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AICPA, CalCPA Issue Comment Letter on California's Climate Disclosure Legislation

On March 21, the AICPA and the California Society of CPAs (CalCPA) issued a joint comment letter to the California Air Resources Board (CARB) about the state's climate disclosure legislation—SB 253, the Climate Corporate Data Accountability Act.

In the letter, the AICPA and CalCPA said that the comments are "to support the development of an effective and efficient climate-disclosure framework."

They said that with CARB's Dec. 5, 2024 Enforcement Notice saying that it will exercise its enforcement discretion for the first reporting cycle—provided entities make a “good faith effort” to comply, they are suggesting that CARB clarify and offer guidance regarding the related assurance requirements.  Although they appreciate CARB’s approach in letting entities work toward compliance without risking strict enforcement during the implementation period, "this may result in reports that are incomplete, inaccurate or not aligned with reporting requirements."

The letter also noted that since the IFRS Foundation’s International Sustainability Standards Board has already established its IFRS Sustainability Disclosure Standards, climate-disclosure regulations should accept these as recognized reporting standards. The associations said that letting interoperability with regard to recognized reporting standards that have undergone due process allows for consistency and comparability across entities, simplifies compliance for firms that are subject to climate-disclosure requirements, boosts transparency and enhances the integrity and reliability of reported information.

The associations also said that to maintain consistency, comparability and reliability when it comes to assurance engagements and reports, they are suggesting the use of terminology aligned with recognized assurance standards. "The use of non-standard terms can create confusion for practitioners, preparers and report users, making it harder to apply standards correctly," they said. 

The letter also recommended that to ensure the effectiveness of the assurance requirements of sustainability-related laws and regulations, minimum qualifications should be established for assurance practitioners on independence, competency, ethics, oversight and quality management. "These requirements should be at least as rigorous as those 

followed by CPAs when assuring financial and nonfinancial information to help ensure consistency, comparability and reliability," the letter stated.

According to the letter, during the time when California’s climate-disclosure legislation was under consideration, CalCPA and the AICPA actively engaged with legislative staff and stakeholders to offer input to help ensure the language aligned with existing reporting and assurance standards that were employed by a CPA. These recommendations helped refine key amendments.

After the legislation passed, the associations established a climate-disclosure working group of experienced CPA firm leaders who specialize in sustainability reporting and assurance to develop a response aiming to facilitate implementation and compliance for impacted entities, the letter said.