On December 5, 2024, the California Air Resources Board--the agency responsible for implementing California's climate disclosure regulations--announced that it would “exercise enforcement discretion for the first reporting cycle on the condition that entities demonstrate good faith efforts to comply with the requirements of the [climate disclosure] law.” In other words, the key California regulator “recognize[d] that companies may need some lead time to implement new data collection processes to allow for fully complete scope 1 and scope 2 emissions reporting,” and therefore announced that “for the first reporting cycle, CARB will not take enforcement action for incomplete reporting against entities, as long as the companies make a good faith effort . . . .” In effect, the CARB is providing reassurance to companies that they will not be penalized if meaningful efforts nonetheless fall short due to the abbreviated timeframe for compliance. 

This forbearance is welcome news to companies that are subject to California's mandatory climate disclosure law, as S.B. 253 requires disclosure of Scope 1 and Scope 2 greenhouse gas emissions in 2026--even though the CARB is not required to promulgate the regulations implementing this requirement until July 1, 2025--a late date that may pose difficulties for companies seeking to comply. That said, the CARB was clear in this enforcement notice that leniency would only be extended to “entities that demonstrate good faith efforts to comply with the requirements of the law,” including “a good faith effort to retain all data relevant to emissions reporting for the entity's prior fiscal year.” So, companies should not regard this exercise of enforcement discretion as a license to avoid complying with the regulation for the first year; rather, it simply affords comfort to companies that seek to comply yet nonetheless fall short. 

So, in order to benefit from this announcement, companies should still undertake data collection efforts to comply with the California climate disclosure laws, particularly as these laws have not been stayed despite the pending legal challenge (in contrast to the SEC's voluntary stay of its own climate disclosure rule pending the resolution of the lawsuit seeking to overturn the regulation). California's mandatory climate disclosure laws remain in full force; the enforcement will simply be lenient for the first year--a limited, but welcome, relief. 

The purpose of this Enforcement Notice is to notify reporting entities that CARB has decided to exercise its enforcement discretion ... SB 253 requires reporting entities, “starting in 2026 on or by a date to be determined by the state board” to “publicly disclose . . . all of the reporting entity’s scope 1 and scope 2 emissions for the reporting entity’s prior fiscal year.” ... [] CARB will exercise its enforcement discretion such that, for the first report due in 2026, reporting entities may submit scope 1 and scope 2 emissions from “the reporting entity’s prior fiscal year” that can be determined from information the reporting entity already possesses or is already collecting at the time this Notice was issued. ... on the condition that entities demonstrate good faith efforts to comply with the requirements of the law.