On March 6, 2024, the U.S. Securities and Exchange Commission adopted certain climate reporting regulations, requiring registrants to disclose their Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emissions in annual reports and registration statements.
The SEC’s regulations differ from California’s climate disclosure laws in several key respects, the latter of which mandates disclosure of Scope 3 emissions in addition to Scope 1 and 2 emissions, creating ambiguity and uncertainty for companies subject to both disclosure requirements.
On March 15, 2024, the U.S. Court of Appeals for the Fifth Circuit granted an emergency stay of the SEC regulations, pending the consideration of a legal challenge to the regulations by several states and regulated companies.

On March 6, 2024, the U.S. Securities and Exchange Commission (SEC) finalized and adopted its controversial greenhouse gas (GHG) reporting and climate disclosure regulations after a review of over 24,000 public comments and two years of hot debate. These new SEC climate-related regulations will soon require publicly traded companies to disclose, among other things, financially “material” Scope 1 emissions (direct emissions from operations) and Scope 2 emissions (indirect emissions from energy use) in their annual reports and registration statements, and will also require registrants to provide information regarding a registrant’s climate-related risks that have materially impacted, or are reasonably likely to have a material impact on, its business strategy, operations or financial condition. Pillsbury recently published an alert on the content and details of new SEC climate-related regulations, which can be found here.

As a general matter, the new SEC regulations resemble—but contain important differences from—California’s novel SB 253 and SB 261 climate disclosure laws enacted back in October 2023, thereby creating the potential for conflicts between the two regulatory regimes and possible conflicting obligations for companies subject to both the SEC’s and California’s climate disclosure requirements.

On March 15, 2024, the Fifth Circuit U.S. Court of Appeals granted the request of state and industry petitioners to issue an emergency stay of the SEC climate disclosure regulations while the petitioners’ challenge to the regulations proceeds, rejecting the SEC’s argument that the stay was premature due to the regulations not yet being published and not requiring actual disclosures until March 2026. While the stay freezes any immediate implementation of the SEC regulations, the ultimate fate of the regulations—including any resulting compliance schedule—will depend on the outcome of the challenge.

Possible Conflicting Obligations to the SEC and California
When the new SEC climate-related regulations were initially proposed in March 2022, the proposed regulations encompassed three categories of reportable GHG emissions: Scope 1 (direct) emissions, Scope 2 (indirect) emissions and Scope 3 emissions—emissions generated throughout a company’s supply chain and its customers’ use of the company’s products. The final version adopted by the agency is arguably a scaled-down version of the regulations initially proposed and differs in several key respects, with the most notable being the elimination of mandatory Scope 3 emission disclosures and a lengthy, phased-in compliance timeframe for registrants subject to the GHG disclosure requirements.

With respect to GHG emission disclosure requirements, specifically, large accelerated filers must report their material Scope 1 and Scope 2 GHG emissions for the year ending December 31, 2026, with compliance deadlines of 2029 and 2033 for the requisite limited assurance and reasonable assurance attestations, respectively. Accelerated filers not otherwise exempt are required to report their material Scope 1 and Scope 2 emissions for the year ending in December 31, 2028, with a compliance deadline of 2031 for limited assurance attestations only; reasonable assurance attestations are not required.

Significantly, however, the new SEC regulations have certain material differences from California’s new climate disclosure requirements, the latter of which generally go into effect beginning in 2026 (for 2025 Scope 1 and 2 emissions). In contrast to the SEC’s climate regulations, for instance, California’s climate disclosure laws generally apply to both public and private companies above a certain revenue threshold and mandate the disclosure of Scope 3 emissions in addition to Scope 1 and Scope 2. Moreover, California’s climate disclosure laws apply to any company “doing business in California,” a term that is broadly interpreted to cover any entity that, among other things, derives financial value or gain in California. This means that registrants that are not otherwise headquartered, or do not have physical offices or locations, in California could still be subject to California’s far-reaching climate reporting requirements, which—as explained above—are shaping to be more stringent and aggressive than the SEC’s climate disclosure rules.

We have previously reported on legal challenges to California’s climate disclosure laws and related uncertainty for regulated parties here.

Potential Implications
If the SEC regulations survive legal challenge in their current form, the broad reach of California’s climate disclosure laws makes it likely that a wide swath of companies will be subject to both the new SEC regulations and California’s climate disclosure requirements. Unlike the SEC regulations, however, the California Air Resources Board (CARB) has yet to promulgate regulations implementing the SB 253 and SB 261 climate disclosure laws. Thus, it remains to be seen whether CARB will promulgate implementing regulations that are in parallel with, congruent to or in conflict with the SEC’s climate regulations. At the very least, however, California’s climate disclosure requirements will contain requirements for tracking and public reporting of Scope 3 GHG emissions—a controversial area of GHG reporting the SEC ultimately declined to mandate. It is yet unclear whether and to what extent California’s implementing regulations may allow companies to meet California requirements with submittal of Scope 1 and 2 emissions reporting prepared to meet the SEC regulations—SB 253 contained no such provision, and depending on CARB’s regulatory action, companies may face potentially differing standards from California and the SEC as to the Scope 1 and 2 emissions they are required to track and report.

In any event, all of this creates ambiguity and induces profound uncertainty for companies that must comply with both the SEC’s new climate regulations and California’s forthcoming reporting requirements. In other words, one shoe may not fit both feet, and impacted companies may need to undertake different actions to comply with California’s climate disclosure requirements that are separate and apart from actions to comply with SEC’s new climate-related regulations.

Like California’s novel climate disclosure laws, the SEC’s new climate disclosure rules will no doubt be the subject of intense litigation. However, impacted companies should not wait until those legal challenges are resolved to begin preparing for compliance with the SEC regulations, or both the SEC regulations and California’s arguably more aggressive requirements. With both the SEC’s and California’s GHG emission disclosure deadlines fast approaching in 2026, impacted companies should operate under the assumption that both the SEC regulations and California’s climate disclosure laws will remain in full force and effect. Pillsbury is well suited to assist companies in navigating the complex framework established by both the SEC’s new regulations and California’s climate disclosure laws, as well as the inevitable collision of these two novel regulatory regimes.

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