The U.S. Securities and Exchange Commission (SEC) issued its long-awaited final climate reporting rules on March 6, 2024. The new rules require public companies to report, among other things, details on the climate risks they face (including the governance and management of those risks), the financial impacts of severe weather events and their climate-related goals and targets. Some companies must also report their greenhouse gas emissions. 

Notably, the SEC has significantly narrowed the types of emissions data that a company must report. Initially, the SEC had proposed that a company report its Scope 1 (direct emissions from a company’s owned or controlled sources), Scope 2 (indirect emissions from generating a company’s purchased energy) and Scope 3 (emissions generated by a company’s suppliers and customers) emissions. Based on public comments the agency received on its proposed regulations, the SEC has now dropped the Scope 3 emissions reporting requirement from its final rule.  

The effective date for the Scope 1 and 2 emissions reporting obligations depends on each company’s SEC registration type. A company’s registration type depends on its “public float size,” which is the value of a public company’s stock held by public investors, as opposed to company officers, directors or stockholders that hold controlling interests. A company whose public float exceeds $700 million must report its Scope 1 and 2 emissions beginning with its 2026 fiscal year reports. A company whose public float is between $75 and $700 million must report its Scope 1 and 2 emissions beginning with its 2028 fiscal year reports. A company whose public float is less than $75 million is exempt from emissions reporting requirements. Although the SEC’s final rule is less ambitious than its proposal, it remains controversial. West Virginia and Georgia (joined by 8 other states) have challenged the final rule in the courts. Business groups, including the National Association of Manufacturers and U.S. Chamber of Commerce, have threatened additional lawsuits, and environmental groups like the Sierra Club and Earthjustice are considering litigation. Such litigation could delay implementation of the final rule.  

Politically, Republicans in Congress plan to use the Congressional Review Act to try to overturn the rule, but President Biden has the authority to veto such action.  

In the meantime, the reporting deadlines noted above remain in effect. For more information about the final rule, the SEC has prepared a useful fact sheet.   

In addition to the SEC’s federal climate-related reporting requirements, California has enacted its own reporting laws (known as SB 253 and SB 261). Although similar in some respects to the SEC’s approach, California’s rules are different in terms of who and what to report (for example, California will require some non-public companies to report climate data and will require covered companies to report Scope 3 emissions data). Please refer to this earlier ISPA Insider report for more details about California’s requirements.  

Nevertheless, the reporting deadlines set by the new California laws may be delayed for at least 2 reasons. First, California at present has reduced funding to the state agency responsible for implementing and enforcing these laws (the California Air Resources Board). If this situation persists, it could delay the laws’ implementation. Second, several business groups in California recently challenged the laws on constitutional grounds, which could also delay their implementation.