The California climate disclosure laws, SEC’s proposed climate-related disclosure rule and the CSRD: What U.S. companies need to do now to comply
Mandatory climate disclosure for U.S. companies is here. In several key jurisdictions, companies will be required to disclose climate-related information within the next few years. Companies need to take action now to (1) determine what disclosure rules will apply to them and (2) put into place the necessary infrastructure to be in a position to […]
Loyti Cheng and David A. Zilberberg are Counsel at Davis Polk & Wardwell LLP. This post was prepared for the Forum by Ms. Cheng and Mr. Zilberberg. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain (discussed on the Forum here) and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) both by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita; and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy – A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.
Mandatory climate disclosure for U.S. companies is here. In several key jurisdictions, companies will be required to disclose climate-related information within the next few years. Companies need to take action now to (1) determine what disclosure rules will apply to them and (2) put into place the necessary infrastructure to be in a position to develop, collect and report the information called for by applicable requirements. This post will focus on three legal regimes with particular salience for U.S. companies: California’s S.B. 253 and 261, the U.S. Securities and Exchange Commission’s (SEC) proposed climate-related disclosure rule and the European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD).[1]
As discussed below, there is a certain core set of disclosure requirements common to these disclosure regimes, including those relating to the material risks that climate change poses to the company based on the Task Force for Climate Financial Disclosures (TCFD). However, the disclosure burdens posed by the CSRD are significantly greater due to the fundamentally different way it defines materiality and the CSRD’s broad coverage of subject areas far beyond climate. Accordingly, a key threshold question facing U.S companies is whether or not they are within the scope of the CSRD.
