Colorado is proposing legislation requiring businesses with over $1 billion in revenue to disclose greenhouse gas emissions beginning in 2028. This initiative follows California’s similar approach and responds to a growing demand for climate accountability from large corporations. The bill specifies phased requirements for Scope 1, 2, and 3 emissions reporting, with enforcement led by state authorities.
Colorado is following the recent trend among states by considering legislation that mandates businesses to disclose their greenhouse gas (GHG) emissions. This move comes after the U.S. Securities and Exchange Commission (SEC) proposed to abolish its climate-related reporting requirements originally set for 2024. If the bill passes, companies in Colorado with revenues exceeding $1 billion will need to commence their reporting by 2028.
Since the Paris Agreement of 2015, various global initiatives have been launched to curtail climate change impacts, targeting net-zero GHG emissions by 2050. Significant investment firms have taken bold steps to promote sustainability, leading to widespread, albeit non-standardized, ESG and sustainability reporting practices among businesses. However, the lack of regulatory guidelines has made such reports more akin to marketing materials rather than substantive accountability.
The situation intensified within the financial sector where firms claiming to be sustainable must provide verifiable data to support their claims. Global regulators have begun drafting standards for climate-related disclosures in response to increasing market demands and the directives stemming from the Paris Initiative. Consequently, the International Financial Reporting Standards (IFRS) were revised and adopted as the global benchmark for sustainability reporting in June 2023.
In the United States, the SEC proposed climate-reporting standards in March 2022, intending to require large publicly traded companies to disclose their climate actions and associated financial impacts. Despite initial plans for implementation, the SEC faced legal challenges that led to indefinite delays, and recent announcements indicate that the rule may soon be repealed.
States have begun to take the lead on climate accountability; California recently enacted its Climate Accountability Package, necessitating annual emissions reports from companies with significant revenues. Following this, Colorado introduced House Bill 25-1119, which echoes California’s standards requiring businesses to disclose their GHG emissions.
The bill defines “reporting entities” as those operating in Colorado with revenues exceeding $1 billion. Confusion around what constitutes doing business in Colorado, as seen in California, poses a challenge to compliance. Initial reporting for direct emissions and energy-related emissions (Scope 1 and Scope 2) is set to begin in January 2027.
The phased implementation of Scope 3 emissions reporting has been designed uniquely, encompassing GHG emissions not directly controlled by the reporting entity. This includes emissions from the supply chain, employee commuting, and waste management. Subsequent phases will expand the reporting requirements through to 2031, covering various emissions categories.
The timeline established by the bill for annual reporting appears ambitious, as it demands businesses to report emissions from the previous year by January 1. Most jurisdictions typically allot a longer processing duration. Thus, the reporting timeline may undergo revision during legislative discussions.
In an unprecedented move, enforcement will be the responsibility of the district attorney and the attorney general, with non-compliance potentially resulting in significant penalties. While it is anticipated that the penalty structure may see revisions, the bill’s fate within the Colorado General Assembly remains uncertain, although Democratic control enhances its chances of passing, despite opposition from business lobbyists.
In conclusion, Colorado’s proposed House Bill 25-1119 aims to require large businesses to disclose GHG emissions, echoing California’s recent legislation. While the initiative reflects a growing accountability trend among states for climate-related impacts, the ambitious reporting timeline and compliance enforcement measures present significant challenges. As the bill advances, its final form will be influenced by legislative discussions and lobbying efforts from the business community.
Original Source: www.forbes.com
