California is leading the charge in corporate climate accountability with the passage of SB 253, also known as the Climate Corporate Data Accountability Act. This groundbreaking law mandates that significant business entities, including large corporations and partnerships operating in California, publicly disclose their greenhouse gas (GHG) emissions, including the often-overlooked Scope 3 emissions. As climate-related regulations gain momentum worldwide, understanding SB 253 is crucial for businesses aiming to remain compliant and sustainable.
This guide breaks down the essentials of SB 253, including its scope, implementation timeline, and its impact on businesses. Additionally, we’ll explore how this law fits into California’s broader climate policy framework and offer actionable steps companies can take to prepare.
What is the SB 253: The Climate Corporate Data Accountability Act?
The Climate Corporate Data Accountability Act (SB 253) sets a new standard for corporate emissions reporting. It requires large U.S. public and private companies with operations in California and annual revenues exceeding $1 billion to disclose their greenhouse gas emissions following the Greenhouse Gas Protocol, the widely accepted international standard for measuring and reporting emissions.
A critical aspect of SB 253 is its requirement for companies to report their entire carbon inventory, including:
- Scope 1 emissions – Direct emissions from owned or controlled sources.
- Scope 2 emissions – Indirect emissions from purchased electricity, heat, or steam.
- Scope 3 emissions – Indirect emissions from the value chain, including supply chain, business travel, and product usage.
Scope 3 emissions, which often constitute more than 90% of a company’s total climate impact, are particularly challenging to measure. By mandating their disclosure, SB 253 ensures a more comprehensive and transparent view of corporate carbon footprints.
Verification and compliance
To maintain credibility and accuracy, companies will be required to submit emissions data to a digital reporting platform. The California Air Resources Board (CARB), responsible for overseeing implementation, will set the specific reporting framework by July 2025. Companies will also need to disclose their greenhouse gas emissions to an emissions reporting organization, which will manage the reporting process and ensure compliance with the California Climate Corporate Data Accountability Act.
Additionally, companies must hire independent auditors to verify their emissions disclosures. This external verification is meant to prevent greenwashing and enhance investor confidence in corporate sustainability reports.
Failure to comply with SB 253 could result in civil penalties, enforced by the California Attorney General’s office.
Which businesses are covered by SB 253?
SB 253 applies to U.S.-based businesses that meet all of the following criteria:
- Generate over $1 billion in annual revenue
- Operate in California (either directly or through subsidiaries, offices, or partnerships)
- Fall under corporate structures such as corporations, limited liability companies (LLCs), and partnerships
These businesses, referred to as reporting entities, are required to publicly disclose their greenhouse gas emissions. This scope means that an estimated 5,400 companies will be impacted, including major multinational corporations with a presence in California. Notably, the law applies to both public and private companies, making it one of the most extensive climate disclosure requirements in the U.S.
What is the timeline for implementation?
SB 253 will be rolled out in phases, giving businesses time to adapt and prepare:
- By July 1, 2025 – CARB will finalize the disclosure requirements and reporting platform guidelines to ensure timely reporting implementation.
- In 2026 – Companies must begin reporting Scope 1 and Scope 2 emissions for the 2025 reporting year.
- In 2027 – Companies must begin reporting Scope 3 emissions for the 2026 reporting year.
To ensure accuracy, companies must also secure third-party assurance for their emissions data. Initially, they will need to obtain limited assurance in 2026, progressing to reasonable assurance by 2030—a higher standard of verification.
What are the other California Climate Laws?
SB 253 is part of California’s broader climate accountability framework, which includes several key laws aimed at increasing corporate responsibility for climate risks and emissions. One such law is the California Global Warming Solutions Act, which mandates the State Air Resources Board to oversee the reporting of statewide greenhouse gas emissions from large business entities. This ensures that emissions data is publicly accessible and compliance is monitored to meet environmental goals.
SB 261: The Climate-Related Financial Risk Act
SB 261, signed alongside SB 253, requires businesses with revenues over $500 million and operations in California to report on their climate-related financial risks. These disclosures must align with the Task Force on Climate-Related Financial Disclosures (TCFD) framework and be published by 2026, with updates every two years.
The law applies to an estimated 10,000 companies and focuses on how climate change could financially impact business operations, including risks related to supply chains, extreme weather events, and market shifts due to emissions regulations. It emphasizes the importance of consulting diverse stakeholders, including stakeholders representing consumer interests, to ensure comprehensive and transparent reporting.
Other related climate laws
In addition to SB 253 and SB 261, California has introduced laws that enhance corporate climate transparency:
- AB 1305 – Requires companies making carbon neutrality claims to disclose details about carbon offsets, preventing misleading environmental claims.
- SB 54 – Mandates venture capital firms to report demographic diversity in investments, expanding corporate accountability beyond environmental concerns.
- New Bill – Requires the California State Air Resources Board to consult with stakeholders, including those representing consumer and environmental justice interests, while developing regulations on greenhouse gas emissions disclosures. This ensures that the voices of marginalized communities, often disproportionately affected by environmental issues, are included in the decision-making process.
How can businesses prepare?
With SB 253’s compliance deadlines approaching, businesses should take proactive steps to ensure they meet reporting requirements and minimize risks.
1. Assess current emissions reporting practices
Companies should evaluate their existing emissions tracking methods and identify gaps, especially in Scope 3 emissions, which are often the hardest to measure. Businesses that have not previously engaged in GHG accounting should start building internal expertise or seeking external consulting support.
2. Invest in reliable climate data management
Given the requirement for independent verification, companies need robust and auditable data collection systems. Investing in carbon accounting software can streamline data tracking and ensure compliance with GHG Protocol standards. This is crucial for tracking progress towards state greenhouse gas emissions reductions goals and managing emissions data effectively.
3. Engage supply chain partners
Scope 3 emissions include indirect greenhouse gas emissions from suppliers, distributors, and product use. Businesses should start collaborating with supply chain partners to obtain accurate emissions data from these indirect sources and encourage them to align with reporting standards.
4. Work with third-party auditors
To meet verification requirements, companies should identify and partner with qualified third-party auditors experienced in carbon accounting and regulatory compliance. This collaboration ensures that the reporting entity’s public disclosure of greenhouse gas emissions data is accurate, verified, and compliant with legislative regulations.
5. Develop internal climate governance
Establishing a sustainability task force or expanding corporate ESG (Environmental, Social, and Governance) teams, including those within a limited liability company, can help organizations stay ahead of evolving climate regulations.
6. Stay updated on CARB regulations
Since CARB will finalize reporting details by July 2025, businesses should actively monitor policy updates and engage in industry discussions to anticipate potential changes. This includes understanding the requirements for reporting entities’ public disclosures, which mandate that entities with significant annual revenues must publicly disclose their greenhouse gas emissions. Ensuring compliance through an assurance engagement, where an independent third-party verifies these public disclosures, is crucial for transparency in emissions reporting.
The path forward
SB 253 marks a transformative shift in corporate climate accountability, requiring thousands of companies to disclose their full carbon footprint. By mandating Scope 1, 2, and 3 emissions reporting and publicly disclosing these emissions, California aims to set a new standard for climate transparency and corporate responsibility.
While compliance may present initial challenges, companies that take proactive steps—such as improving emissions tracking, engaging supply chains, and investing in verification processes—will be better positioned for the future. As global climate regulations continue to evolve, aligning with SB 253 not only ensures regulatory compliance but also strengthens a company’s sustainability strategy and long-term resilience in a carbon-constrained world.
