California Adopts New Rule on Climate Disclosures for Corporations
On October 7, 2023, California’s Governor Newsom signed a landmark climate disclosure bill, Senate Bill 253, which is expected to have global impacts on corporate climate accountability. The bill, also known as the Climate Corporate Data Accountability Act (CCDAA), will require more than 6,000 U.S. corporations with global revenue over $1 billion and doing any business in California to annually report their global emissions of carbon dioxide and other planet-warming gases. The law includes Scope 3 reporting which will extend the carbon reporting down into the supply chains of corporations, thus creating a far-reaching carbon reporting mandate throughout the US.
This new legislation aims to hold corporations accountable for the role they play in climate change and is likely to be the first corporate greenhouse gas (GHG) emissions disclosure law to go into effect in the United States. The bill will require a reporting entity to obtain an assurance engagement, performed by an independent third-party assurance provider, of the entity’s public disclosure as provided. As the industrial manufacturing sector is a significant contributor to greenhouse gas emissions, companies in this industry will face unique challenges and opportunities in meeting the requirements of the CCDAA.
What are the CCDAA Requirements?
The CCDAA legislation will apply to any company that meets the revenue threshold and sells or produces goods or services in California, including large global corporations. Some key requirements of the bill include:
- Annual Emissions Reporting: Companies must submit yearly reports on their global emissions of carbon dioxide and other gases that contribute to global warming.
- Financial Risk Assessment: Companies making over $500 million must explain how climate change affects their finances, not just in California but globally.
- Consolidated Reporting: The bill lets parent companies consolidate climate-related financial risk reports instead of requiring reports from each subsidiary.
- Website Disclosures: Companies must publicly disclose their emissions and climate-related financial risks on their websites. The first disclosure is for calendar year 2025, due on January 1, 2026, and subsequent disclosures are required every two years. We are encouraging clients to have their carbon accounting and software systems implemented in 2024.
- Enforcement and Penalties: The California Air Resources Board (CARB) will be responsible for enforcing the CCDAA, and companies that fail to comply may be subject to penalties.
How We Can Help
Cherry Bekaert can assist companies in meeting their carbon accounting and reporting needs. We can help companies set up their reporting process to measure, track and report their carbon emissions to follow new laws on greenhouse gases. We help companies understand the financial risks of climate change and suggest ways to reduce these risks.
Manufacturing and other companies should begin preparing to meet the requirements of the CCDAA by assessing their current emissions, overall carbon footprint, supply chain management practices, and energy efficiency measures. Given the complexities of the audit process, compliance and liability risks, it is critical to have carbon accounting reporting done by certified accountants. By leveraging Cherry Bekaert capabilities in accounting, finance and risk management, we can help companies navigate the complexities of the new legislation and drive meaningful progress towards a more sustainable future.