This series seeks to identify legal questions that can add definition and value to the good work that sustainability teams are doing. Our last post focused on alternatives for determining if an entity meets the revenue triggers for reporting climate information required by California Health and Safety Code Sections 38532and 38533(aka SB 253 and SB 261).
Ask your sustainability team what specific time period they plan to use for the data and information used for California reporting. This question is particularly important if the end of an entity's fiscal year is close to the reporting deadline.
The applicability of California climate disclosure obligations to a particular entity is determined under both of these provisions based on the entity's revenue for the prior fiscal year. It is arguable that the $500 million revenue trigger for climate-related financial risk reporting should be determined on Jan. 1, 2026, which is the deadline for preparing and posting the required report. This interpretation could pose unique challenges for entities that expect to be close to the revenue trigger and have fiscal years that end on Dec. 31, especially if they are not already collecting and reporting the relevant information in some fashion.
The timeframe that has to be covered by the climate-related financial risk report is not specified. Section 38533(b)(1) simply mandates that the report be prepared in accordance with the TCFD framework or an equivalent requirement and updated biennially. This standard implies that any report previously prepared in accordance with the TCFD framework that remains substantially accurate can be used until the required biennial update. The TCFD framework expects reporting on the basis of a fiscal year that is the same as financial statement reporting.
The greenhouse gas emission data report required Section 38532 does not initially appear to have the same flexibility. The emission reports with the requisite third-party assurance for the prior fiscal year are due by an annual date to be set by CARB. This timing could present difficulties for entities that have fiscal years ending near the reporting date.
Fortunately, Section 38532(c)(2) requires CARB to consider the timelines by which reporting entities typically receive emissions data and the capacity for engaging an independent assurance provider. CARB has suggested it may offer some flexibility to allow reports for periods other than an entity's prior fiscal year, but the rules have not yet been proposed (drafts expected in 2026). One option that CARB could consider is to establish reporting deadlines that, like SEC deadlines, are a fixed number of days after an entity's fiscal year ends rather than the same annual calendar date.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
