and transition risks.
Key Timelines:
- December 31, 2026: The New York State Department of Environmental Conservation (DEC) must adopt implementing regulations, including specific reporting timelines.
- 2027: Companies begin reporting Scope 1 and Scope 2 emissions for the 2026 fiscal year.
- 2028: Scope 3 emissions reporting starts for the 2027 fiscal year, and biennial climate-related financial risk reports are due.
Obligations for Affected Companies
Companies meeting the revenue thresholds and operating in California or New York must:
- Emissions Reporting: Quantify and disclose Scope 1, Scope 2, and Scope 3 GHG emissions, as applicable.
- Climate Risk Assessment: Evaluate and report on climate-related financial risks following frameworks like the Task Force on Climate-related Financial Disclosures (TCFD).
- Third-Party Assurance: Engage independent auditors to verify emissions data, ensuring accuracy and credibility.
- Public Disclosure: Make reports publicly available, typically on the company's website.
Effect on the Mid-Market (Small/Mid-Sized Businesses)
While California's and New York's climate disclosure laws primarily target large corporations, small to mid-sized businesses (SMBs) may still feel their impact, especially if they are part of larger supply chains or operate in sectors closely linked to regulated entities.
Key Indirect Impacts for SMBs:
- Supply Chain Pressure: Larger companies subject to disclosure rules may request emissions data from their suppliers to meet reporting obligations, making emissions tracking relevant even for smaller businesses.
- Operational and Cost Implications: Meeting client demands may require new data collection processes or third-party support, which could increase time and resource commitments.
- Regulatory Ripple Effects: Even if not directly affected now, SMBs should stay informed about evolving legislation in their operating regions and anticipate future reporting expectations.
What SMBs Can Do Now:
- Start Tracking Data Early: Building emissions tracking into your operations now can prepare you for client or regulatory requests down the line.
- Talk to Larger Partners: Open conversations with clients about their reporting needs can clarify expectations and help you align on data requirements and timelines.
- Stay Ahead of Legislation: Keep an eye on climate policy developments to adapt quickly and minimize disruption.
How Ecolytics Fits In
Navigating these complex reporting requirements can be challenging. Ecolytics helps with environmental data management, offering solutions that help businesses of all sizes, specifically SMBs, streamline emissions tracking, facilitate accurate reporting, and ensure compliance with evolving regulations. Our platform provides robust data analytics and reporting tools, enabling companies to effectively monitor their environmental impact and meet disclosure obligations with confidence.
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