Colorado is proposing House Bill 25-1119, requiring businesses with over $1 billion in revenue to disclose greenhouse gas emissions, mirroring similar laws in California. Reporting timelines for Scope 1, Scope 2, and Scope 3 emissions are set from 2027 to 2031. The bill faces potential challenges from the business lobby as it progresses through the legislature.
Colorado has initiated efforts to mandate businesses to disclose their greenhouse gas emissions, following the footsteps of California and recent federal developments. In light of diminishing federal reporting requirements by the U.S. Securities and Exchange Commission (SEC), the proposed Colorado legislation—House Bill 25-1119—applies to entities with revenues exceeding $1 billion and aims for compliance beginning in 2027, echoing California’s regulations.
Following the Paris Agreement in 2015, a global push triggers more stringent accountability from businesses regarding climate impacts. Investor pressure and regulatory changes have prompted more comprehensive annual ESG and sustainability reporting, although previous efforts lacked standardization and resulted in misleading claims. This lack of consistency has prompted calls for clear and enforceable reporting standards across jurisdictions.
The International Financial Reporting Standards Foundation introduced Sustainability Disclosure Standards in June 2023, accepted as the global benchmark for climate-related disclosures. However, the SEC’s efforts to implement U.S. climate-related reporting standards faced legal delays, leading to indefinite postponement.
In California, the recent Climate Accountability Package strengthens state-level requirements for large companies to submit detailed annual reports on greenhouse gas emissions. Following this trend, Colorado aims to emulate these regulations, with businesses required to delineate their Scope 1 and Scope 2 emissions beginning January 1, 2027.
Scope 1 and Scope 2 encompass direct emissions from company operations and emissions linked to energy consumption, respectively. The bill also delineates a unique approach for Scope 3 emissions, covering various indirect greenhouse gas emissions throughout the supply chain and business operations, necessitating detailed disclosures starting from 2029 onward.
The proposed timeline for reporting remains highly ambitious, as it demands that businesses provide annual emissions data from the prior calendar year. Typically, jurisdictions allow a six-month period for businesses to compile this critical information. Hence, modifications to this timeline may be anticipated during the legislative process.
Enforcement of compliance rests with state authorities, with noncompliance potentially incurring steep penalties of $100,000 per day. As the legislative session unfolds, it remains uncertain whether the bill will successfully navigate through the Colorado General Assembly, despite Democratic party control enhancing its prospects. Stakeholder opposition from business interests could significantly influence the outcome of this legislative initiative.
The introduction of Colorado House Bill 25-1119 signals a significant escalation in state-level requirements for climate-related disclosures among large businesses. This legislation builds on previous initiatives from California and responds to a growing call for transparency and accountability in corporate emissions reporting. The ambitious reporting timeline and the proposed penalties for noncompliance highlight the urgency of addressing climate change, although challenges may arise as stakeholders engage in legislative discussions.
Original Source: www.forbes.com
