In an era where corporate transparency and climate accountability are becoming non-negotiable, California has taken a pioneering step with the passage of SB 253, formally known as the Climate Corporate Data Accountability Act. This landmark legislation establishes one of the most comprehensive and stringent climate disclosure frameworks in the United States.

Enacted in October 2023 alongside its counterpart, SB 261, the law requires large organizations doing business in California to publicly report their greenhouse gas (GHG) emissions, including those generated across their entire value chain. The move reflects California’s broader goal of positioning itself as a leader in climate action and aligns with international standards like the Greenhouse Gas Protocol (GHGP) and the EU’s Corporate Sustainability Reporting Directive (CSRD).

By setting a new benchmark for corporate climate transparency, SB 253 aims to improve environmental accountability and provide investors, regulators, and the public with reliable, comparable, and verifiable emissions data. With California ranking among the world’s largest economies, the law’s influence is expected to extend well beyond its borders, shaping the future of climate disclosure regulations across the U.S. and globally.

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What Do We Understand by SB 253?

The Climate Corporate Data Accountability Act (SB 253) requires large U.S.-based companies operating in California to report their annual GHG emissions across all three scopes, i.e., direct, indirect, and value-chain emissions. Specifically, it applies to entities with annual revenues exceeding $1 billion, regardless of whether they are headquartered in California.

Under the law, companies must disclose:

• Scope 1 emissions: Direct emissions from owned or controlled sources, such as manufacturing facilities or company vehicles.
• Scope 2 emissions: Indirect emissions from the consumption of purchased electricity, heat, or cooling.
• Scope 3 emissions: All other indirect emissions from activities in a company’s value chain, including suppliers, logistics, product use, and disposal.

All disclosures must follow the Greenhouse Gas Protocol, ensuring standardized and internationally comparable measurement. Importantly, emissions data must be independently verified by a third party, enhancing credibility and reducing the risk of greenwashing.

With over 5,000 companies expected to be affected, SB 253 represents a major operational and financial undertaking. Yet it also offers an opportunity for businesses to demonstrate genuine leadership in sustainability through accurate and transparent carbon reporting.

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SB 253 and SB 261: Core Differences

While SB 253, SB 261, and AB 1305 are often mentioned together, they serve different purposes within California’s broader climate disclosure framework. Collectively, these laws aim to increase corporate transparency, accountability, and climate-related risk assessment, but their focus areas and disclosure requirements vary.

SB 253 (Climate Corporate Data Accountability Act):
Focuses on quantifiable greenhouse gas emissions reporting across Scopes 1, 2, and 3. It requires large companies operating in California to publicly disclose their emissions data verified by an independent third party.

SB 261 (Climate-Related Financial Risk Act):
Centers on climate-related financial risks and the strategies companies use to mitigate them. Businesses must release biennial reports detailing how climate change could affect their operations, revenues, or supply chains.

AB 1305 (Voluntary Carbon Market Disclosures Act):
Targets transparency in carbon offsets and climate claims. It requires companies that market or purchase carbon offsets, or make net-zero or carbon-neutral claims, to disclose detailed information about those credits and their underlying methodologies.

Key distinctions include:

• Scope of focus:
  • SB 253 → Quantitative emissions disclosure
  • SB 261 → Qualitative financial risk disclosure
  • AB 1305 → Carbon offset transparency and climate claim integrity
• Reporting frequency:
  • SB 253 → Annual reporting
  • SB 261 → Biennial reporting
  • AB 1305 → Ongoing, as marketing or offset claims occur
• Applicability:
  • SB 253 and SB 261 apply to companies with over $1 billion in annual revenue
  • AB 1305 has a lower threshold ($50 million in revenue) and focuses on offset usage and claims
• Verification:
• SB 253 mandates third-party assurance for emissions data
• SB 261 and AB 1305 rely more on narrative and self-reported disclosures

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Impacted Parties: SB 253

SB 253 applies to both public and private entities, including corporations, limited liability companies (LLCs), and partnerships that conduct business in California and exceed the $1 billion revenue threshold.

A company is considered to be “doing business in California” if it meets any of the state’s existing tax or economic activity thresholds, for instance, exceeding a certain level of sales, payroll, or property value in the state. This means that even firms with limited physical presence may still fall within the law’s scope if they generate substantial business within California.

An estimated 5,400 organizations are expected to be covered under SB 253. Many of these entities are multinational corporations that will have to align their global emissions accounting frameworks with California’s reporting standards.

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SB 253: Reporting Requirements

Under SB 253, covered entities must prepare annual emissions reports that:

• Include Scope 1, 2, and 3 emissions data following the GHG Protocol.
• Are verified by an independent third-party auditor to ensure data accuracy.
• Are made publicly accessible, typically through a digital reporting platform managed or approved by the California Air Resources Board (CARB).

Verification standards will begin as limited assurance for initial reporting years and progress to reasonable assurance for certain scopes by 2030. This gradual tightening allows businesses time to refine their methodologies and improve data quality.

Commencement of Reporting: SB 253

Despite early discussions of potential delays, California has reaffirmed its commitment to maintain firm timelines. The first reporting cycle will begin in 2026, based on fiscal year 2025 data.

• June 30, 2026: Reporting deadline for Scope 1 and 2 emissions.
• 2027: Commencement of Scope 3 emissions reporting (under a safe harbor provision until 2030).
• 2030 onward: Higher assurance requirements and stricter enforcement.

The safe harbor provision gives companies time to improve data accuracy without facing penalties for unintentional Scope 3 misstatements before 2030.

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Reason for Enactment: SB 253

California’s motivation for passing SB 253 stems from its urgent need to address climate change and enhance corporate accountability. The state has been severely impacted by wildfires, droughts, and floods, intensifying public and political pressure for stronger environmental regulation.

The Act aims to:

1. Increase transparency in corporate emissions data.
2. Enable investors and regulators to identify high-emitting sectors.
3. Encourage companies to decarbonize by revealing their climate footprints.
4. Align corporate reporting with international standards.

The bill’s passage also reflects growing investor demand for credible, comparable climate data. With consistent emissions reporting, stakeholders can make informed decisions, detect greenwashing, and evaluate a company’s progress toward net-zero targets.

Rule-Making Responsibilities: SB 253

The California Air Resources Board (CARB) plays a central role in developing, implementing, and overseeing SB 253’s regulatory framework.

CARB’s responsibilities include:

• Drafting and adopting implementing regulations by July 1, 2025, as extended under the amendment bill SB 219.
• Managing or contracting a digital reporting platform for emissions disclosures.
• Establishing guidelines for third-party verification.
• Publishing lists of affected entities, reporting deadlines, and templates.

CARB also plans to conduct public workshops and issue updates to clarify implementation details. Its oversight ensures consistency, accuracy, and accountability across all reported data.

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SB 253: Compliance Deadlines and Major Milestones

California’s Climate Corporate Data Accountability Act (SB 253) establishes a clear, phased timeline to help companies prepare for mandatory emissions disclosures. The compliance milestones are designed to give businesses enough lead time to develop robust reporting systems and verification processes.

Key Compliance Milestones

• 2024:
  • The California Air Resources Board (CARB) begins the rulemaking process to define detailed reporting and verification requirements.
  • CARB is tasked with developing a digital emissions reporting program and outlining procedures for third-party assurance.
• By 2025:
  • CARB must finalize the regulatory framework and set the official disclosure standards for companies operating under SB 253.
  • Businesses are encouraged to start internal audits and establish GHG data collection systems for Scopes 1, 2, and 3.
• 2026 (Reporting Year for 2025 Data):
  • Companies must begin disclosing their Scope 1 and Scope 2 emissions.
  • These disclosures must be independently verified by accredited third parties to ensure data reliability and transparency.
• 2027 (Reporting Year for 2026 Data):
  • Companies are required to report Scope 3 emissions—covering indirect emissions from their value chain, including suppliers, logistics, and product use.
  • Scope 3 data verification begins, marking a significant expansion in corporate climate accountability.
• Ongoing from 2028 onward:
• Annual emissions reporting continues, with continuous third-party assurance and public disclosure through CARB’s digital reporting platform.
• Companies must also address any discrepancies or corrective actions identified during assurance reviews.

Navigating Compliance: Risks and Challenges

• Scope 3 Data Collection: For many companies, Scope 3 emissions represent 70–90% of their total footprint. These emissions come from suppliers, distributors, and product use, areas often beyond direct control. Gathering accurate data requires supplier engagement and may involve estimations based on industry averages, leading to potential inaccuracies.
• Limited Availability of Third-Party Auditors: SB 253 mandates independent verification, yet the number of qualified GHG assurance providers is limited. As demand surges, companies may face long wait times and escalating costs projected between $150,000 and $500,000 annually, depending on complexity.
• Legal and Regulatory Uncertainty: SB 253 has already drawn opposition from business groups claiming that mandatory disclosures infringe on constitutional rights or impose excessive burdens. While litigation could affect specific provisions, companies are advised to proceed with preparations to avoid compliance delays.
• Integration with Global Frameworks: Multinational corporations must reconcile SB 253 disclosures with other frameworks such as CSRD or the SEC’s climate disclosure rules. Aligning methodologies and timelines across jurisdictions will be critical to maintaining consistency and efficiency.

Top Practices to Ensure SB 253 Compliance

Organizations that start early will be better positioned to manage costs, minimize errors, and demonstrate leadership in sustainability. The following best practices can help streamline compliance:

Invest in Data Management Systems

Deploy robust emissions tracking tools and AI-powered platforms for real-time data collection, supplier engagement, and validation. These technologies reduce manual errors and enhance transparency across the supply chain.

Secure Third-Party Assurance Early

Identify and engage auditors well ahead of deadlines to avoid capacity constraints. Conducting internal audits can help uncover data gaps before formal verification begins.

Align with Global Reporting Standards

Integrate SB 253 reporting with other frameworks such as CSRD, TCFD, and GHGP to minimize duplication and enhance comparability. Companies with multiple subsidiaries may also opt for parent-level disclosures for greater efficiency.

Engage Suppliers and Stakeholders

Educate suppliers about data-sharing requirements and establish partnerships for accurate Scope 3 emissions reporting. Collaboration across the value chain is key to ensuring complete and credible data.

Build Cross-Functional Teams

Form dedicated ESG and compliance teams that include finance, legal, and sustainability experts. Coordinated internal governance is essential to handle evolving reporting and assurance requirements.

Climate Reporting: The Road Ahead

The passage of SB 253 signals a turning point for corporate climate transparency in the U.S. While compliance poses logistical and financial challenges, the law is expected to accelerate innovation in emissions tracking, carbon management, and sustainability reporting.

As CARB refines its regulatory framework, companies must proactively prepare, align internal systems, and cultivate transparency as a core value. Over time, these disclosures will not only satisfy regulators but also build investor confidence, enhance reputational strength, and support global decarbonization goals.

California’s Climate Corporate Data Accountability Act thus marks the dawn of a new era, one where corporate climate accountability, emissions transparency, and sustainable business leadership become defining hallmarks of long-term success.

Frequently Asked Questions (FAQs)

What is SB 253, and how does it fit within California’s climate disclosure laws?

SB 253, also known as the Climate Corporate Data Accountability Act, is a key part of California’s climate disclosure laws. It requires large business entities with over $1 billion in total annual revenues that operate in the state to publicly disclose their GHG emissions, including direct and indirect emissions, verified through third-party assurance. Together with SB 261 and AB 1305, it forms a comprehensive framework for climate disclosure and corporate accountability.

Which companies are subject to SB 253 reporting requirements?

Companies subject to SB 253 include public and private companies, limited liability companies, and other business entities doing business in California with total annual revenues exceeding $1 billion in the prior fiscal year. These covered entities must report their emissions in compliance with CARB regulations.

What are the main disclosure requirements under the Climate Corporate Data Accountability Act?

Under the Act, reporting entities must disclose:

• Scope 1 and Scope 2 GHG emissions (direct and purchased electricity-related emissions).
• Scope 3 emissions, which include other indirect emissions across the value chain.
• Assurance-ready reports verified by an independent third party to ensure transparency and reliability.

What is the timeline for emissions reporting under SB 253?

The Air Resources Board (CARB) will adopt implementing regulations by 2025.

• 2026: Companies begin reporting Scope 1 and Scope 2 emissions.
• 2027: Companies begin reporting Scope 3 emissions.
• Annually thereafter: Companies must publicly disclose verified emissions data following the reporting framework established by CARB.

How does SB 253 differ from SB 261 and other climate-related financial disclosures?

While SB 253 focuses on emissions reporting, SB 261 targets climate-related financial risk disclosures.

• SB 253 → Quantitative GHG emissions and data accountability
• SB 261 → Climate risk reports and risk management strategies
  Together, they ensure companies address both climate risk and financial risks stemming from climate change.

How should companies calculate their emissions under SB 253?

Companies must use the Greenhouse Gas Protocol (GHG Protocol), a globally recognized carbon accounting and reporting framework. This includes identifying direct emissions, purchased electricity, and other indirect emissions across operations and supply chains.

What role does third-party assurance play in the emissions disclosure process?

SB 253 requires limited third-party assurance for Scope 1 and Scope 2 emissions, and eventually for Scope 3. Independent assurance providers review the data to ensure accuracy and compliance. Over time, CARB may require limited assurance to evolve into more stringent verification, reinforcing trust in corporate emissions disclosures.

What happens if a company fails to comply with SB 253?

Companies that do not make good faith efforts to meet disclosure obligations may face administrative penalties and civil penalties imposed by CARB. Non-compliance could also lead to legal challenges and reputational risks, particularly for firms that publicly claim net zero emissions or climate leadership.

How does SB 253 impact private companies and limited liability companies?

Although many climate-related financial disclosures initially targeted public corporations, SB 253 extends to private companies and limited liability companies that meet the revenue threshold. This ensures accountability across all reporting companies contributing significantly to greenhouse gas emissions within the state.

What steps can companies take now to prepare for SB 253 compliance?

• Conduct internal GHG emissions audits using the GHG Protocol.
• Begin tracking Scope 3 (indirect) emissions across the value chain.
• Engage third-party assurance providers early to create assurance-ready reports.
• Align sustainability efforts with risk management and climate-related financial disclosures required under SB 261.
• Stay informed about CARB’s measures adopted and future key milestones in the climate corporate data accountability framework.