Sustainability accounting & reporting webcast

Patchwork of Mandatory Disclosures

The landscape for sustainability accounting and reporting has shifted dramatically since the SEC's 2024 final climate disclosure rules. Adopted under the prior administration, those rules required public companies to report material climate risks and Scope 1 and 2 emissions in SEC filings, with phased implementation starting in 2026 for large filers. But following litigation and a change in administration, the SEC ended its defense of the rules in March 2025, leading to stays and uncertainty; by late 2025, the rules appear effectively shelved at the federal level.

Into this vacuum, California has advanced its own regime. SB 253 requires companies with annual revenues exceeding $1 billion that do business in California—regardless of headquarters—to disclose Scope 1 and Scope 2 GHG emissions for fiscal years beginning after January 1, 2025, with the first reports due by August 10, 2026, covering 2025 data. Limited assurance from accredited providers is mandated, escalating to reasonable assurance by 2030. SB 261, which would have required biennial climate risk reports starting January 1, 2026, faces a temporary injunction from the Ninth Circuit pending appeal, but SB 253 enforcement remains on track.

The stakes are concrete: non-compliance risks civil penalties enforced by the California Air Resources Board, while poor disclosures can elevate borrowing costs or deter investors who increasingly price climate risks. Large multinationals, including many non-California-based firms, are pulled in because 'doing business' in the state is broadly interpreted. This creates compliance burdens—building reliable emissions inventories, engaging assurers, and integrating data into governance—often costing millions in consulting and systems.

Non-obvious tensions abound. The retreat from federal uniformity has fragmented requirements, forcing companies to reconcile state mandates with international standards like ISSB's IFRS S1 and S2, adopted or aligned with in over 20 jurisdictions covering significant global GDP. EU adjustments to the Corporate Sustainability Reporting Directive (CSRD) via Omnibus simplifications aim to ease burdens but still demand detailed reporting from in-scope entities. This divergence raises trade-offs: voluntary ISSB-aligned reporting may satisfy investors seeking comparability, yet state laws impose binding obligations with assurance teeth. Critics argue such rules impose undue costs on business without clear environmental gains, while proponents highlight better risk transparency and market efficiency.

Meanwhile, other U.S. states eye similar measures, and global pressures from supply-chain rules like the EU Deforestation Regulation add layers. The result is a high-stakes compliance scramble where preparation now determines who navigates the fragmentation successfully.