As federal regulations on climate reporting stall, several U.S. states are taking the initiative to implement their own mandatory climate disclosure requirements. In the absence of comprehensive rules from the Securities and Exchange Commission (SEC), these state-level actions aim to ensure that companies remain accountable for their environmental impact. Sustainable Fitch has highlighted key states leading this movement, providing a roadmap for businesses on compliance and deadlines.
States Leading the Charge
- California: Known for its progressive environmental policies, California is at the forefront of mandatory climate reporting. The state has introduced legislation requiring companies to disclose their greenhouse gas (GHG) emissions and climate-related financial risks. These regulations apply to both public and private companies operating within the state.
- New York: Another major player, New York, has implemented climate reporting requirements through the Climate Leadership and Community Protection Act (CLCPA). This act mandates that companies disclose their emissions and outline their strategies for reducing their carbon footprint.
- Washington: With its strong emphasis on sustainability, Washington State has also established mandatory climate reporting guidelines. Companies must report their GHG emissions and provide detailed plans for achieving emission reduction targets.
Who Must Comply?
The mandatory climate reporting regulations generally apply to:
- Large public companies with significant operations in the state.
- Private companies meeting specific revenue or operational thresholds.
- Companies in high-emission industries, such as manufacturing, energy, and transportation.
- Compliance requirements vary by state, but the common objective is to enhance transparency and accountability regarding corporate environmental impact.
What Needs to Be Done?
To comply with the new state-level climate reporting mandates, companies must undertake the following actions:
- Emission Inventory: Conduct a comprehensive inventory of all GHG emissions, including direct (Scope 1) and indirect (Scope 2 and Scope 3) emissions.
- Risk Assessment: Identify and evaluate climate-related financial risks, such as physical risks from extreme weather events and transitional risks from changing regulations and market dynamics.
- Disclosure: Publicly disclose the collected data and risk assessments in annual reports or dedicated sustainability reports. The disclosures must adhere to specific guidelines set by each state.
- Reduction Plans: Develop and implement strategies to reduce GHG emissions, including setting measurable targets and timelines.
Deadlines for Compliance
Compliance deadlines vary across states, but there are some general timelines that companies need to be aware of:
- California: Initial disclosures are required by the end of the fiscal year following the enactment of the regulations, with subsequent annual reports.
- New York: Companies must submit their first reports within a year of the CLCPA’s implementation date.
- Washington: The state requires initial disclosures within 18 months of the regulation’s enactment, with annual updates thereafter.
As the federal government deliberates on SEC rules for climate reporting, states like California, New York, and Washington are stepping up to ensure that companies are held accountable for their environmental impact. Businesses operating in these states must stay informed about the specific requirements and deadlines to ensure compliance. By doing so, they not only adhere to regulations but also contribute to broader efforts to combat climate change and promote sustainability.
Sustainable Fitch’s analysis underscores the importance of state-level initiatives in driving climate accountability. As more states potentially follow suit, companies across the U.S. will need to prioritize climate reporting as a critical component of their corporate responsibility strategies. Vervantis stands ready to assist businesses in navigating this complex landscape, ensuring they meet their reporting obligations and contribute to a sustainable future.
