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#DeloitteESGNow — The Sweeping Impacts of California’s Climate Legislation (October 10, 2023; Last Updated December 19, 2023)

Heads Up | Volume 30, Issue 18
October 10, 2023 (Last Updated December 19, 2023)
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#DeloitteESGNow — The Sweeping Impacts of California’s Climate Legislation

AB-1305 Update: The author of AB-1305 (discussed below), California State Assembly Member Jesse Gabriel, sent a letter to the chief clerk of the assembly to clarify his intent related to the timing of the disclosures required under AB-1305. In the letter, Mr. Gabriel stated, “While the bill does not specify the date on which the first set of disclosures must be posted to a company’s Internet website, it was my intent that the first annual disclosure be posted by January 1, 2025. This deadline provides reporting entities with sufficient time to align their business practices with the stated objectives of AB 1305 prior to being subject to potential civil fines” (emphasis added).
While the effective date of AB-1305 remains January 1, 2024, Mr. Gabriel’s letter may affect enforcement decisions by the California attorney general. Companies should continue to consult with their legal advisers regarding how to approach the disclosure requirements in AB-1305 and the January 1, 2024, effective date.


The assembly bill defines a VCO as “any product sold or marketed in the state that claims to be a ‘greenhouse gas emissions offset,’ a ‘voluntary emissions reduction,’ a ‘retail offset,’ or any like term, that connotes that the product represents or corresponds to a reduction in the amount of greenhouse gases present in the atmosphere or that prevents the emission of greenhouse gases into the atmosphere that would have otherwise been emitted.”
The bill describes these as “claims regarding the achievement of net zero emissions, claims that the entity, related entity, or a product is ‘carbon neutral,’ or . . . other claims implying the entity, related entity, or a product does not add net carbon dioxide or greenhouse gases to the climate or has made significant reductions to its carbon dioxide or greenhouse gas emissions.”
Floor analyses of SB-253 and SB-261.
SB-253 and SB-261 apply to U.S.-based companies but use slightly different terminology. SB-253 defines a “reporting entity” as “a partnership, corporation, limited liability company, or other business entity formed under the laws of this state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States.” SB-261 defines a “covered entity” similarly; however, it excludes companies in the insurance business.
Starting in 2030, entities may need to disclose Scope 3 GHG emissions “as close as practicable” to their disclosure timing for Scope 1 and Scope 2 GHG emissions; however, the California Air Resources Board will evaluate this in 2029 on the basis of current trends in Scope 3 GHG emission reporting.
Scope 3 assurance requirements to be determined by 2027.
Companies may also report in accordance with an “equivalent reporting requirement” (e.g., IFRS Sustainability Disclosure Standards, issued by the ISSB).
In April 2022, the National Association of Insurance Commissioners in conjunction with the internationally recognized TCFD adopted a new standard for insurance companies’ reporting of their climate-related risks.
Reporting date to be determined by CARB.
The tables merely summarize certain aspects of the metrics and requirements under the climate disclosure regulations; they do not take into account all scope or disclosure scenarios. See the Other Resources section for additional information about other existing or proposed climate disclosure regulations.
The SEC climate rule has been proposed but not yet finalized; all specifications in the table are based on the proposed regulation and are subject to change. Smaller reporting companies are exempt from Scope 3 disclosure requirements, and nonaccelerated filers are exempt from attestation requirements.
Proposed SEC implementation timeline would require initial reporting in 2024 for a large accelerated filer; however, the timeline reflected in the SEC proposal is likely to differ from the timeline in a final SEC rule.
IFRS S1, General Requirements for Disclosure of Sustainability-Related Financial Information, and IFRS S2, Climate-Related Disclosures.
The CSRD requires assessment of materiality from both an impact and a financial perspective (a concept known as “double materiality”).
“An entity need not disclose information otherwise required by an IFRS Sustainability Disclosure Standard if the information is not material” on the basis of an assessment of materiality as defined in IFRS S1.
See footnote 18.
See footnote 19.
See footnote 15.
See footnote 16.