California’s Leadership in Climate Disclosure: A Professional Overview
California remains at the forefront of climate action with its advancement of critical disclosure laws: the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). The California Air Resources Board (CARB) recently conducted its first public workshop on these landmark climate disclosure laws, reinforcing the necessity for companies to prepare for firm reporting deadlines.
Key Timelines and Reporting Requirements
Although CARB aims to finalise rules by the end of 2025, the core reporting timelines remain unchanged. Senator Scott Wiener, the bill’s architect, emphasised the importance of adhering to these deadlines during the workshop. Companies must prepare for the following requirements:
- SB 253 – Corporate Climate Data Accountability Act:
- Scope 1 & 2 Emissions: Reporting starts in 2026 for Fiscal Year 2025 data, with limited assurance required.
- Scope 3 Emissions: Reporting begins in 2027 for Fiscal Year 2026 data.
- Assurance: Limited assurance is required for Scope 1 and 2 until 2029, transitioning to reasonable assurance by 2030. CARB will then assess assurance requirements for Scope 3 emissions.
- SB 261 – Climate-Related Financial Risk Act:
- Climate-Related Financial Risk Disclosures: Due in January 2026 and biennially thereafter.
CARB advises alignment with existing frameworks, such as the Greenhouse Gas Protocol for emissions and the Task Force on Climate-related Financial Disclosures (TCFD) or the International Sustainability Standards Board (ISSB) for climate risk, indicating a preference for practical, actionable disclosures.
Enforcement and Stakeholder Engagement
As outlined in a December 2024 Enforcement Notice, CARB will exercise enforcement flexibility for SB 253 in 2026 if companies demonstrate a “good faith effort” to comply. No such flexibility exists for SB 261. CARB’s public comment period, which ran from December 2024 to March 2025, solicited stakeholder feedback to refine implementation, underscoring a commitment to robust stakeholder engagement.
Key themes from the 261 responses include:
- Clarification on Scope: Businesses sought clarity on definitions related to “doing business in California,” revenue thresholds, and corporate relationships.
- Alignment with Existing Protocols: Stakeholders stressed the importance of aligning rules with existing frameworks, such as ISSB IFRS S2, to ease reporting burdens and facilitate global comparability.
- Cost Considerations: Feedback addressed anticipated compliance costs and the need for consistency with other regulatory requirements.
- Regulatory Considerations: Stakeholders urged CARB to consider the approaches of other global regulators, such as EFRAG in the EU.
Outstanding Issues and Legal Challenges
Some definitions and precise requirements are still being finalised, leaving certain aspects ambiguous. CARB plans additional public workshops to further refine these details. Open questions remain, such as specific reporting deadlines and the definition of “good faith effort” for SB 253 enforcement flexibility.
Despite ongoing litigation, California’s climate disclosure laws have shown resilience. A U.S. District Court order in February 2025 dismissed constitutional challenges against SB 253 and SB 261, allowing CARB’s regulatory development to proceed.
Strategic Opportunities Beyond Compliance
Companies should not delay preparation despite the delay in final rules. Fundamental reporting dates