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

Senate Bill 253 has been introduced in the California Senate. The bill, which is nearly identical to a bill that the Senate passed last year but the Assembly defeated, 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 its Scope 1, 2 and 3 emissions.  (Scope 1 refers to a company’s own direct greenhouse gas (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.) If enacted, companies would begin reporting their data in 2025. 

Meanwhile, as we have previously reported, the SEC is reviewing comments on proposed rules to require publicly traded companies to provide certain climate-related information in their registration statements and annual reports. Similar to SB 253, the proposed SEC rules would require information about a company’s climate-related risks, including its GHG emissions, that are reasonably likely to have a material impact on its business. The SEC’s proposal is facing some strong opposition. If finalized in the next few months, 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 could be modified in the final rule. 

The California bill and the SEC’s proposed rule overlap to a large extent, but only public companies (of any size) would have a direct obligation to comply with the SEC rules, while the California legislation would apply to both public and private companies with annual revenues over $1 billion that do business in California.