Colorado is proposing a bill that requires businesses with over $1 billion in revenue to disclose greenhouse gas emissions beginning in 2028. This initiative follows similar regulations in California as part of broader efforts to meet climate change goals established by the Paris Agreement. The bill outlines strict reporting requirements across different emission scopes, with significant penalties for non-compliance.
Colorado is following in the footsteps of other states by considering new legislation requiring businesses to disclose their greenhouse gas (GHG) emissions. This comes after the U.S. Securities and Exchange Commission (SEC) scrapped a previously adopted reporting requirement. If approved, businesses with over $1 billion in revenue operating in Colorado must start reporting their emissions starting in 2028.
Initiatives to combat climate change have been ongoing since the Paris Agreement of 2015, aimed at achieving net-zero emissions by 2050. A multi-faceted approach emerged, with influential investment firms and regulators advocating for sustainability through environmental, social, and governance (ESG) criteria. By 2021, it became common for companies to publish annual ESG and sustainability reports, although many lacked standardization, which led to unregulated, promotional claims rather than factual data.
The absence of regulated reporting generated challenges, particularly for financial entities boasting ESG compliance. This resulted in international regulators creating standards for sustainability reports tied to climate action. In 2021, the International Financial Reporting Standards Foundation established Sustainability Disclosure Standards, which were accepted as global benchmarks for climate and emissions reporting in June 2023, although the U.S. continues to use generally accepted accounting principles (GAAP).
In March 2022, the SEC proposed climate-related reporting guidelines, which, despite being adopted in March 2024, faced legal opposition, causing the SEC to delay their implementation. Meanwhile, states are increasingly taking independent action; California recently enacted the Climate Accountability Package mandating large companies to disclose GHG emissions, starting with reports required by 2026.
Following California’s lead, Colorado introduced House Bill 25-1119 on January 28, which mirrors California’s regulatory framework. The criteria for reporting entities include businesses with total revenues exceeding $1 billion in the previous year, encompassing income from subsidiaries. Colorado’s approach to defining “doing business” in the state may also present regulatory complexities similar to those encountered in California.
Entities must report Scope 1 emissions, which are direct emissions, and Scope 2 emissions, from energy consumption, starting by January 2027. Scope 3 emissions, which include indirect emissions from sources not owned or directly controlled, will be reported in phases commencing in 2029 and fully integrated by 2031.
The timelines for reporting are perceived as stringent, as companies will need to disclose GHG data for the previous year on January 1—an impractical timeline under normal circumstances. Adjustments are anticipated as the legislative process unfolds. Colorado’s enforcement protocols designate penalties for non-compliance at $100,000 per day, though these may also face amendments.
The potential for this bill’s passage remains uncertain, yet the Democratic control of both state legislative chambers and the governorship improves its prospects. However, significant opposition from business interests could influence the final form and feasibility of the legislation.
Colorado has introduced legislation that could mandate businesses to report their greenhouse gas emissions, addressing climate change initiatives. If passed, it will align with similar laws in California, requiring substantial transparency from large corporations by 2028. As discussions progress, the bill’s practicality and enforcement mechanisms remain contentious, especially given its ambitious reporting timelines and significant penalties for non-compliance.
Original Source: www.forbes.com
