The California Climate Disclosure Accountability Act (CCDAA): What businesses need to know

California has long been a pioneer in climate regulation, setting standards that often ripple across the United States and beyond. With the introduction of the California Climate Disclosure Accountability Act (CCDAA), the state has raised the bar once again. Together with Senate Bills 253 and 261, the CCDAA represents one of the most ambitious efforts worldwide to make emissions disclosure and climate risk reporting part of business as usual.

To help unpack what this means for companies, our internal expert Alison Gammie answers some key questions. Her perspective is simple: companies should start preparing now, before reporting obligations come into force.

The California Climate Disclosure Accountability Act requires large public and private companies that are doing business in California to measure, disclose, and in some cases obtain third party assurance for their greenhouse gas emissions. As a climate reporting law, the CCDAA obligates each reporting company to provide comprehensive disclosures of their scope 1, 2, and 3 emissions in accordance with the act’s requirements. Oversight of the law sits with the California Air Resources Board (also known as air resources board carb), which is tasked with developing detailed implementation rules and enforcement measures.

How does the CCDAA relate to SB 253 and SB 261?

The CCDAA is part of a package of laws designed to strengthen California’s climate leadership.

SB 253 requires companies with over 1 billion dollars in annual revenues to disclose their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. SB 261 applies to companies with more than 500 million dollars in annual revenues and requires disclosure of climate related financial risks. These include both physical risks such as extreme weather events and transition risks such as policy changes, shifting market demand, or reputational pressures.

The CCDAA builds on these laws by creating a broader accountability framework for emissions disclosure. It ensures that reporting is consistent and reliable and that companies begin preparing for third party assurance as the rules phase in.

Which businesses are covered?

What does “doing business in California” mean?

This definition is intentionally broad. It can include companies headquartered in California, companies with significant sales or services in the state, and companies that operate subsidiaries, offices, or facilities that contribute to their revenues in California. For organizations with multiple subsidiaries, reporting can often be consolidated at the parent company level, which may simplify compliance and reduce the reporting burden.

In practice, the scope goes well beyond California-based companies. Many global firms with only partial operations in the state will still find themselves subject to the CCDAA and its reporting obligations. Under the law, both the reporting company and its subsidiaries may be considered reporting companies, each with obligations to disclose greenhouse gas emissions and climate risks in accordance with regulatory requirements.

What are the timescales for the CCDAA?

The California Air Resources Board is finalizing the detailed rules, but the first reporting obligations are expected to begin in 2026 for fiscal year 2025 data. Companies will be required to annually disclose and publicly report their emissions data, and this constitutes public disclosure under the law.

The initial focus will be on Scope 1 and Scope 2 emissions disclosure, with Scope 3 following in later years, including the need to publicly disclose Scope 3 emissions when required. Third party assurance requirements will also phase in gradually.

While the deadlines may seem some distance away, the complexity of the requirements means that businesses need to start laying the groundwork now. Early preparation will not only reduce compliance risks but also help ensure compliance to avoid non compliance, administrative penalties, and the possibility of receiving an enforcement notice.

Companies must have a reasonable basis for their disclosures, especially for Scope 3 emissions, to benefit from safe harbor provisions. Early action will also build investor and stakeholder confidence.

How can in-scope businesses prepare now?

The first step is to understand whether your company meets the criteria for annual revenues and California operations that bring you within the scope of the CCDAA. The definition of doing business in California includes engaging in activities for financial or pecuniary gain, so even indirect or limited activities aimed at generating profit may qualify. If so, the following actions are critical:

• Begin measuring greenhouse gas emissions across Scope 1, Scope 2, and Scope 3 using recognized methodologies, ensuring you account for all emissions produced throughout your value chain, supply chain, and supply chains, including indirect emissions such as business travel.
• Establish governance and internal controls for collecting and validating data.
• Prioritize robust data collection and the quality of sustainability data to support compliance and third-party assurance requirements.
• Use carbon accounting software to streamline emissions reporting and climate reporting, ensuring accuracy and readiness for evolving regulations.
• Plan for third party assurance by making sure that data is consistent, traceable, and auditable.
• Align your approach with global standards such as ISSB and CSRD so that disclosures can serve multiple regulatory requirements.
• Engage leadership and board members early on climate related financial risks, making sure both physical and transition risks, material risk, employee health, financial investments, institutional investments, financial markets, financial standing, long term financial outcomes, shareholder value, and economic health are assessed as part of strategy and risk management.

How can ESG software help with greenhouse gas emissions?

Meeting the CCDAA’s reporting obligations will require high quality, reliable data across multiple business units and value chains. Manual processes will not be enough. ESG software can help businesses prepare by:

• Automating the collection and aggregation of emissions data, including carbon emissions and greenhouse gas (GHG) emissions, across operations, suppliers, and the entire value chain
• Standardizing reporting to match CCDAA requirements as well as SB 253 and SB 261
• Providing clear outputs that make emissions disclosure efficient and auditable
• Supporting third party assurance with transparent data flows and documentation, and enabling reasonable assurance to strengthen climate accountability
• Linking climate related financial risks to emissions data, enabling better decision making and long term planning

In summary

The CCDAA marks a major shift in climate accountability, extending California’s influence far beyond its borders. For in-scope companies, the message is clear: start preparing now. By building strong data systems, engaging stakeholders, and aligning with global frameworks, businesses can turn compliance into an opportunity – strengthening resilience, building trust with investors, and positioning themselves as leaders in the low-carbon economy.