CLIMATE-RELATED

DISCLOSURES FOR
U.S. BUSINESSES
A guide to the SEC rules,
California bills and the CSRD

1 ®2024 Sphera. All Rights Reserved.

Introduction
The new climate disclosure rules from the Securities and Exchange
Commission (SEC) are pushing publicly traded businesses in the U.S. to
provide greater transparency around climate-related risks, greenhouse
gas (GHG) emissions, risk mitigation and governance.

The rules represent a significant milestone for sustainability reporting and are set to reshape corporate
accountability and investor relations for businesses operating in the U.S. This ebook covers the critical
implications of the new rules and related national and global mandates, such as California’s climate bills
SB 253 and SB 261 and the EU’s Corporate Sustainability Reporting Directive (CSRD), for U.S. companies. It
outlines strategies to tackle the evolving requirements, foster investor confidence and drive growth.

Background
The U.S. Securities and Exchange Commission adopted final climate-related disclosure rules on March
6, 2024, to enhance and standardize emissions and climate risk reporting by certain public, U.S.-listed
companies and in certain public offerings. The long-awaited rules aim to increase visibility into material
climate-related risks and impacts at large organizations and how those risks and impacts are being managed
and mitigated. This is of growing importance to investors amid a global backdrop of rising temperatures,
extreme weather events and changing consumer expectations. With the SEC’s rules, the U.S. joins other
countries in requiring consistent, comparable and reliable information on climate-related issues from large
companies.

Under the final rules, certain U.S. public companies will be required to provide information in regulatory
statements and annual reports about the financial effects of climate-related risks. That includes material
climate-related risks, measures being taken to address those risks, board and management oversight of
climate risks, as well as certain emissions-related information. Large accelerated filers are expected to
comply with Scope 1 and 2 emissions reporting in fiscal year 2026, with accelerated filers required to report
in fiscal year 2028. Of note, Scope 3 reporting requirements were removed from the final ruling. However,
many companies will be required to provide this information under California’s Climate Corporate Data
Accountability Act (SB 253) and the European Union’s Corporate Sustainability Reporting Directive (CSRD),
both of which apply to certain public and private companies.

On the following pages, we will review the regulations, compare them to other relevant mandates and outline
key strategies to prepare for compliance. Please note that this ebook serves as a general summary resource
for U.S. businesses that are preparing their organizations for climate reporting. However, this is not intended
to and does not provide legal, compliance or any similar advice to any individual or company and does not
serve as a replacement for obtaining such legal advice from licensed professionals.

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Key Dates for SEC reporting
The SEC provides the following timeline for reporting under the climate-related disclosures rules.

Compliance dates under the Final Rules1

Registrant type Disclosure and financial statement effects GHG emissions/assurance Electronic
audit tagging

All reg. S-K and S-X Item 1502(d)(2), Item 1505 Item 1506 Item 1506 Item 1508
disclosures, other than Item 1502(e)(2), and (Scopes 1 - Limited - Reasonable - Inline XBRL
as noted in this table Item 1504(c)(2) and 2 GHG Assurance Assurance tagging for
emissions) subpart 15002

LAFs
FYB 2025 FYB 2026 FYB 2026 FYB 2029 FYB 2033 FYB 2026

AFs (other than

FYB 2026 FYB 2027 FYB 2028 FYB 2031 N/A FYB 2026
SRCs and EGCs)

FYB 2027
FYB 2027 FYB 2028 N/A N/A N/A FYB 2027

1
As used in this chart, “FYB’ refers to any fiscal year beginning in the calendar year listed.
2
Financial statement disclosures under Article 14 will be required to be tagged in accordance with existing rules pertaining to the tagging of financial statements. See
Rule 405(b)(1)(i) of Regulation S-T.

Source: SEC Fact Sheet – The Enhancement and Standardization of Climate-Related Disclosures: Final Rules

Reporting entities should note the timeline for emissions disclosures and ensure that they have the right
expertise and tools for measurement of Scope 1 and Scope 2 emissions.

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4 Key Components of the SEC rules
We have identified the following four pillars as fundamental to
the SEC climate-related financial disclosure rules.

1. Greenhouse gas accounting 3. Climate-related financial

The rules mandate that companies calculate statement metrics
and disclose their material Scope 1 and 2
Companies are now required to consider
emissions, with a limited assurance requirement,
how climate risks will impact their financial
beginning in FY 2029 for large accelerated
performance and incorporate this information
filers and FY 2031 for accelerated filers. Large
in annual public reports, such as the 10-K or in
accelerated filers will need to report with
disclosures for Regulations S-K and S-X. This
reasonable assurance in 2033. (The requirement
means processes will need to be designed to
for reasonable assurance does not apply to
capture climate-related metrics, such as emissions
accelerated filers.)
per square foot or per unit of product, and link
Scope 1 covers direct emissions from owned them directly to financial performance. The
or controlled sources, while Scope 2 emissions overarching goal is to quantify material risks in a
are indirect emissions from the generation of way that is reliable, accurate and comparable.
purchased electricity, steam, heating and cooling
consumed by the reporting company. 4. Climate risk scenario analysis
Lastly, companies will need to invest in climate-
Disclosure of Scope 3 emissions, which are risk scenario analysis to understand the long-
generated along an organization’s value chain, term business impacts. As an example, for any
is not required by the SEC at this time. However, regulations that compel companies to reduce
many businesses subject to the SEC climate emissions, businesses will need to evaluate
disclosure rules may be required to report Scope how technological or equipment upgrades may
3 emissions in other jurisdictions. impact their carbon footprint, alongside capital
investments.
2. Climate risk identification
and governance
In alignment with the Task Force on Climate- Core elements of recommended climate-related
related Financial Disclosures (TCFD) framework, financial disclosures
the SEC’s final rules require companies to
understand and disclose how climate change
and its associated impacts present material risks Governance

to their strategy, business model and outlook.

Companies are also expected to provide details Strategy
on the measures they are taking to address
climate-related risks.
Risk Management

Governance
The organization’s governance around climate-
related risks and opportunities
Metrics
Strategy and Targets
The actual and potential impacts of climate-related risks and opportunities on
the organization’s businesses, strategies and financial planning

Risk Management
The processes used by the organization to identify, assess, and manage
climate-related risks

Metrics and Targets

Figure 2: Recommendations of the task force on climate-
The metrics and targets used to assess and manage relevant climate-related
risks and opportunities related financial disclosures, 2017

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Preparing for SEC rules
With the first group of registrants expected to comply with the disclosure rules in fiscal
year 2026, companies should be preparing now. They can begin with these four steps:

1. Analysis
Checklist for SEC preparedness
Begin by analyzing climate-related risks,
opportunities and impacts across specific business Assignee(s) Assignment Done
activities, as well as owned and managed assets. Assess reporting requirements and
Organizations should identify physical and needs at your organization.
transition risks through this process. Physical risks Review current and past sustainability
are those that pose physical threats to a business. initiatives.
For example, hurricanes and floods pose physical Develop an understanding of the GHG
risks for supply chains. Transition risk tends to be Protocol and data gathering for Scope
1 and 2 at a minimum.
more long-term, involving factors like rules and
Collect data and calculate GHG
regulations, technological changes and market
emissions for Scope 1 and 2.
shifts. Both are important to get a full picture of
Develop an understanding of climate
risk. risk and how to analyze it.

2. Classification Identify climate-related risks,

opportunities and impacts.
The next step is to classify and prioritize business Engage senior management and
activities and assets through the lens of climate-related directors in the preparation process
for SEC disclosures.
risks. Leaders should be able to identify immediate
needs and risk areas and distinguish them from Establish a governance framework
and structure.
long-term opportunities for risk mitigation. It is also
Develop a climate-related risk
important to understand the probability and scale of management strategy.
potential impacts associated with various risks to help
Create a roadmap and timeline.
align decision-making and strategic priorities.
Engage operational leadership.
3. Assessment
Set up or adjust targets, policies and
Now businesses are ready to assess the financial transition plans.
impacts of various climate-related risks. While Identify areas for improving
climate risks may affect the bottom line, addressing procedures.
them proactively can motivate positive change, Streamline the reporting process and
achieve progress toward sustainability goals and disclose investor-grade information.

position companies more favorably in the eyes of Automate and digitalize reporting.
investors and the public.
Ensure independent 3rd party
assurance.
4. Report
The last step is reporting key metrics and targets. Remember that the climate disclosure process is not
Reports should include company-specific a one-time effort, but an iterative cycle. The most
descriptions of risk, risk management methods, successful organizations will revisit these core steps
responses and overall progress toward targets. The on an annual basis at a minimum. This disciplined
rules also require certain companies to seek third- approach will enable companies to refine their
party assurance to validate the data reported. processes, ensure ongoing compliance and optimize
climate-related initiatives, giving them a competitive
edge in the marketplace.

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Beyond the SEC rules: California’s Climate
Accountability Package
While the SEC sets the tone at the federal level, businesses must prepare for other climate reporting rules in
and outside the U.S.

Thousands of U.S. companies that operate in California are preparing for the GHG reporting requirements of the
state’s Climate Corporate Data Accountability Act (SB 253), which is part of California’s Climate Accountability
Package. Unlike the SEC’s climate disclosure rules, SB 253 includes Scope 3 emissions.

SB 253 applies to “… specified partnerships, corporations, limited liability companies, and other business entities
with total annual revenues in excess of $1,000,000,000 and that do business in California.” According to the
California Franchise Tax Board, companies are considered to be doing business in the state if they meet any of
these criteria:

• Engage in any transaction for the purpose of financial gain within California

• Are organized or commercially domiciled in California

• Your California sales, property or payroll exceed the following amounts:

California sales, property or payroll

Year CA sales exceed CA real and tangible personal CA payroll compensation exceeds
(either the threshold amount or property exceed (either the threshold amount or 25% of
25% of total sales) (either the threshold amount or 25% total payroll)
of total property)

2023 $711,538 $71,154 $71,154

2022 $690,144 $69,015 $69,015

2021 $637,252 $63,726 $63,726

2020 $610,395 $61,040 $61,040

2019 $601,967 $60,197 $60,197

2018 $583,867 $58,387 $58,387

2017 $561,951 $56,195 $56,195

2016 $547,711 $54,771 $54,771

2015 $536,446 $53,644 $53,644

2014 $529,562 $52,956 $52,956

Source: California Franchise Tax Board

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Starting in 2026, a reporting entity must: According to SB 253, Scope 1 and Scope 2 emissions
disclosures must be audited at the limited assurance
… publicly disclose to the emissions registry all level beginning in 2026 and at a reasonable
of the reporting entity’s Scope 1 emissions and assurance level starting in 2030. Additionally, “On or
Scope 2 emissions for the prior calendar year, and before January 1, 2027, the state board may establish
its Scope 3 emissions for that same calendar year an assurance requirement for third-party audits
no later than 180 days after that date, using the of Scope 3 emissions. Scope 3 emissions shall be
Greenhouse Gas Protocol Corporate Accounting audited at a limited assurance level beginning in
and Reporting Standard and the Greenhouse 2030.”
Gas Protocol Corporate Value Chain (Scope 3)
Accounting and Reporting Standard … The California Climate Accountability Package also
includes the Greenhouse Gases: Climate-Related
Financial Risk (SB 261) legislation. It mandates climate
risk disclosures for public and private companies,
specifically those that meet the definition of

… a corporation, partnership, limited liability

company, or other business entity formed under
the laws of the state, the laws of any other state
of the United States or the District of Columbia,
or under an act of the Congress of the United
States with total annual revenues in excess
of five hundred million United States dollars
($500,000,000) and that does business in
California.

Businesses required to report under SB 261 must

disclose their climate-related financial risk according
to the Final Report of Recommendations of the
Task Force on Climate-related Financial Disclosures
(TCFD). They must also report on measures they
have adopted to reduce and adapt to climate-related
financial risk. Reporting entities must prepare their
first report on or before January 1, 2026, and then
biennially thereafter. The report must be available to
the public on its website.

California’s laws are pushing even more companies

to report their carbon footprint and disclose climate-
related risks on a timeline similar to that of the SEC.
But these aren’t the only disclosure rules that U.S.
businesses must adhere to.

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The Corporate Sustainability
Reporting Directive
As U.S. businesses determine which disclosure rules The CSRD reporting timeline is as follows:
apply to them, they must also consider the EU’s
Corporate Sustainability Reporting Directive (CSRD). • FY 2024 for companies already subject to the
It went into effect in 2023, and roughly 10,000 Non-Financial Reporting Directive (NFRD). Reports
non-EU headquartered companies fall within its must be published in 2025.
scope.
• FY 2025 for other non-listed, large companies above
Under the CSRD, reporting entities must adhere to the thresholds (>250 employees, turnover of at least
the ESG reporting requirements outlined in the 12 EUR 40 million or a balance sheet total of at least
European Sustainability Reporting Standards (ESRS). EUR 20 million) that are not presently subject to the
The CSRD mandates Scope 1, Scope 2 and Scope NFRD. Reports are to be published in 2026.
3 emissions disclosures and climate risk analysis, if
• FY 2026 for listed small and medium-sized
climate change has been identified as a material topic
enterprises (SMEs), small and non-complex credit
or if the company has publicly announced climate-
institutions and captive insurance undertakings.
related goals. The ESRS are seen as the gold standard
An opt-out will be possible for SMEs during a
of sustainability practice and are harmonized with
transitional period.
international frameworks such as the TCFD, the Global
Reporting Initiative (GRI) and the IFRS Sustainability • FY 2028 for non-European companies. The
Disclosure Standards (IFRS S1and IFRS S2). requirement to provide a sustainability report applies
to all companies listed in EU markets that generate a
net turnover of EUR 150 million in the EU and have at
least one subsidiary or branch in the EU.

Rule Scope 1&2 Scope 3 GHG Assurance? Climate/ Initial Reporting

GHG Emissions Emissions Scenario Risk Year
Analysis?

SEC X 2026

CSRD 2025

SB 253 X 2026

SB 261 X X X 2026

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 Sphera’s approach
Alongside these complex regulatory requirements, organizations face
pressure from investors and lenders, customers and supply chain partners to
disclose climate-related risk, GHG emissions and other sustainability metrics.
Increasingly, businesses are being asked if they’ve developed science-based
net-zero targets or if they have an ESG program in place. Being able to respond
to these demands hinges on collecting high-quality data both internally and
externally.

To help companies prepare for compliance with upcoming climate disclosure

regulations, Sphera’s sustainability consultants have developed a three-phased
approach. This modular approach can be adapted to the sustainability maturity
level of a client’s organization and is based on over 30 years of experience in
strategic sustainability and ESG consulting.

1. Baseline Assessment
Understand the impact and reporting obligation for your organization.
Consider U.S. regulations as well as international ones. While preparing for
the SEC climate disclosures, businesses are advised to proactively prepare
for other relevant mandates, which may include California’s SB 253 and SB
261, the Canadian Sustainability Disclosure Standards or the EU’s CSRD.
Take stock of existing sustainability initiatives and reporting practices and
compare them to the upcoming reporting requirements to identify gaps.

2. Transformation
Start with a (double) materiality assessment. A double materiality assessment
includes analysis of both impact and financial materiality, which helps establish
a solid foundation for future ESG and sustainability-related decision-making, risk
assessment and reporting. Combining the results of the materiality assessment
with the results of the gap assessment conducted in the first step helps
companies prioritize and allocate resources needed to close material gaps.
Furthermore, a TCFD-aligned climate risk assessment is required to conform
with the CSRD, SEC and SB 261 and should be conducted well in advance of
reporting deadlines.

At this stage, companies should define a roadmap and timeline to start

collecting and calculating relevant sustainability data and metrics. It is also
important to involve process owners and define roles and responsibilities to
create a proper governance structure for the coming reporting years.

3. Reporting
In addition to collecting data points required for compliance with the
relevant climate disclosure regulations, companies are advised to prepare
for the general reporting requirements such as digitalization and third-party
assurance. Companies need systems and processes in place to collect the
data needed for these regulatory mandates. Organizations that aren’t yet
equipped with the right software tools can turn to Sphera for help.

This modular approach is based on over 30 years of advisory experience in

sustainability and ESG, combined with robust, in-house software tools and
industry-specific databases. Sphera also offers clients specialized insights
based on maturity level, industry and specific needs.

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Sphera’s software solutions
and consulting services
Sphera’s Integrated Sustainability offering includes software products and consulting services that can help
companies report under the upcoming sustainability and ESG reporting regulations such as the CSRD and
SEC rules and voluntary frameworks such as the IFRS, CDP and more.

DATA
The only non-academic, 60+ industry
CONSULTING EXPERTISE
association-provided, annually
200+ strategic ESG and LCA
updated LCA data available
consultants with sector expertise
and Ph.D.-level experience
INTEGRATED PLATFORM
Purpose-built software
SOFTWARE designed for interoperability
#1 analyst-rated ESG for audit-proof reporting
software used by the top 10
companies cross-industry

Sphera’s Sustainability Consulting Services provide customers with the support they need to
achieve their ESG and sustainability goals. With decades of experience, Sphera’s consultants
offer guidance for materiality and double materiality assessments, help identify and calculate
relevant sustainability metrics, address company-specific climate risk reporting challenges
and work collaboratively to develop ESG and sustainability strategies that mitigate risks and
capitalize on opportunities.

Sphera’s Managed LCA Content (MLC) provides companies with a premium

secondary data foundation for reliable and fact-based quantification of their
corporate and product emissions. Sphera’s MLC is the largest industry-based,
third-party-verified and annually updated LCA database globally with more than
20,000 datasets. It was first verified by DEKRA in 2013, with ongoing sector-
specific verifications provided since then to ensure data quality.

With the SpheraCloud Corporate Sustainability Solution,

companies can gather relevant data for ESG and sustainability
reporting across multiple jurisdictions and for different frameworks,
including the SEC rules, California’s climate bills and the CSRD.

Sphera’s Supply Chain Sustainability Platform

connects buyers and suppliers, facilitating primary
data collection for Scope 3 emissions reporting.

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Conclusion
The new SEC rules underscore the
importance of investing in climate-
related disclosure capabilities and
climate risk analysis and reporting.
With California’s Climate Accountability Package
and the CSRD also on the regulatory horizon, it is
clear that GHG accounting and climate-related
disclosures will feature largely in the business
landscape for years to come.

By identifying climate-related risks, businesses

will also be uncovering opportunities to enhance
efficiency, advance sustainable innovation of
products and business models, protect assets and
align with global net-zero objectives. Integrating
sustainability initiatives with financial and
operational strategies now will only strengthen
companies’ resiliency for the future.

Selected global legislation

2024: The Canadian Sustainability Standards Board issued proposed Canadian
Sustainability Disclosure Standards, setting benchmarks for sustainability
performance for businesses operating in the country.

2023: The EU Corporate Sustainability Reporting Directive (CSRD) requires

companies to disclose their ESG performance in line with the European
Sustainability Reporting Standards. Under the directive, companies must
report their Scope 3 GHG emissions if deemed material or if they publicly set
climate-related goals. The CSRD applies to roughly 49,000 companies including
approximately 10,000 non-EU companies with operations in the EU.

2022: In the U.K., mandatory climate-related financial disclosure rules went into
effect for large companies and LLPs in England, Wales and Scotland with 500+
employees and a turnover of more than GBP 500M.

2021: The Securities and Exchange Board of India has mandated the Business
Responsibility and Sustainability Report for India’s top 1,000 listed companies.
These organizations must disclose their Scope 1 and Scope 2 emissions and
other ESG-related impacts.

2021: The Sustainable Finance Disclosure Regulation (SFDR) mandated

sustainability impact disclosures for financial market participants and financial
advisors in the EU.

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The information provided in this ebook is for
general information purposes only, may not be
updated in real time and does not constitute legal
advice. Please consult with your legal and other
advisors to discuss your particular needs and
circumstances.

About Sphera
Sphera is the leading provider of Enterprise
Sustainability Management (ESM) performance and
risk management software, data and consulting
services focusing on Environment, Health,
Safety & Sustainability (EHS&S), Operational Risk
Management (ORM), Product Stewardship and
Supply Chain Transparency.

www.sphera.com
For more information contact us at:
sphera.com/contact-us
®2024 Sphera. All rights reserved.

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