California Enacts Sweeping Climate Change Bills

California Gov. Gavin Newsom signed Senate Bill 253, the Climate Corporate Leadership and Accountability Act, and Senate Bill 261, the Climate-Related Financial Risk Act, into law on Oct. 7, 2023.

Under the statutes, companies doing business in California will be required to publicly report their climate-related financial risks and greenhouse gas (GHG) emissions starting as early as 2026 for some organizations.

The mandates apply to both public and private companies, although each bill has slightly different revenue thresholds. California defines any of the following as "doing business" in the state:

• Any business engaging in any transaction for the purpose of financial gain within California
• Any business organized or commercially domiciled in California
• Any business having California sales, property or payroll exceeding certain amounts found here

Senate Bill 253 (SB 253)

SB 253, which garnered support from businesses such as Apple and Salesforce, requires the California Air Resources Board (CARB) to develop and adopt disclosure rules by 2025 with implementation rolled out over a two-year period.

Public and private businesses earning over $1 billion (USD) a year in revenue will be subject to SB 253 mandates. Reporting should adhere to the Greenhouse Gas Protocol standards.

Companies will need to have their emissions verified by a third-party reporting agency.

Approximately 5,300 - 5,400 companies will be affected by SB 253.

SB 253 compliance milestones

• 2026 – Scope 1 and scope 2 emissions reporting starts with limited Scope 1 and scope 2 assurance (third-party verification) required
• 2027 – Scope 3 emissions reporting and attestation requirements
• 2030 – Reasonable assurance of scope 1 and scope 2 emissions with limited assurance of scope 3 based on CARB review in 2027

Senate Bill 261 (SB 261)

SB 261 seeks to deliver greater transparency and accountability by requiring companies doing business in California and earning revenue exceeding $500 million (USD) to report on their climate-related financial risks and the measures they have adopted to reduce and adapt to climate-related financial risks.

The reports will have to align with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

An estimated 10,000 plus companies will be impacted by SB 261.

SB 261 compliance milestone

• 2026 – Climate-related financial risk reports must be posted on companies’ websites beginning Jan. 1, 2026, and every two years thereafter.

What this means for your business

As the largest subnational economy in the world, with a $3.6 trillion gross state product (GSP) as of 2022, California’s passage of corporate climate accountability legislation is making global news. SB 253 and SB 261 are part of an expansive, global movement to legislate climate reporting for companies doing business within legislative limits. Companies need to be confident in their reporting as increased financial, legal and third-party assurance of emissions data is now the norm.