Disclosure Requirements and Compliance Implications

California’s recently enacted SB 219 represents a substantial update to corporate climate disclosure requirements, mandating more comprehensive reporting on greenhouse gas emissions and climate-related risks, impacting companies operating within the state that meet specific revenue thresholds. This alert provides an overview of the SB 219 requirements and what this means for corporate compliance in California.

Changes to Existing California Disclosure Regulations

California’s SB 219 amends the earlier SB 253 and SB 261 with key modifications that affect compliance deadlines, reporting requirements, and company obligations. For a comparative breakdown of each requirement, see our California Climate Disclosure Chart below.

1. Extended Deadlines of CARB Regulatory Adoption:

   SB 253 set a phased schedule for reporting Scope 1, 2, and 3 emissions starting in 2026, which SB 219 adjusts to provide a longer preparation period for the California Air Resources Board (CARB) to finalize the applicable regulations.

   • For scope 1 and 2 emissions, SB 219 gives CARB additional time to adopt necessary regulations governing emission disclosures, pushing the deadline to July 1, 2025. However, this amendment does not provide an extension on the compliance date to regulated companies, which remain subject to compliance with the law “starting in 2026 on or by a date determined by CARB.”
   • For scope 3 emissions, SB 219 now requires CARB to specify a schedule for reporting entities to publicly disclose their scope 3 emissions. Prior to SB 219, regulated companies had to disclose their scope 3 emissions within 180 days of publicly disclosing their scope 1 and 2 emissions.

2. Consolidated Reporting at the Parent Company Level:

   SB 219 introduces flexibility for companies with complex structures by allowing consolidated emissions reporting at the parent company level. This change simplifies the disclosure process for companies with subsidiaries.

3. No Annual Filing Fee for Reporting:

   SB 219 removes the requirement for companies to pay annual fees when submitting their emissions reports to the State of California. This change aims to reduce the financial burden on companies for compliance.

4. Alignment with TCFD Standards:

   SB 219 mandates that companies align their disclosures with the Task Force on Climate-Related Financial Disclosures (TCFD) framework, as published in the final report of Recommendations of the Task Force on Climate-related Financial Disclosures (June 2017), enhancing the consistency and comparability of reporting within California and globally.

5. Assurance Level:

   SB 219 confirms the assurance engagement timeline, with limited assurance for Scope 1 and Scope 2 emissions beginning in 2026 and reasonable assurance beginning in 2030, alongside limited assurance for Scope 3 emissions starting in 2030.

Overall, SB 219 aims to provide a more manageable transition into compliance with California’s Climate disclosure regulations for CARB, while retaining the essential requirements and enforcement mechanisms of SB 253 and SB 261.

No Change in Key Compliance Requirements

SB 219 does not change the key compliance requirements of applicable companies operating in California to adhere to the amended disclosure standards of SB 253 and SB 261 with a particular focus on:

• Emissions Reporting: Certain companies must report Scope 1 and Scope 2 emissions and, in many cases, Scope 3 emissions. This reporting requires accounting for direct emissions (Scope 1), indirect emissions from purchased electricity (Scope 2), and, where applicable, upstream and downstream emissions from supply chains and product use (Scope 3).
• Climate Risk Disclosures: Certain companies must disclose potential physical risks posed by climate change, such as vulnerabilities to extreme weather events, as well as transition risks associated with policy changes, market shifts, or reputational impact.

Companies in California, especially those in sectors with complex supply chains, should begin to prepare for compliance by establishing systems for emissions tracking, adopting risk assessment frameworks, and engaging independent assurance. Companies operating in California also should review and adapt their existing environmental data and risk management systems to ensure compliance with SB 219.

Engaging with ESG experts and advisors will be key to navigating these new requirements and positioning for success as ESG expectations evolve. For tailored guidance on SB 219, SB 253, and SB 261 and how these changes may affect your business, please reach out to our team. Our firm is well-positioned to guide you through the legal complexities of California’s climate disclosure landscape.

California Climate Disclosure Regulations Chart

Aspect	SB 219	SB 253	SB 261
Title	Greenhouse Gases: Climate Corporate Accountability: Climate-Related Financial Risk	Climate Corporate Data Accountability Act	Climate-Related Financial Risk Disclosure Act
Purpose	Amends SB 253 and SB 261 to adjust implementation timelines and reporting requirements.	Mandates public disclosure of GHG emissions for large companies operating in California.	Mandates disclosure of climate-related financial risks, focusing on resilience and risk assessment.
Applicability	Companies subject to SB 253 and SB 261.	U.S.-based public and private companies with annual revenues exceeding $1 billion that do business in California.	Companies with over $500 million in annual revenues that do business in California.
Key Requirements	Extends CARB’s deadline to adopt regulations to July 1, 2025. Allows consolidated reporting at the parent company level. Removes the requirement for companies to pay annual fees when filing reports.	Annual disclosure of Scope 1 and Scope 2 emissions starting in 2026. Disclosure of Scope 3 emissions starting in 2027. Obtain third-party assurance for emissions disclosures.	Annual reporting of climate-related financial risks beginning in 2026. Disclosure of risk management processes and resilience strategies.
Reporting Deadlines	CARB regulations by July 1, 2025. Reporting deadlines as per SB 253 and SB 261 remain unchanged.	Scope 1 and Scope 2 emissions: Reporting begins in 2026. Scope 3 emissions: Reporting begins in 2027.	Reporting of climate-related financial risks begins in 2026, with updates required annually.
Assurance Requirements	Limited assurance for Scope 1 and Scope 2 emissions beginning in 2026. Reasonable assurance for Scope 1 and Scope 2 emissions beginning in 2030. Limited assurance for Scope 3 emissions beginning in 2030.	Limited assurance for Scope 1 and Scope 2 emissions beginning in 2026. Reasonable assurance for Scope 1 and Scope 2 emissions beginning in 2030. Limited assurance for Scope 3 emissions beginning in 2030.	Assurance not specified, but companies must disclose methodologies and processes to assess climate-related risks.
Penalties for Non-Compliance	No changes.	Up to $500,000 per reporting year, based on CARB’s consideration of all relevant circumstances including violator’s past and present compliance and good faith measures to comply.	Up to $50,000 per reporting year, based on CARB’s consideration of all relevant circumstances including: violator’s past and present compliance and good faith measures to comply.

Notes:

SB 219 serves as an amendment to SB 253 and SB 261, introducing changes such as extended deadlines for regulatory adoption and allowing consolidated reporting at the parent company level.

The enforcement of SB 253 and SB 261 are currently pending a challenge with litigation in the federal district court for the Central District of California.

SB 253 and SB 261 do not define doing business in California; until a court provides otherwise, we would recommend interpreting doing business in California broadly.