Colorado is considering a bill that would mandate businesses with over $1 billion in revenue to disclose greenhouse gas emissions, starting in 2028. This follows a trend initiated by California’s Climate Accountability Package. The bill outlines specific reporting requirements for Scope 1, Scope 2, and Scope 3 emissions, with strict penalties for non-compliance. The political landscape suggests a history of support for such legislation, but business lobbying may influence its final form.
Colorado is moving towards requiring businesses to disclose their greenhouse gas emissions. This initiative follows the recent announcement by the U.S. Securities and Exchange Commission (SEC) to eliminate its reporting requirement established in 2024. If the new Colorado bill is enacted, businesses with revenue exceeding $1 billion that operate within the state will need to start reporting emissions by 2028.
In the wake of the Paris Agreement in 2015, global efforts have intensified to combat climate change and achieve net-zero greenhouse gas emissions by 2050. Large investment firms like BlackRock have significantly influenced corporate practices by advocating for sustainability and environmental oversight, leading to a rise in annual environmental, social, and governance (ESG) reports. However, these reports have often lacked standardization, leading to concerns regarding accountability and transparency.
As businesses claiming to be sustainable are now required to provide data to substantiate their claims, international regulators have begun to develop reporting standards. In June 2023, the International Financial Reporting Standards (IFRS), utilized by 132 jurisdictions globally, adopted Sustainability Disclosure Standards to enhance transparency in reporting greenhouse gas emissions.
While the SEC proposed climate-related reporting standards in March 2022, their implementation has faced legal challenges, leading to delays. Recently, state-level legislation has emerged as a potential alternative avenue for regulation. In September 2023, California passed the Climate Accountability Package, setting up sustainability reporting requirements for large companies. Colorado appears to be following this trend with House Bill 25-1119, aimed at establishing similar disclosure requirements for businesses operating in the state.
The Colorado bill introduces the necessity for companies with revenues exceeding $1 billion to start reporting their direct (Scope 1) and energy-related (Scope 2) greenhouse gas emissions next year. Scope 3 emissions, which encompass indirect emissions across the business ecosystem, will be introduced gradually over the following years, requiring comprehensive data collection practices from businesses.
The bill also stipulates strict enforcement measures, with non-compliance potentially resulting in daily penalties of up to $100,000. Given the Democratic majority in both legislative chambers and the governorship, the likelihood of the bill advancing through the legislative process remains high. However, significant opposition from the business lobby should be acknowledged, which could influence potential amendments to the bill.
In summary, Colorado’s proposed legislation aligns with a growing trend among states to enhance climate accountability through mandatory greenhouse gas emissions reporting. The bill sets forth ambitious timelines for businesses to disclose various scopes of emissions, including challenging Scope 3 emissions reporting. While the legislation’s passage seems probable due to political support, it is anticipated that lobbying efforts may significantly impact the final stipulations and enforcement mechanisms of the law.
Original Source: www.forbes.com
