On January 13, the Federal Acquisition Regulatory (FAR) Council withdrew the greenhouse gas (GHG) disclosure rule that it proposed in late 2022. As explained previously, the proposed rule would have required certain federal contractors to disclose their scope 1-3 GHG emissions and set science-based targets to reduce same, with the scope 3 disclosure and science-based target requirements limited to contractors receiving more than $50 million in federal contract obligations per year. In its withdrawal of the proposed rule, the FAR Council explained that the agencies lack sufficient time during the Biden-Harris Administration to finalize the proposal, particularly given the large volume of public comments and policy issues raised.
Meanwhile, the Securities and Exchange Commission (SEC) stayed its final climate-related disclosure rule in April of last year pending judicial resolution of consolidated challenges to the rule in the U.S. Court of Appeals for the Eighth Circuit (our Client Alert on the final rule is available here). This litigation is ongoing, and it’s unclear how the rule’s deadlines, should the rule be upheld, will be impacted by the SEC’s stay.
As this federal limbo continues, California’s climate disclosure laws (SB 253, SB 261, both amended by SB 219) are in effect, with initial requirements that kick in in 2026. As explained previously, these laws require companies above certain annual revenue thresholds that do business in California to disclose their scope 1-3 GHG emissions and prepare climate-related financial risk reports. Among other things, SB 219 extended the deadline for the California Air Resources Board (CARB) to adopt regulations concerning the emissions disclosure requirements to July 1, 2025. CARB is currently soliciting feedback that will inform the implementation of these climate disclosure laws. Comments must be submitted here by February 14.
Late last year, CARB issued an Enforcement Notice stating that it will exercise its enforcement discretion with respect to the first GHG disclosure reports due in 2026 (requiring disclosure of scope 1 and 2 GHG emissions). The Notice recognizes that some companies may need some lead time to implement new data collection processes to allow for fully complete scope 1-2 emissions reporting and explains that reporting entities may submit emissions that can be determined from information they already possess or are already collecting at the time the Notice was issued. CARB explains that it will not take enforcement action for incomplete reporting against entities as long as companies make a good faith effort to retain all data relevant to emissions reporting for the prior fiscal year and are actively working towards full compliance.
Relatedly, SB 253 provides that companies will not be penalized for any misstatements with regard to Scope 3 disclosures (must be disclosed beginning in 2027) “made with a reasonable basis and disclosed in good faith.” Moreover, between 2027 and 2030, companies will only be penalized on their scope 3 reporting for non-filing.
California’s climate disclosure laws are currently being challenged in the U.S. District Court for the Central District of California (No. 2:24-cv-00801). On November 5 of last year, the court denied the plaintiffs’ motion for summary judgment on their facial First Amendment challenges.
Climate disclosure legislation is pending in Illinois, Minnesota, New York, and Washington.
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