California Climate Accountability Laws

California mandates full climate disclosure for large companies, setting a new national and global benchmark.

Uniqus is actively monitoring developments in California’s climate legislation. Please share your contact details to receive the latest updates and insights.

The California climate laws, SB 253 and SB 261, enacted in October 2023 and further clarified by SB 219 in September 2024, impose climate-related disclosure requirements on large companies doing business in California, effective from 2026.

California Air Resources Board (CARB), California’s lead agency for air quality and climate change programs, intends to finalize regulations by the end of 2025.

Applicability thresholds for entities

(SB 253) Climate Corporate Data Accountability Act

Requires companies with over USD 1 billion in revenue doing business in California to publicly disclose Scope 1, 2, and 3 GHG emissions and mandates third-party assurance for emissions data.

(SB 261) Climate-Related Financial Risk Act

Requires companies with over USD 500 million in revenue doing business in California to disclose climate-related financial risks and mitigation strategies, aligned with TCFD (and potentially other frameworks, such as IFRS S2).

Who?

Companies who

Are non-insurance firms (SB 261),
US-based, and do business in California

Generate USD 500M+ (SB 261) or 1B+
(SB 253) in gross revenue based on the prior fiscal year

How?

Reporting according to

TCFD recommendations around governance, strategy, risk management, and metrics and targets; other standards to be considered by CARB
GHG Protocol for emissions quantification; other standards to be considered by CARB

Reported to

Both publicly available (e.g., corporate website) and to CARB (or contracted nonprofit disclosure organization, to be determined)

What?

Report climate-related financial risks

Physical risks
Transition risks

Report measures taken or plans around

Climate mitigation
Climate adaptation

Report GHG emissions

Scope 1 and 2 with limited, later reasonable assurance
Scope 3 with limited assurance

When?

Phase in timelines

(SB 253) Climate Corporate Data Accountability Act

2026

Scope 1 & 2 GHG emissions with limited assurance; annual reporting cadence

2027

Scope 3 GHG emissions likely due; annual reporting cadence

2030

Assurance would rise to reasonable level for Scope 1 & 2; limited assurance for Scope 3

(SB 261) Climate-Related Financial Risk Act

TCFD-aligned climate risk reports; biennial reporting cadence

Why?

Corporate perspective

Mandates companies to assess the financial materiality of climate-related risks and consider how they can address them

Stakeholder perspective

Provides investors, policy makers, and consumers with material climate information which may inform financial decisions

Applicability of SB 253

The flowchart diagram illustrates whether a business entity is likely to be in scope under the remit of SB 253.

Applicability of SB 261

The flowchart diagram illustrates whether a business entity is likely to be in scope under the remit of SB 261.

Companies within the insurance industry are exempt from SB 261 as they are subject to similar disclosure requirements under the National Association of Insurance Commissioners.

What does ‘doing business in California’ mean?

Uniqus has updated these figures from our original thought leadership piece to reflect updates to California’s Revenue and Taxation Codes. These definitions align with current proposals from CARB.

CARB Public Workshop Updates

Purpose and Context

On May 29, CARB held a public workshop to launch stakeholder engagement for implementing California’s corporate climate disclosure regulations (SB 253, SB 261, and SB 219). CARB aims to align the framework with global standards (e.g., ISSB), enhance interoperability, and integrate stakeholder feedback before formal rulemaking begins later in 2025.

CARB Rulemaking Focus Areas and Emerging Stakeholder Issues

Definition of “Doing Business in CA”

CARB Proposal

Based on California Revenue & Tax Code §23101, with refinements to exclude entities with minimal economic nexus.

Key Stakeholder Concerns and Questions

Is the proposed definition too broad? Should it include emissions-based or materiality thresholds?

Revenue Definition

CARB Proposal

Based on California Revenue & Tax Code §25120 (gross receipts) and may reference audited financial statements.

Key Stakeholder Concerns and Questions

Should interest and dividend income (financial sector) be excluded? How should CARB handle complex revenue structures (e.g., subsidiaries)?

Corporate Structure (Parent/Subsidiary)

CARB Proposal

Cap-and-Trade “operational control” model (i.e., ≥50% control threshold) to define ownership control.

Key Stakeholder Concerns and Questions

Should alternative definitions (e.g., legal ownership vs control) be used? How should the rule apply across multinational groups?

Streamlining & Interoperability

CARB Proposal

Reporting standards to align with GHG Protocol, TCFD/ISSB, and existing standards.

Key Stakeholder Concerns and Questions

Key Stakeholder Concerns and Questions Can disclosures be harmonized with CSRD, EPA, and other standards? How will Scope 3 materiality be addressed?

Enforcement Approach

CARB Proposal

Grace period in 2026 with no penalties from CARB for demonstrated good-faith efforts in the initial reporting year.

Key Stakeholder Concerns and Questions

How will CARB assess “good faith?” What constitutes sufficient documentation?

Scope 3 Disclosure Challenges

CARB Proposal

Supports phased implementation, open to feedback on materiality thresholds and data availability.

Key Stakeholder Concerns and Questions

How will disclosures strike a balance between rigor and feasibility? Should estimates or screening methods be accepted early on?

Next Steps and Stakeholder Input

Formal rulemaking is expected to begin later in 2025, with final rules due one year after the proposed rulemaking is published. CARB invites input on definitions, suggestions for reducing duplicity with existing standards, Scope 3 thresholds, and tips for effectively designing SB 253 and SB 261 regulations. Public feedback is encouraged via climatedisclosure@arb.ca.gov

Uniqus POV: Strategic Insights and Implications

California is setting a de facto national standard

With broad applicability and interoperability ambitions given the scope of firms operating in California, these rules may shape how large companies report globally, especially in the absence of federal mandates. Additional states are following suit, having introduced or proposed climate-related financial risk disclosure regulations, such as Minnesota (SF 2744), New York (SB 3697), and Washington (SB 6092).

Scope 3 is a regulatory frontier in the US

The phased implementation approach reflects the complexity of Scope 3 reporting, but CARB is moving toward mandating deep value chain transparency. This precedent will impact supply chains.

Global alignment is intentional

CARB’s coordination with ISSB and monitoring of EU, UK, and APAC disclosure frameworks signals an intent to design a globally interoperable and enforceable framework.

CARB is firm on timelines but will exercise enforcement discretion in the first year of reporting

Companies demonstrating “good faith efforts” to achieve full compliance using existing data will not face penalties in 2026. While stakeholder feedback is welcome, CARB appears to remain firm on timelines and legal durability of the rules.

How to Prepare for CA Climate Laws

If your company is in scope for SB 253 or SB 261, here are key questions you should consider now:

Are your internal teams prepared to manage evolving climate disclosure requirements, or do you need additional support from external consultants?

Do you have strong controls to ensure disclosure accuracy, completeness, and timeliness?

Have you identified the right technology for GHG data management and assurance readiness?

Are you engaging with the right internal and external stakeholders to proactively prepare?

How long will it take to implement the technology and prepare for external disclosure, and is your roadmap in place?

Actions businesses can take now:

Climate Risk Assessment Scope 1 & 2 GHG Accounting Scope 3 GHG Accounting

Identify and assess physical and transition climate risks and their financial impact on operations and assets, mapping them to facilities and organizational boundaries
Determine feasibility for incorporating climate risk considerations into strategic planning and decision-making processes, if necessary
Evaluate and enhance existing climate risk management and integration into strategic planning, benchmarking against peer companies’ climate risk disclosures
Compile the necessary information and analysis to support compliance with California SB 261 disclosure requirements and evaluate climate risk mitigation initiatives

Calculate Scope 1 and 2 GHG emissions for a defined period (e.g., CY 2024) following the Greenhouse Gas Protocol, identifying reporting gaps versus requirements
Establish a document with a consistent methodology for ongoing emissions tracking and calculation, assessing data quality management systems
Prepare an emissions inventory report with methodology, data sources, and reporting processes with future attestation in mind
Benchmark emissions performance against industry peers
Engage with third-party consultants or assurance providers for GHG emissions inventory to receive early feedback on internal controls and data collection processes

Identify and categorize relevant Scope 3 emission sources per the GHG Protocol Value Chain Standard
Collect and analyze data to calculate material emissions across key categories, engaging with key stakeholders early, including value chain partners, to gather necessary information to estimate upstream or downstream emissions
Establish a methodology for ongoing Scope 3 tracking, considering data quality and availability; document assumptions where estimations are employed based on heavy assumptions or limitations
Develop a report detailing the emissions inventory, methodology, limitations, and improvement areas
Consider engaging with third-party consultants or assurance providers for assistance with GHG emissions inventory, as Scope 3 accounting can be a complex endeavor

Our clients include marquee organizations globally across the US, India, Asia, and Europe. With a unique blend of strong ESG domain capabilities and innovative AI-based technology, ESG UniVerse streamlines data management, enhances user experience, and supports organizations in achieving their long-term ESG goals through the four modules.

ESG Disclosures and Reporting
GHG Inventorization

Value Chain Assessment
UniQuest AI Assistant

Capabilities of ESG Universe

ESG UniVerse can help your organization in preparing for the requirements of California’s climate regulations. Uniqus also offers a suite of sustainability consulting services to guide clients needing tailored expertise. If interested in learning more, click here or contact Uniqus today.

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