The “Golden State” is about to roll out two landmark pieces of legislation that will affect all U.S. businesses above a certain size – raising the bar for transparency, accountability, and sustainability. These are SB 261, “The Climate-Related Financial Risk Act.” and  “The Climate Corporate Data Accountability Act” or (Senate Bill) SB 253.

US businesses with annual revenues of over $1 billion (SB253) and $500 million (SB261) doing business in California, will be directly impacted. Smaller companies may also feel the effect.

SB 261, “The Climate-Related Financial Risk Act.”

SB261 mandates that large companies with over $500 million in annual revenue that do business in the state must publicly disclose their climate-related financial risks and mitigation strategies.

What is SB261 all about?

The requirement on organisations in scope is to disclose the financial risks they face arising from climate-change and what they are doing about them.  It asks businesses to identify potential scenarios and outline mitigation / adaption plans. The analysis must cover both “physical” and “transitional” risks. Examples of physical risks include, rising temperatures, extreme weather events or water scarcity. Transitional risks cover secondary impacts, such as those from legislation; changes to customer buying habits; access to funding or the effect on company reputation. Importantly transitional changes present companies with positive opportunities as well as risks.

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SB 253, “The Climate Corporate Data Accountability Act”

SB 253, mandates US businesses with over $1 billion in annual revenues and operating in California, to file detailed reports on their carbon emissions.

What is SB253 all about?

Companies will need to measure and report upon their emissions of greenhouse gases (often termed as “carbon”) in accordance with the Greenhouse Gas Protocol. Both public and private companies are impacted, so long as revenues exceed the $1 billion annual revenue threshold. Requirements are comprehensive, as companies will need to disclose direct and indirect emissions. In technical terms this means: Scope 1 (fuel you burn); Scope 2 (fuel burnt on your behalf – predominantly electricity) and finally Scope 3 (roughly everything else). The last one of these (Scope 3) is the most telling and the most complex. It represents a “catch-all” for every indirect emission from a company’s value chain.

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Download our comprehensive guide to SB216 & SB253