California Seeks Public Input on Landmark Climate Accountability Rules

On December 16, 2024, the California Air Resources Board (CARB) published a request for public comment to gather information for upcoming climate accountability rules. The rules will implement two landmark laws passed in 2023 — the Climate Corporate Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261), both as amended by SB 219 — and will affect thousands of companies doing business in California that are incorporated in the United States, including companies headquartered overseas with a U.S. subsidiary. California is the first U.S. jurisdiction to require climate disclosure from private as well as public companies, making this an unprecedented opportunity for stakeholders to influence the future of climate change accountability regulation.

SB 253 requires U.S.-incorporated entities with more than $1 billion in annual revenue in California to report their Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions. SB 261 requires U.S.-incorporated companies with more than $500 million in annual revenue that do business in California to report their climate-related financial risks and mitigation measures.

CARB, which is now embarking on the rulemaking process to implement these laws, is seeking feedback from a wide range of stakeholders on various issues, such as the following:

• Scope: how to define “doing business in California” and which entities should be covered by the laws
• Standards: how to rely on external standards and protocols, which may evolve over time, to address California-specific needs
• Efficiency: how to minimize duplication of effort for entities that already report GHG emissions or financial risk under other programs and how to leverage existing voluntary reporting practices and datasets
• Quality assurance: how to ensure data quality, consistency, and verification
• Procedure: how to facilitate reporting and disclosure through appropriate platforms and formats

The comment period is currently open until February 14, 2025, though the deadline may be extended due to the ongoing wildfires in California that have disrupted many businesses and communities.

While existing frameworks such as the SEC final rules or the EU Corporate Sustainability Reporting Directive standards provide guidelines, we expect CARB to start its drafting process on a fresh piece of paper and craft its own unique reporting regime.

This is a rare opportunity to help shape the future of these wide-reaching regulations, which will govern corporate climate disclosures for the next decade or more.

Law clerk Leena Dai* contributed to this Sidley Update.
*not admitted to practice