California Climate Laws (SB 219, SB 253, SB 261)
As the federal landscape around climate disclosure remains uncertain, California has forged a path as the leader in state climate regulations with the passage of SB 219 on September 27, 2024.
Context
SB 219 makes amendments to climate bills SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act), which together with AB 1305 (Voluntary Carbon Market Disclosures Act), form California’s “Climate Accountability Package.”
These laws aim to address corporate climate responsibility by increasing transparency for investors, regulators and the public, particularly around greenhouse gas emissions, climate risk, and the use of carbon offsets.
In this post, we’ll break down SB 253 and SB 261, including the latest updates from SB 219 on disclosure requirements, important deadlines and next steps for companies to take in order to not just meet but go beyond compliance.
For more information about AB 1305, read our detailed blog post here.
Climate Corporate Data Accountability Act (SB 253)
Objectives of SB 253
SB 253 aims to increase transparency and accountability around greenhouse gas (GHG) emissions by requiring large businesses operating in California to publicly disclose their carbon footprint.
Companies in Scope
SB 253 applies to public and private companies with annual revenues exceeding $1 billion that do any business in California.
Disclosures Required
Companies in scope must report their scopes 1 and 2 GHG emissions in 2026 and scope 3 GHG emissions in 2027 in accordance with a schedule provided by the California Air Resources Board (CARB). These disclosures take into account two types of materiality:
Financial Materiality: Information of interest to investors that has been deemed to have a material impact on the financial condition or company performance
Impact Materiality: Information of interest to a broader stakeholder group, a holistic view of a company’s impact to the environment and society
In addition, assurance is required for companies reporting their emissions:
Scopes 1 and 2 Emissions:
Limited assurance (baseline level) required in the first year of reporting
Reasonable assurance (comprehensive level) required 4 years into implementation
Scope 3 Emissions:
Assurance requirements will be evaluated by the state board in 2026
Limited assurance required in 2030
Key Dates
July 1, 2025: Deadline for CARB to release reporting guidelines (6 month extension with the passing of SB 219)
2026: First year that companies (with annual revenues exceeding $1 billion doing business in California) must begin disclosing Scope 1 and Scope 2 emissions with limited assurance, on or by a date determined by CARB
2027: First year that companies (with annual revenues exceeding $1 billion doing business in California) must begin disclosing Scope 3 emissions according to a schedule provided by CARB
2030: Companies must receive reasonable assurance for Scope 1 and 2 emissions and limited assurance for Scope 3 emissions
Preparing for California Climate Laws
Accurate emissions mapping: Ensure that you have clear data on Scopes 1 and 2 emissions - the emissions your company directly controls - and begin strategizing how you will tackle Scope 3, which often represents the largest share of a company’s total emissions but can be the hardest to track
Data processes and controls: Companies should invest in internal processes that ensure data is consistent, verifiable, and auditable. With limited assurance required in year one, it’s important to get these systems in place early to avoid scrambling for accuracy down the line
Materiality assessment: Scope 3 emissions will likely be subject to a materiality threshold (although this will be finalized by CARB). Companies may need to assess which scope 3 categories are material, based on their business model, industry, and value chain impact
Engagement with stakeholders: Reporting on Scope 3 emissions requires collaboration with suppliers, partners, and other stakeholders in your value chain. Early engagement is key to ensuring you can gather the necessary data without disrupting operations
Our Recommendation
Focus on data integrity: Given the assurance requirements, companies need to prioritize high-quality data collection and verification processes to avoid complications within audits
Start now: With the passing of SB 219, there is no time to waste, particularly with Scope 3 emissions, which requires extensive preparation. Early action will reduce stress and ensure that your reporting is accurate and comprehensive
Strategic compliance: Compliance with SB 253 should be seen not just as a regulatory hurdle but as an opportunity to gather insights that can improve efficiency and risk management. While this won’t eliminate the challenges of reporting, it can turn compliance into a more strategically beneficial process
Where Bespoke Can Support
We focus on practical steps that ensure compliance while adding value to your business. Here’s how we can help:
GHG expertise and upskilling your employees: Whether you're starting from scratch or refining existing processes, we offer comprehensive GHG emissions calculations for scopes 1, 2, and 3, alongside developing inventory management plans and customized GHG workbooks. To ensure long-term compliance, we also provide training programs to equip your team with the skills to manage GHG reporting and adapt to evolving regulations
Preparing for third-party assurance: Assurance is a significant part of the regulation, and we prepare you for it from day one by ensuring your data is reliable and your reporting is audit-ready
Integration into business strategy: Beyond compliance, we help companies understand how emissions data can inform better business decisions – whether that’s improving operational efficiency, reducing costs, or identifying sustainability opportunities
Climate-Related Financial Risk Act (SB 261)
Objectives of SB 261
SB 261 aims to enhance transparency around how companies are assessing and addressing climate-related financial risks by requiring businesses to disclose their risk management strategies. These include physical (such as extreme weather events) and transition (such as regulatory changes and market shifts) risks.
Companies in Scope
SB 261 applies to public and private companies with annual revenues exceeding $500 million that do any business in California. Companies within scope must disclose regardless of if risks are deemed material to the company’s financial performance or operations.
Disclosures Required
SB 261 requires companies to publicly report in their biennial climate risk report on (1) their climate-related financial risks (physical and transition) and (2) the measures they have adopted to reduce and adapt to these risks, in line with the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations.
Key Dates
January 1, 2026: Initial climate-related financial risk reports are due, with disclosures required biennially thereafter
Preparing for SB 261
To comply with SB 261, companies should start by conducting a comprehensive climate-related financial risk assessment. This process involves identifying physical risks (e.g., extreme weather, flooding, fires) and transition risks (e.g., regulatory changes, shifting market dynamics) that could affect operations, revenue streams, and long-term viability.
Scenario Analysis: Running different climate scenarios (aligned with TCFD recommendations) to understand how various climate-related events could impact financial performance
Governance & Oversight: Establishing strong internal governance structures to ensure that climate risks are factored into all business decisions
Data Collection: Ensuring data from across the organization – whether related to energy usage, supply chain impacts, or financial reporting – is accurate, consolidated, and can be tracked over time
Our Recommendation
We see SB 261 as an opportunity for companies to enhance their resilience to climate risks while simultaneously positioning themselves as leaders in sustainability. Rather than viewing compliance as a burden, we encourage companies to leverage these requirements to improve long-term business stability and build investor confidence. Early preparation will not only ensure regulatory compliance but also provide a competitive advantage in an increasingly climate-conscious market.
Where Bespoke Can Support
Bespoke ESG can help companies turn what might feel like a compliance burden into a strategic advantage. Our team offers support across several critical areas:
Tailored Risk Assessments: We work with businesses to develop customized climate risk assessments, ensuring that companies are not only prepared to disclose but also able to use the information to make strategic decisions
TCFD Alignment: Our experts help companies prepare to report in alignment with TCFD recommendations, from scenario planning to disclosures. We ensure you are fully equipped to meet both regulatory requirements and stakeholder expectations
Integrating Climate Risk into Broader Strategy: We assist in embedding climate risk management into your overall business strategy, enabling companies to improve their risk resilience, unlock cost-saving opportunities, and innovate in ways that align with sustainability goals
Reach out to us to learn how we can help you with your
California Regulatory needs!
Disclaimer: The information provided in this document is for general informational purposes only and does not constitute legal advice. Regulatory advice is provided solely within the scope of contracts between Bespoke ESG and its clients.