SB 253: California's Push for Greener Business Practices.

• Author: Fox, Jason

Ina bid to champion environmental responsibility, California is on the brink of setting new standards in sustainability disclosure requirements. These rules, aiming to drive businesses toward a more sustainable future, arc poised to outshine other proposals and set a new model for reporting of greenhouse gas emission data. But fear not, as we break down the California Climate Corporate Data Accountability Act, also known as SB 253, into digestible bits for a clearer understanding.

What is SB 253 and What's New?

Introduced by Sen. Scott Wiener, SB 253 has been undergoing some tweaks to ensure its effectiveness. The latest development is a change in the timeline for reporting different types of emissions. Let's delve into the nitty-gritty:

* Scope 1 Emissions: These are direct emissions, like greenhouse gases released from manufacturing plants.

* Scope 2 Emissions: These involve indirect emissions, such as the greenhouse gases that arise from utilities, like electricity and natural gas, to heat and cool buildings or operate equipment.

* Scope 3 Emissions: These encompass emissions from the entire value chain, including those stemming from upstream suppliers.

SB 253 stipulates that companies will start disclosing their Scope 1 and 2 emissions in 2026, followed by Scope 3 emissions in 2027. This shift in the reporting schedule aims to allow businesses more time to gear up for the process.

Who's In and What's Required?

Public and private companies with annual revenue of at least $1 billion that operate within California arc directly impacted by the reporting requirement. However, because of the inclusion of Scope 3 emissions, SB 253 also captures a much wider array of entities that do business with larger reporting businesses. So, whether it's the local bakery or a giant tech company, they may be in a position of having to report emissions.

And it's not just about reporting--businesses will be required to provide assurance from an independent third-party auditor when they report their emissions data to the California Air Resources Board. This is where the expertise of the CPA profession, already trusted experts in the sustainability reporting and assurance space, will become key players in the implementation of SB 253.

How Are CPAs Involved?

As established providers of a myriad of financial and advisory services, including required audit services, to a wide spectrum of businesses, CPAs arc well-positioned to provide assurance over CHG emissions.

...