How Buro Happold can support compliance with SB 253 and SB 261.

SB 253 and SB 261: Mandatory reporting is here. We can help.

What Happened

On Saturday October 7th 2023, two California bills were signed into law that require companies to analyze and report on their GHG emissions, as well as their climate-related financial risks.

The California Climate Accountability Package was comprised of three different bills – Senate Bill 253 (SB 253), Senate Bill 261 (SB 261), and Senate Bill 252 (SB 252). This package was initially issued in 2022 but faced delays and amendments such as the limits on liability for Scope 3 emissions.

As of October 7th, SB 253 and SB 261 were signed into law, increasing the demand on businesses for transparency and climate action:

• SB 253: The Climate Corporate Data Accountability Act. [SIGNED]

Requires companies to report their annual Scope 1, 2, and 3 emissions, increasing transparency into corporations’ emissions and providing essential insights for investors and consumers. This is not limited to emissions originating within California but includes all emissions that a reporting entity is responsible for. This bill also includes an assurance engagement, performed by an independent third-party assurance provider, for Scopes 1 and 2. The Scope 3 assurance requirements will be reviewed ahead of 2027.

• SB 261: The Climate-Related Financial Risk Act. [SIGNED]

Requires companies to disclose both physical and transition climate-related risks, in accordance with the Task Force on Climate-Related Financial Disclosures (TFCD), and the measures they have taken to reduce and adapt to identified, increasing transparency.

• SB 252: California Fossil Fuel Divestment Act. [UNSIGNED]

Expected to clear the Assembly in 2024 and is dedicated to banning the California’s public pensions from investing in the 200 most carbon-intensive fossil fuel companies and divest current holdings in those companies by 2031.

Why it matters

It sets a standard: The California state assembly has estimated that both bills will impact roughly 10,000 or more companies. California has now set the precedent for the nation related to scope emissions reporting standards, so, in time, we should expect other states and jurisdictions to follow suit, potentially reshaping U.S. climate-related business considerations.

Next up, The SEC: The legislation comes as somewhat of a preview to the implications of the much-anticipated SEC Climate Proposal, which would have similar requirements to the Californian bills but continues to face strong opposition from industry over components such as the bright-line materiality threshold of 1% for climate impacts. Other states are also looking to implement similar legislation such as New York Senate Bill 5437, introduced on March 3, 2023, which broadly mirrors SB 252.

What else you need to know

	SB 253 The Climate Corporate Data Accountability Act	SB 261 The Climate-Related Financial Risk Act
Applies to	Specified partnerships, corporations, limited liability companies, and other business entities (publicly traded or not) that are US-based and that ‘do business’ in California.
How is “doing business” in California	If a company meets any of the following, they are subject to comply: – Engages in any transaction for the purpose of financial gain within California – Are organized or commercially domiciled in California – Their California sales, property, or payroll exceeds the amounts specified by the California Franchise Tax Board.
Revenue Threshold	Applicable to companies with total annual US revenues of $1 billion or more.	Applicable to companies with total annual US revenues of $500 million or more.
Compliance timeline and requirements	2026: Report Scopes 1 & 2 emissions annually, assured by an independent 3rd party 2027: Report Scope 3 emissions annually, no later than 180 days after the scopes 1 & 2 reporting.	January 1, 2026: Report climate-related financial risk (biennially thereafter), disclosing the identified risks and the measures adopted to reduce and adapt to the risk.
What are the penalties for non-compliance?	Penalties associated with nonfiling, late filing etc. could be up to $500,000 in a reporting year.	Penalties for not making such a report publicly available or does so with insufficient data/detail could be up to $50,000 in a reporting year.

How Buro Happold can help

Buro Happold has a skilled team of strategic sustainability consultants and a deep technical bench of analysts and engineers to support your company’s compliance with SB 253 and SB 261. We offer a range of highly relevant services, including:

• Overall Strategic Sustainability Consulting

• Environmental, Social, Governance Policy and Process Development
• Social Impact Assessments
• Data Review and Validation
• Reporting Services

• SB 253: The Climate Corporate Data Accountability Act

• GHG Accounting
• Net Zero Strategy
• Portfolio Decarbonization Strategy

• SB 261: The Climate-Related Financial Risk Act

• Climate-Related Physical and Transition Risk Assessment (in alignment with TCFD)
• Climate Risk Assessment Standard Operating Procedure
• Climate Action Plans
• Resilience Planning