Share to Facebook Share to Twitter Share to Linkedin Denver, Colorado USA:Gold plated roof top of the Capitol Building of Denver Colorado Colorado has joined the wave of states considering requiring businesses to disclose greenhouse gas emissions. This follows the U.S. Securities and Exchange Commission announcing they will eliminate their reporting requirement that was adopted in 2024, but never went into effect. If passed, businesses with a presence in Colorado and over $1 billion in revenue will be required to start reporting as soon as 2028. Following the Paris Agreement in 2015, a series of global initiatives were pursued to reduce the impacts of climate change and reduce overall greenhouse gas emissions to “net zero” by 2050. A multi-prong approach was used to influence and regulate businesses. Large investment firms, like BlackRock, used their influence to drive sustainability and environmental, social, and governance. By 2021, it was standard practice for businesses to release annual ESG and sustainability reports. However, there was no standardization of the practice. Claims were unregulated and content was unclear. As a result, reports were focused on what the business thought mattered to investors and were little more than marketing pieces. This became problematic in the highly regulated financial industry. Funds that claim to be ESG, green, climate friendly, or sustainable must back up those claims with data. As a result of demand and Paris Agreement based initiatives, international regulators began drafting standards for reporting, marketing, and investments relating to climate change and other green initiatives. In 2021, the International Sustainability Standards Board drafted the International Financial Reporting Standards Foundation’s Sustainability Disclosure Standards. IFRS is an independent, nonprofit organization that develops financial reporting standards, including international accounting standards. IFRS is not used in the U.S., who uses generally accepted accounting principles, also known as GAAP, but is used in 132 jurisdictions. The IFRS Standards were adopted in June 2023 as the global standard for sustainability and climate change reporting, including greenhouse gas emissions. In the U.S., the SEC proposed the development of climate-related reporting standards in March 2022. The final rule, adopted on March 6, 2024, required large publicly traded companies to disclose climate action, GHG emissions, and the financial impacts of severe weather events. The Climate-Related Disclosure Rule was initially set to go into effect in 2026. However, it was immediately met with legal challenges and the SEC delayed implementation indefinitely while the cases worked through the judicial process. In February, the acting Chair of the SEC announced that the Climate-Related Disclosure Rule was in the process of being repealed. MORE FOR YOU Here’s Where Trump’s Government Layoffs Are—As Firings At FAA Begin How Apple’s iPhone SE Can Change Smartphones Forever Apple iPhone SE 4 Release Date: Your Final, Complete Guide To What And When Focus now shifts to the states. In September 2023, California approved the Climate Accountability Package, a pair of bills aimed at creating sustainability reporting requirements. Senate Bill 253 required companies that do business in California and have an excess of $1 billion in revenue, defined as “reporting entities”, to submit an annual report for Scope 1 and Scope 2 starting in 2026. Scope 3 reporting will begin in 2027. California is still drafting the applicable regulations and the reporting timeline is likely to be delayed. Now, Colorado is following suit. House Bill 25-1119, titled Requiring Certain Entities to Disclose Information Concerning Greenhouse Gas Emissions, was introduced on January 28 by Democrat state representative Manny Rutinel. The bill mimics the requirements of the California legislation. Reporting entities is defined as “an entity that does business in Colorado and has total revenues exceeding one billion dollars in the preceding calendar year, including revenues received by all of the businesses entity’s subsidiaries that do business in Colorado.” The scope of “does business in” has come into question in California and is causing problems for businesses trying to determine if they fall under the reporting requirement or not. It will be interesting to see how Colorado addresses this issue. The reporting of Scope 1, the direct GHG emissions of the company, and Scope 2, the GHG emissions of their energy provider tied to the business’ energy consumption, will begin reporting by January 1, 2027, for the 2027 annual year. Scope 3 reporting will be phased in using a unique definition. Broadly, the bill defines Scope 3 as GHG emissions “other than Scope 2, that are from sources that a reporting entity does not own or directly control. ‘Scope 3 Emissions’ may include emissions associated with a reporting entity’s supply chain, business travel, employee commutes, procurement, waste, and water usage, regardless of location.” By January 1, 2029, companies will need to disclose Scope 3 emissions from the 2028 calendar year from "purchased goods and services, capital goods, and the use of sold products." By January 1, 2030, companies will need to disclose Scope 3 emissions from the 2029 calendar year from “emissions from fuel and energy activities, which emissions are not classified as Scope 1 emissions or Scope 2 emissions; waste generated in operations; processing of sold products; and the end of life of sold products.” By January 1, 2031, companies will need to disclose Scope 3 emissions from the 2030 calendar year from “upstream transportation and distribution, business travel, employee commuting, upstream leased assets, downstream transportation and distribution, downstream leased assets, and franchises.” Notably, the timing of the reporting requirement is, in my opinion, unobtainable. It is unreasonable to require businesses to report GHG emissions from the preceding calendar year on January 1. Most jurisdictions allow six months for businesses to process the information and compile the reports. I expect this will be change as the bill goes through the legislative process. Unique to Colorado, enforcement is delegated to the district attorney and attorney general. If a business fails to comply with the disclosure requirement, they may be prosecuted and face a penalty of $100,000 per day. I expect that to be reduced or otherwise amended. It is too early in the legislative session to predict the chances the bill will make it through the Colorado General Assembly and become law. Democrats control both the Senate and the House of Representatives. Likewise, Governor Jared Polis is Democrat. This greatly increases the likelihood the bill will make it through the legislative process. However, do not underestimate the business lobby’s efforts to kill the bill or make substantial changes. Follow me on Twitter or LinkedIn. Check out my website. Jon McGowan Editorial Standards Forbes Accolades