Colorado Proposes Bill for Mandatory Climate Emissions Disclosure

Colorado is pursuing a bill to require businesses with over $1 billion in revenue to disclose greenhouse gas emissions, following California’s lead. Scope 1 and Scope 2 emissions reporting begins in 2027, with Scope 3 emissions to be phased in through 2031. The bill, introduced by Rep. Manny Rutinel, faces potential challenges from the business lobby despite Democratic support in the legislature.

Colorado has proposed a bill mandating larger businesses to disclose their greenhouse gas emissions. This initiative follows the U.S. Securities and Exchange Commission’s (SEC) move to repeal its climate reporting requirements, allowing Colorado to step forward with its regulations targeting businesses exceeding $1 billion in revenue starting in 2028.

In response to the Paris Agreement of 2015, a global effort to curb climate change was initiated, aiming for net-zero emissions by 2050. This increased emphasis on sustainability saw investment firms like BlackRock lobbying for corporate accountability through environmental, social, and governance (ESG) metrics, leading to annual sustainability reports. These reports often lacked consistency or regulatory oversight, causing them to appear more as marketing tools rather than genuine accountability measures.

The financial sector, hearing the call for more rigorous standards, faced challenges in substantiating their ESG claims. In 2021, the International Sustainability Standards Board developed the Sustainability Disclosure Standards to establish uniform reporting standards globally. Although the U.S. follows Generally Accepted Accounting Principles (GAAP), international standards are gaining traction and could influence U.S. regulations in the future.

The SEC, in March 2022, began drafting its own climate-related reporting standards. Although a rule requiring disclosures from publicly traded companies was set for 2024, it faced pushback and was subsequently delayed indefinitely amid legal disputes. Recently, the SEC announced the intention to repeal these regulations, prompting states to consider their measures instead.

In September 2023, California enacted legislation for sustainability reporting, prompting Colorado to develop similar measures through House Bill 25-1119, introduced by Representative Manny Rutinel. This bill mandates reporting for companies operating in Colorado with $1 billion in revenue, pushing for transparency around Scope 1 and Scope 2 emissions starting in 2027, with Scope 3 emissions reporting phased in by 2031.

Scope 2 relates to emissions from energy consumption, while Scope 3 encompasses indirect emissions from the supply chain, business travel, and other activities. Notably, Colorado’s reporting timeline may be overly ambitious, as companies typically require at least six months to compile accurate reports. Unique to Colorado, noncompliance could result in significant penalties enforced by the district attorney and attorney general.

While Democratic control of the state legislature enhances the likelihood of the bill’s passage, the influence of the business lobby remains a significant factor that could alter the final version of the legislation.

The proposed legislation in Colorado represents an evolving landscape in corporate responsibility regarding climate emissions. If enacted, the bill would require significant disclosures from large businesses, aligning state efforts with international sustainability goals. However, challenges remain in balancing regulatory compliance with the practicalities of data reporting and business operations, as well as potential opposition from business advocates that could affect the legislative outcome.

Original Source: www.forbes.com