USA – CALIFORNIA Trends and Developments Contributed by: Eoghan Gallagher and Catherine Johnson, Environmental General Counsel
modifications that could satisfy the constitutional challenges or facilitate settlement of such claims. For example, adopting measures such as transparency in the PRO’s calculation of fees, an opportunity for administrative or judicial review of fee assessments and/or other PRO decisions, and simplified book- keeping to account for materials that are not easily traceable to a producer. In addition, to avoid or optimise defences from equal protection and interstate commerce challenges, some states, including California, may consider stepping up enforcement to level the playing field. Enforcement could take place at the retail level because of the dif- ficulties of enforcing against companies incorporated in countries outside the United States. It remains to be seen exactly how the EPR pro- grammes will unfold in California or the disposition of any litigation that may be filed in California (or in other states). Meanwhile, however, it is reasonable to expect that retailers will be demanding compliance and indemnity provisions from their suppliers – and that other potential producers will be seeking similar assurances across their own supply chain. In conclusion, companies in California will need to take proactive steps to comply with SB 54 to avoid the sales restrictions on non-compliant producers that will take effect from 1 January 2027. Climate Change Initiatives California’s climate change initiatives, particularly its stringent volatile organic compounds (VOC) restric- tions and corporate disclosure requirements, are generally considered among the most ambitious and pioneering globally. Disclosure requirements The Climate Corporate Data Accountability Act (SB 253) requires companies with over USD1 billion in rev- enue to annually disclose all Scope 1, 2, and 3 green- house gas (GHG) emissions, with the first reports (for 2025 data) due in 2026. Separately, the Climate-Relat- ed Financial Risk Act (SB 261) requires companies with over USD500 million in revenue to publish bien- nial reports on the financial risks posed by climate change, with the first report due by 1 January 2026.
California’s approach goes beyond the now-aban- doned climate change disclosures proposed by the US Securities Exchange Commission (SEC) in at least two significant respects. First, by mandating the dis- closure of Scope 3 (value chain) GHG emissions for companies with over USD1 billion in annual revenue, regardless of a financial materiality assessment. Sec- ond, both SB 253 and SB 261 apply to both public and private US companies that meet the relevant revenue thresholds and “do business” in California. Addition- ally, SB 253 requires mandatory third-party assurance for emissions data, starting with limited assurance for Scope 1 and 2 emissions in the first reporting cycle, with the requirement escalating over time. The laws are currently in the crucial rulemaking phase led by the California Air Resources Board (CARB). CARB has pushed the initial proposed rulemaking of SB 253 to the first quarter of 2026 to integrate sub- stantial stakeholder feedback. Despite the delay in final regulations, companies must prepare to report their 2025 financial year data starting in 2026. The statutory deadline for the first biennial report under SB 261 is 1 January 2026. Both laws are also subject to ongoing litigation from business groups that are challenging their constitu- tionality and scope, arguing they violate commerce and free speech clauses. This litigation adds a layer of uncertainty, but companies are nevertheless moving forward with compliance efforts to meet the looming statutory deadlines. Air quality and VOC regulation CARB’s Consumer Products Regulation remains cen- tral to California’s strategy for reducing ozone-forming emissions from consumer and commercial products. The 2023 amendments represented the most compre- hensive tightening of volatile organic compound (VOC) limits in more than a decade and are projected to deliv- er a total statewide reduction of approximately 9.8 tons per day (tpd) of VOC emissions once all phased limits – effective through 2031 – are fully implemented. Early reductions of about 3 tpd will occur in the near term, primarily from categories such as air freshen- ers, multipurpose cleaners, and personal-fragrance products, with additional reductions realised as later compliance dates take effect.
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