Attention all Californians! Have you heard about the new California bills Governor Gavin Newsom signed? Each of these bills represents another step towards the goal of carbon neutrality by 2045. They are:
- SB 253: The Climate Corporate Data Accountability Act
- SB 261: Greenhouse Gases: Climate-Related Financial Risk
Wondering how SB 253 and SB 261 will impact your business and/or when you should start planning to meet the new standards?
These two new California climate disclosure laws have massive implications, but don’t worry! We’ve got you covered. Read this blog to get a closer look at:
- What these laws include
- Their potential impact
- The deadlines you may need to be aware of
What are the new California Climate Disclosure Laws?
Many of California's companies will soon have to disclose their Scope 1, 2, and 3 emissions. How do you know if your organization is included? The criteria is as follows:
This will impact any business that earns over $500 million in revenue, and:
- Participates in transactions for financial gain within California
- Has facilities organized or commercially domiciled in California
- Meets California sales, property or payroll numbers above the amounts listed here.
SB 253: The Climate Corporate Data Accountability Act
SB 253 will impact California businesses with revenue of over $1 billion.
By law, they will now have to disclose their Scope 1, 2 and 3 emissions. What does this mean? Allow us to dive deeper:
Scope 1 Emissions: Direct greenhouse (GHG) emissions. This includes:- Company-owned vehicles
- Stationary sources, manufacturing/ processing materials
- Fugitive emissions
- Coal burning
Scope 2 Emissions: Indirect emissions as a result of using purchased energy. This could include a power station, for example.
Scope 3 Emissions: Indirect emissions from assets that impact the company’s value chain but are not owned/ controlled by the company. This casts a wide net that could include:
- How many employees are commuting to work
- How many commercial flights do employees take
- Waste and fuel transportation
These disclosure requirements are important to fulfil not just to remain compliant, but to also get a more accurate view of your organization's overall performance and impact on the environment.
When does SB 253 reporting begin?
California companies need to disclose their Scope 1, 2, and 3 emissions in 2026. But, Scope 3 emissions won’t need to be disclosed until the year 2027, based on their data from 2026.
At the same time, SB 253 mandates that companies acquire third-party assurance for their emissions reporting. This would roll out with a limited assurance level in 2026 for Scope 1 and 2 emissions. Then, 2030 will see a limited assurance level for Scope 3, with a more stringent reasonable assurance level for Scope 1 and 2 emissions.
What are the penalties for misreporting or misrepresenting information?
Your company could face administrative penalties of up to $500,000 for non-filing, late filing, or misreporting; however, there are no fines for misreporting Scope 3 emissions as long as the reports are “made with a reasonable basis and disclosed in good faith.”
SB 261: Greenhouse Gases: Climate-Related Financial Risk
SB 261 will impact California businesses with an annual gross revenue of over $500 million. According to a report from the California Senate, this would include an estimated 10,000 companies.
SB 261 requires companies to submit climate-related financial risk reports to disclose:
- Their climate-related financial risk
- The measures they have adopted to reduce those risks
These reports should follow the Task Force on Climate-Related Financial Disclosure (TCFD) framework.
When does SB 262 reporting begin?
So, when should you be expected to submit your findings? The first round of reporting will be required by January 1, 2026, with reports being prepared and submitted biennially after that.
Uncover more tips and tricks needed to submit successful ESG reports in our new Greenhouse Gas Reporting Guide:
It’s vital that you start putting the processes and systems in place to collect the necessary data for these climate disclosure bills. According to an EcoOnline survey done on 124 companies worldwide, 42% admitted they do not have an ESG reporting system in place.
What are the penalties for misreporting or misrepresenting information?
It’s important these reports are officially submitted, and they also need to be made publicly available for anyone to find online.
With that in mind, you could face $50,000 in fines for failing to make the report available on your website, or publishing an inadequate report. In addition to financial costs, attempts at greenwashing or inaccurate data could damage your company’s reputation, so make sure you've familiarized yourself with all ESG reporting requirements.
Are Californian companies ready for emissions disclosure?
Several of the state’s biggest brands such as Salesforce, Microsoft and Google have voiced their support for this initiative. At the same time, PwC LLP reported that 69% of surveyed companies felt prepared for any new disclosure rules. Another 50% responded that they saw climate change as a threat to their business.
Of course, there are concerns these new laws will put too much new financial pressure on California's companies.
In signing the bill, California Governor Gavin Newsom raised concerns about SB 253’s financial impact on businesses. He also asked the California Air Resources Board (CARB) to keep an eye on the cost impact and make recommendations to improve the program.
Is your company ready for emissions disclosure?
These aggressive 2026 and 2027 deadlines will arrive too fast for some companies, so we want to help you be as ready as ever to report your greenhouse gas emissions.
Check out our guide, GHG Reporting: How to Keep Your Investors and the Environment Happy to understand this concept more deeply.