CLIMATE INNOVATION NETWORK

About Verdantix

© 2025 Verdantix. All rights reserved.

As Federal Legislation Falters, States Step Up On Climate-Related Disclosures

Mar 21, 2025

·

2 min read

Written by

Jessica Pransky
Regulations & Standards
Cover Image for As Federal Legislation Falters, States Step Up On Climate-Related Disclosures

Join Verdantix Vantage, our new platform providing complimentary and unlimited access to the entire portfolio of Verdantix research for qualifying practitioners

Join now

In February, the acting chairman of the US SEC announced that it would be pausing progress on its proposed climate disclosure rule. While this may mean organizations do not face disclosure requirements at a federal level, many may still be subject to climate-related legislation – just at a state level. California was the first to introduce climate-related legislation – which includes requirements for GHG emission and climate-related financial risk disclosures – in January 2023. This legislation has since been amended and passed, and while it faces legal challenges, firms could be required to make their first disclosures in 2026.

Since President Trump’s inauguration, four additional states – Colorado, Illinois, New Jersey and New York – have proposed legislation requiring organizations to disclosure GHG emissions. New York’s proposal also includes requirements for firms to disclose climate-related financial risks. Across the board, the bills all:

  • Apply to organizations with revenues over $1 billion.
    Unlike the SEC’s rule, which only applied to publicly listed firms, each of the state’s proposed bills will apply to public and privately held firms that do business in the state with over $1 billion in revenue. This means that large privately held firms, such as Illinois-based Reyes Holdings and New York-based Wegmans Food Markets, among many others, could be subject to state-level disclosures.

  • Require disclosure of Scope 1, 2 and 3 emissions, and some level of assurance.
    The inclusion of Scope 3 emissions was one of the most controversial elements of the SEC’s proposed climate rule, and was eventually omitted in its final proposal. Nonetheless, all five states will require firms to disclose Scope 1 and 2 emissions (as soon as 2026, in California) and Scope 3 emissions (as soon as 2027, in California). The state-level legislation requires organizations to obtain third-party assurance on these emissions, although specific requirements vary. California will eventually require firms to obtain limited assurance on Scope 3 emissions, while the proposed bills in Colorado and Illinois do not provide specifics on assurance requirements.

  • Enforce hefty financial penalties.
    Non-compliance with these reporting requirements will incur significant penalties. In Colorado, organizations could face monetary fines of up to $100,000 per day. Firms in California and New York could receive penalties of up to $500,000 annually.

It remains uncertain whether these state bills will face legal challenges or successfully pass through the legislature, but one thing is clear: states are increasingly pushing for greater transparency in GHG emissions. Organizations that are yet to calculate their GHG emissions or evaluate their climate-related risks need to start doing so now. For many, the first step will be establishing strong internal governance structures and efficient data collection processes, before exploring investment in software and services.

Share:

Written by

JP
Author provider

Jessica Pransky

Jessica is a Principal Analyst in the Verdantix ESG & Sustainability practice, which she joined in 2022. Her current research agenda covers ESG reporting and data management software, ESG solutions for investors, and risk in ESG and sustainability. Prior to joining Verdantix, Jessica worked at Ramboll, focusing on ESG risk and opportunity identification for mergers and acquisitions, as well as EHS due diligence. Jessica has previously held roles evaluating water resource allocation for a state municipality and ensuring EHS compliance for GE Aviation. She holds a BS from Tufts University and an MEng from Johns Hopkins University focused on environmental engineering, as well as an MBA from Boston University.

Curiosity Applied

The Curiosity Applied podcast

Dedicated to exploring the scale, shape and velocity of change in the business world as our economic system adapts to sustainability changes and climate risk.

Listen now

More from Jessica Pransky

The State Of Play In Regulated Climate Disclosures
Regulations & Standards

The State Of Play In Regulated Climate Disclosures

Nov 28, 2023

Answering Corporate Decision-Makers' Most Pressing ESG Questions
Climate Strategy & Risk

Answering Corporate Decision-Makers' Most Pressing ESG Questions

Feb 29, 2024

So Trump Won The Election... What Does That Mean For Sustainability Policy?
Regulations & Standards

So Trump Won The Election... What Does That Mean For Sustainability Policy?

Nov 7, 2024

12 Months And Counting: Organizations Must Prepare Now For California’s Climate Disclosures
Regulations & Standards

12 Months And Counting: Organizations Must Prepare Now For California’s Climate Disclosures

Jan 16, 2025

Related content

Regulations & Standards

A Quick Guide To UK Sustainability Regulations

Apr 15, 2025

Regulations & Standards

While Japan’s Sustainability Standards Remain Voluntary, Mandatory Reporting May Soon Follow

Apr 7, 2025

Regulations & Standards

The EU Omnibus Proposal: Answering Organizations’ Questions

Mar 27, 2025

Regulations & Standards

US Clean Energy At A Crossroads: How Trump Has Damaged Investment And Growth

Mar 18, 2025