In a major move toward climate transparency and accountability, California has enacted a suite of new legislation requiring large corporations, both public and private, to disclose greenhouse gas (GHG) emissions and climate-related financial risks. These laws—SB-253, SB-261, and AB-1305—are among the most ambitious in the U.S., aligning with international frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and setting a precedent for corporate climate accountability.
Overview of California’s Climate Disclosure Laws
SB-253: Climate Corporate Data Accountability Act (CCDAA)
SB-253 mandates that public and private companies that do business in California with over $1 billion in global annual revenue must publicly disclose their Scope 1, 2, and 3 GHG emissions. While Scope 1 and 2 disclosures begin in 2026, Scope 3 disclosures will follow in 2027. Assurance requirements are phased in, starting with limited assurance in 2026 and escalating to reasonable assurance by 2030. Noncompliance could result in penalties of up to $500,000 and potential reputational damage.
SB-261: Climate-Related Financial Risk Act
This law targets companies doing business in California with over $500 million in annual global revenue and requires them to prepare and disclose a TCFD-aligned climate-related financial risk report. The report must include measures adopted to reduce and adapt to financially-material climate risks. Unlike SB-253, SB-261 does not include third-party assurance requirements. It goes into effect January 1, 2026, with noncompliance penalties capped at $50,000.
AB-1305: Voluntary Carbon Disclosure Act
AB-1305 requires disclosure of carbon offsets and associated GHG emissions, even for entities not meeting revenue thresholds. Effective January 1, 2024, this law ensures transparency around the use of voluntary carbon markets and offset claims. Like SB-253, it carries penalties up to $500,000 for noncompliance.
What’s Next for California Climate Disclosure Legislation?
Per SB–219, and amendment to SB–253 and SB–261, signed by California Governor Newsom, the California Air Resources Board (CARB) will issue updated disclosure guidance by July 1, 2025, clarifying the scope of engagement and technical details for reporting. Public comments on these new regulations were accepted between December 16, 2024, and March 21, 2025, providing a crucial opportunity for stakeholders to shape implementation. Many of the comments received demonstrated a preference for aligning with the IFRS S2: Climate-related Risk Disclosure. Doing so would allow for greater interoperability with other national jurisdictions which already have, or are in the process of, adopting the IFRS Sustainability Standards. On April 28th, the IFRS International Sustainability Standards Board (ISSB) published an Exposure Draft that proposes targeted amendments to IFRS S2 to offer transitional relief to companies adopting the standard. The proposed amendments are primarily related to GHG emissions disclosure requirements. The comment period will close on 27 June 2025.
Connect with Experts Today: Time is Running Out for Compliance
Preparing for California’s new climate disclosure laws can take months. With reporting deadlines fast approaching, organizations must begin now to avoid non-compliance and potential penalties. Navigating these new California climate disclosure requirements demands strategic insight and technical expertise. At Environ Energy, we support organizations in complying with climate-related disclosure laws through several services.
GHG Emissions Inventory and Reporting (Scopes 1, 2, and 3)
Environ offers comprehensive greenhouse gas (GHG) inventory management services to support in compliance with California climate disclosure regulations. Our services include an initial consultation to understand goals and review existing data, detailed data collection from relevant GHG emissions sources, development of a Scope 1 and 2 inventory following GHG Protocol standards, and delivery of a complete GHG Inventory Management Plan. The plan includes methodologies, data sources, and strategic recommendations, with all documentation prepared for regulatory submission.
We also offer Scope 3 emissions analysis, which will also be required by the SB-253 in 2027. We suggest getting started with strengthening greenhouse gas accounting and management practices as soon as possible and considering an assurance readiness assessment. This process will set companies up for reducing any potential exposure to regulatory risk.
Climate Risk Assessments
Our climate risk assessment services include an initial consultation, a gap analysis comparing current disclosures against SB 261 requirements, interviews with subject matter experts to align with TCFD reporting pillars, stock taking of existing measures used to mitigate or adapt to financially material climate-related risks, and a climate scenario analysis covering physical and transition risks and opportunities.
Climate Risk and Opportunity Management and Disclosure
Our experts also draft climate-related disclosures (such as the SB 261 required Climate-related Financial Risk Report), develop actionable recommendations with implementation plans, and offer ongoing monitoring and support. Our approach is aligned with global frameworks like TCFD and IFRS Sustainability Standards to ensure regulatory compliance and improved sustainability performance. Once an organization feels confident in their data and is ready to set strategic objectives towards building more resilient operations, we can also help set science-based targets (in accordance with SBTi) and design and implement mitigation strategies.
Our full suite of services, including greenhouse gas accounting, disclosure, risk assessments, engineering, and third-party assurance makes sustainability accessible, actionable and achievable for companies seeking one vendor to do it all.
Don’t wait to prepare. Get ahead of the California climate disclosure mandates.
