California Climate Laws (SB 253, SB 261)

Overview

California has passed the most comprehensive US state climate laws, requiring detailed GHG emissions and climate risk disclosure. These laws will affect thousands of companies doing business in the state.

SB 253: Climate Corporate Data Accountability Act

Requirements

GHG Emissions Reporting:

• Scope 1 emissions (direct)
• Scope 2 emissions (purchased energy)
• Scope 3 emissions (value chain) - if material

Third-Party Assurance:

• Limited assurance for Scope 1 and 2
• Reasonable assurance phased in

Timeline:

• 2026: First reporting year
• Companies >$1B revenue

Scope

• Companies doing business in California
• US companies (not just CA incorporated)
• Global emissions included

SB 261: Climate-Related Financial Risk Act

Requirements

Climate Risk Disclosure:

• Physical risks
• Transition risks
• Governance and strategy
• Risk management processes

Framework:

• Aligned with TCFD recommendations
• Biennial reporting

Timeline:

• 2026: First reporting year
• Companies >$500M revenue

SB 343: Enhanced Climate Disclosure

Requirements

Additional Disclosures:

• Uses ESRS framework
• GHG intensity metrics
• Science-based targets (if set)

Timing:

• Phased implementation
• Larger companies first

AB 1305: Greenwashing Prevention

Requirements

Environmental Claims:

• Net-zero claims must be substantiated
• Clear methodology disclosure
• Third-party verification

Timeline:

• Effective 2024
• Applies to all companies

Compliance Steps

Step 1: Assess Applicability

• Revenue threshold
• California "doing business"

Step 2: Data Collection

• GHG inventory (Scope 1, 2, 3)
• Climate risk assessment

Step 3: Systems

• Reporting infrastructure
• Data management

Step 4: Assurance

• Select assurance provider
• Begin limited assurance

Step 5: Reporting

• Submit to CARB
• Public disclosure
• Website posting

Practical Guidance

For Companies

1. Determine applicability: Check revenue and CA exposure
2. Start data collection: GHG inventory now
3. Engage stakeholders: Legal, finance, sustainability
4. Select framework: TCFD alignment
5. Plan assurance: Third-party verification

Key Challenges

• Scope 3 data
• Assurance requirements
• Multi-state compliance

Key Takeaways

• California leads US climate disclosure
• First US state to require Scope 3
• Significant penalties for non-compliance
• Affects companies nationally
• Implementation 2026
• Preparation essential now