Many U.S. companies would be required to issue public reports on their environmental performance under new rules proposed by the U.S. Securities and Exchange Commission (SEC) and a bill now pending in the California legislature.

As we previously reported, the SEC issued proposed rules in May that would require publicly traded companies to provide certain climate-related information in their registration statements and annual reports. The proposed rules would require information about a company’s climate-related risks, including its greenhouse gas (GHG) emissions, that are reasonably likely to have a material impact on its business. The SEC categorizes the reportable GHGs into three categories: Scope 1 refers to a publicly traded company’s own direct GHG emissions, Scope 2 to GHG emissions associated with electricity and other forms of energy that the company purchases and Scope 3 to “indirect” emissions from other upstream and downstream activities in the company’s value chain.

Many parties have submitted comments on the SEC’s proposal, some supporting and others opposing the rule. If finalized, companies would begin reporting the required data between 2024 and 2027, depending on the company’s size and type and the scope of GHG emissions to be reported, although these deadlines can be modified in the final rule.

Meanwhile, the California Senate has passed SB 260, which would require any U.S.-based company (including both publicly traded and private companies) doing business in the state with annual revenues of over $1 billion (regardless of whether that revenue was generated in California or elsewhere) to report their Scope 1, 2 and 3 emissions.  If enacted, the bill would require California to implement these requirements through regulations by January 1, 2024, and companies would begin reporting their data in 2025.

Although similar in many respects to the SEC’s proposed rule, the California legislation would not be limited to publicly traded companies (as the SEC’s proposal is), but only the SEC rule would apply to public companies with annual revenues under $1 billion. The California law would also have a broad reach, imposing its reporting obligations not only on large California companies but on any U.S.-based company doing business in the state whose annual revenues exceed $1 billion. The bill now awaits a vote on the Assembly floor but faces continuing opposition from several groups.