California SB 219, SB 253 and SB 261: A Comprehensive Guide for Consumer Brands

On November 27th, Governor Newsom Signed SB 219 into law, Affirming Climate Disclosure Deadlines

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[fs-toc-h2]Breaking News and Key Updates

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As of September 27, 2024, California Governor Gavin Newsom has signed Senate Bill 219 (SB 219) into law, enacting several amendments to the landmark climate disclosure laws SB 253 and SB 261. This development marks a critical juncture for consumer brands operating in or selling to California, as it maintains the original reporting deadlines while introducing some flexibility in implementation.

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Key changes introduced by SB 219 include:

1. Reporting Deadlines Maintained: The core reporting deadlines for 2026 remain in place, sending a clear message about California's commitment to rapid climate action and transparency.
2. Extended Rulemaking Period: SB 219 extends the California Air Resources Board's (CARB) deadline for issuing regulations under SB 253 to July 1, 2025 - a six-month extension. This creates a compressed timeline for companies to prepare once final regulations are issued.
3. Consolidated Reporting Allowed: SB 219 permits consolidated reporting at the parent company level for SB 253 emissions disclosures, potentially simplifying the process for complex corporate structures.
4. Flexible Scope 3 Timeline: CARB now has discretion to specify the 2027 deadline for Scope 3 emissions disclosure, rather than the original 180 days after Scopes 1 and 2 disclosure.
5. Fee Requirement Removed: The requirement for companies to pay annual fees when filing SB 253 or SB 261 reports has been eliminated.
6. Ongoing Legal Challenges: A federal lawsuit challenging the constitutionality of both SB 253 and SB 261 is pending, with a hearing set for October 15, 2024.

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These developments underscore the urgency for consumer brands to prepare for compliance with SB 253 and SB 261. Companies must start building their climate disclosure capabilities now, even as the final regulatory details are being determined.

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[fs-toc-h2]5 Key Takeaways for Consumer Brands

1. Wide-Reaching Impact: SB 253 affects large companies (>$1B revenue) doing business in California, requiring disclosure of scope 1, 2, and 3 emissions.
2. Dual Reporting: SB 261 requires companies with >$500M revenue to disclose climate-related financial risks and mitigation strategies.
3. Strict Timeline: Emissions reporting starts in 2026 for 2025 data (scope 1 and 2) and 2027 for 2026 data (scope 3).
4. Third-Party Assurance: Companies must obtain independent verification of their emissions disclosures.
5. Significant Penalties: Non-compliance can result in fines up to $500,000, emphasizing the importance of accurate reporting.

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[fs-toc-h2]What are California SB 253 and SB 261?

California Senate Bills 253 and 261, collectively known as the Climate Corporate Data Accountability Act (CCDAA), represent a significant step towards mandatory climate-related disclosures for companies operating in California. These bills aim to enhance transparency, standardize disclosures, and provide stakeholders with credible climate information.

Key aspects of SB 253 and SB 261 include:

• Comprehensive greenhouse gas emissions reporting requirements
• Disclosure of climate-related financial risks and mitigation strategies
• Mandatory third-party assurance of reported data
• Public accessibility of reported information
• Significant penalties for non-compliance

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[fs-toc-h2]Who Do SB 253 and SB 261 Apply To? 

Specifically, the bills apply to:

• SB 253: US-based public and private companies with annual revenues exceeding $1 billion that do business in California.
• SB 261: US-based public and private companies with annual revenues exceeding $500 million that do business in California.
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It's important to note that while these are California state laws, their reach extends far beyond the state's borders due to California's economic significance and the broad definition of "doing business in California."

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[fs-toc-h2]Which Products and Activities Are Affected?

SB 253 and SB 261 cover all business activities of the companies that fall under their scope. For consumer brands, this includes:

• Manufacturing processes
• Supply chain operations
• Distribution and logistics
• Retail operations
• Product use and end-of-life considerations
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The laws do not distinguish between different product types or categories. Instead, they require comprehensive reporting of all emissions and climate-related financial risks associated with a company's entire business operations.

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[fs-toc-h2] SB 253 and 261 Timeline: Updated Key Dates for Compliance

• September 27, 2024: Governor Newsom signs SB 219 into law
• July 1, 2025: CARB to adopt regulations for implementing SB 253 (extended deadline)
• 2026: First reports due for Scope 1 and 2 emissions (based on 2025 data)
• 2027: First reports due for Scope 3 emissions (based on 2026 data, exact deadline to be determined by CARB)
• January 1, 2026: First climate-related financial risk reports due under SB 261
• Ongoing: Biennial updates required for climate-related financial risk reports

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[fs-toc-h2]Detailed Requirements Under SB 253 and SB 261

1. Greenhouse Gas Emissions Reporting (SB 253)

Companies must disclose:

• Scope 1 emissions: Direct emissions from owned or controlled sources
• Scope 2 emissions: Indirect emissions from purchased energy
• Scope 3 emissions: All other indirect emissions in a company's value chain
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For consumer brands, this includes emissions from:

• Manufacturing facilities
• Company-owned vehicles
• Purchased electricity and heat
• Supplier activities
• Transportation and distribution
• Product use and disposal

2. Third-Party Assurance (SB 253)

• Companies must obtain independent verification of their emissions disclosures
• Assurance requirements start with limited assurance and may progress to reasonable assurance over time

3. Climate-Related Financial Risk Reporting (SB 261)

Companies must disclose:

• Physical risks from climate change (e.g., disruptions to supply chains, damage to facilities)
• Transition risks associated with shifting to a low-carbon economy (e.g., changes in consumer preferences, regulatory changes)
• Strategies for mitigating identified risks
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For consumer brands, this might include:

• Risks to agricultural supply chains for food and beverage companies
• Potential impacts on manufacturing facilities in climate-vulnerable areas
• Shifts in consumer demand for more sustainable products

4. Public Disclosure

• Emissions data will be made publicly available through a digital reporting platform
• Climate-related financial risk reports must be published on the company's website

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[fs-toc-h2]How to Prepare for SB 253 and SB 261 Compliance: A Step-by-Step Guide

1. Assess applicability and scope
   • Determine if your company meets the revenue thresholds for SB 253 and/or SB 261
   • Evaluate your company's activities in California to confirm if you're "doing business" in the state
2. Establish a cross-functional team
   • Include representatives from sustainability, finance, legal, and operations
   • Assign clear roles and responsibilities for compliance efforts
3. Develop a comprehensive emissions inventory
   • Map all emission sources across your value chain
   • Implement robust data collection processes for scope 1, 2, and 3 emissions
   • Consider investing in specialized carbon accounting software
4. Conduct a climate-related financial risk assessment
   • Identify physical and transition risks relevant to your business
   • Quantify potential financial impacts
   • Develop mitigation strategies
5. Enhance data quality and management
   • Implement internal controls to ensure data accuracy and completeness
   • Prepare for third-party assurance by establishing clear audit trails
6. Engage with suppliers and partners
   • Communicate reporting requirements to your supply chain
   • Collaborate on data collection and emissions reduction initiatives
7. Prepare for public disclosure
   • Develop a communication strategy for sharing emissions and risk data
   • Ensure alignment between public disclosures and other corporate communications
8. Stay informed on regulatory developments
   • Monitor CARB's rulemaking process for SB 253 implementation
   • Participate in industry consultations and workshops when possible
9. Integrate climate considerations into business strategy
   • Use insights from emissions and risk assessments to inform long-term planning
   • Explore opportunities for emissions reduction and climate resilience
10. Prepare for ongoing compliance
    • Establish processes for annual emissions reporting
    • Plan for biennial updates to climate-related financial risk reports

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[fs-toc-h2]Leveraging Existing Sustainability Efforts for SB 253 and SB 261 Compliance

While SB 253 and SB 261 introduce new reporting requirements, companies with existing sustainability programs can leverage their current efforts:

1. Carbon Footprint Assessments: Companies that have already conducted life cycle assessments (LCAs) or carbon footprint analyses will have a head start on emissions data collection and reporting.
2. CDP Reporting: Organizations that report to CDP (formerly Carbon Disclosure Project) can use much of the same data and processes for SB 253 compliance.
3. TCFD Alignment: Companies that have adopted the Task Force on Climate-related Financial Disclosures (TCFD) framework will be well-positioned to meet SB 261 requirements.
4. Science-Based Targets: Businesses with science-based emissions reduction targets will have a strong foundation for both emissions reporting and risk assessment.
5. Supplier Engagement Programs: Existing initiatives to collect sustainability data from suppliers can be expanded to gather necessary scope 3 emissions information.
6. Sustainability Reporting Software: Companies using sophisticated sustainability reporting tools may already have the infrastructure needed for efficient data collection and management.
7. Climate Scenario Analysis: Organizations that have conducted climate scenario analysis for strategic planning purposes will have valuable insights for climate-related financial risk reporting.
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By building on these existing efforts, consumer brands can streamline their compliance process and potentially gain competitive advantages in the transition to a low-carbon economy.

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[fs-toc-h2]How Planet FWD Can Help You Prepare for SB 253 and SB 261

At Planet FWD, we understand the complexities of climate-related reporting and the challenges posed by regulations like SB 253 and SB 261. Our platform is designed to help consumer companies, for example in food, beverage, CPG, apparel, footwear, and homegoods industries, measure their environmental impact and identify opportunities for improvement. 

1. Comprehensive Emissions Tracking: Our platform can help you collect, manage, and report on scope 1, 2, and 3 emissions data across your entire value chain.
2. Data Quality Assurance: We provide robust data validation and audit trail capabilities to support third-party assurance requirements.
3. Climate Risk Assessment: We can assist in identifying and quantifying climate-related financial risks in line with SB 261 requirements.
4. Supplier Engagement: Our supplier features facilitate efficient data collection from your supply chain partners, crucial for accurate scope 3 reporting.
5. Reporting and Disclosure: We offer customizable reporting templates and data visualization tools to support both regulatory compliance and stakeholder communications.
6. Continuous Monitoring: Our platform helps you track progress against emissions reduction targets and identify areas for improvement.
7. Regulatory Updates: We stay abreast of evolving regulations to ensure ongoing compliance with SB 253, SB 261, and other emerging requirements.

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[fs-toc-h2]Ready to Take Action?

Preparing for SB 253 and SB 261 compliance may seem daunting, but it's an opportunity to strengthen your company's sustainability strategy and showcase your efforts to investors, customers, and regulators. By starting early and following this guide, you'll be well-positioned for compliance and leadership in sustainable business practices.

Ready to take the next step in your SB 253 and SB 261 compliance journey? Contact us to book a free regulatory consultation with Planet FWD today. Our experts will provide personalized guidance on how our solutions can help you meet SB 54 requirements efficiently and effectively, while also supporting your broader sustainability goals.

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Download our comprehensive Regulatory Guide to learn more about SB 54 and other key sustainability regulations impacting consumer brands. Stay ahead of reporting requirements and turn compliance into a sustainable packaging competitive advantage.

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