What are the California Climate Disclosure Regulations?
The California Climate Disclosure regulations are a series of laws including Senate Bill (SB) 219 (Greenhouse Gases: Climate Corporate Accountability: Climate-Related Financial Risk), SB 253 (Climate Corporate Data Accountability Act), SB 261 (Greenhouse Gases: Climate-Related Financial Risk), and Assembly Bill (AB) 1305 (Voluntary Carbon Market Disclosure Act). These bills require companies that are doing business in California to publicly disclose greenhouse gas (GHG) emissions and climate-related financial risks.
SB 219 amends SB 253, which requires reporting entities with over $1B in total annual revenues that are “doing business” in the state of California to annually disclose Scope 1, 2, and 3 GHG emissions. Scope 1 and 2 emissions reporting for 2025 will be due starting in 2026, on a date that will be finalized by the California Air Resources Board (CARB) by July 1, 2025. CARB will also release a specific schedule for companies required to report their Scope 3 emissions by 2027, although this schedule has not yet been released. GHG emissions data reports can be consolidated at the parent company level if a subsidiary is subject to the laws.
SB 261 (Greenhouse Gases: Climate-Related Financial Risk) requires organizations with over $500M in total annual revenues that conduct business in California to prepare and disclose a climate-related financial risk report every two years.
AB 1305, The Voluntary Carbon Market Disclosures Act, requires public disclosure of detailed information regarding the methodology, verification, and/or carbon offsets used to support climate-related claims. It also requires organizations marketing or selling carbon offsets to publicly disclose detailed information about the offsets’ characteristics, such as location, timeline, and emissions reduction calculation methods.
How to Comply
Companies complying with the California Climate Disclosure regulations should begin preparing early, as the delay given to CARB to finalize regulation timelines will create a shorter timeline for initial compliance in 2026. Companies that fail to comply face fines of up to $500,000 per reporting year, so setting the stage for successful compliance is imperative.
The steps:
1. Assemble and Educate a Cross-Functional Team
Climate reporting touches every part of the organization, so having members on your disclosure team from every area of the business is vital to meet both financial and data-driven requirements. The inclusion of Scope 3 reporting will also require a close examination of value chain-related emissions. Your team may include staff who work closely with suppliers and can contribute insight on Scope 3 emissions, facilities managers who can provide Scope 1 and 2 data, and finance members who can facilitate risk disclosure and audit preparation.
2. Outline a Plan for GHG Data Gathering
The first step to creating a GHG data collection plan is understanding what data is necessary to collect and how you will do so. Because the California Climate bills cover Scopes 1, 2, and 3, your organization will likely need to collect both direct and indirect emissions data. Examples of direct emissions data include things like electricity used in facilities and fuel burned in company vehicles. Indirect emissions include things such as supply chain transportation emissions, end-of-product-life disposal, etc.
It is important to equip your team with the appropriate tools for data gathering. Green Impact’s carbon accounting platform, Carson, can be especially effective here. Carson streamlines data collection across Scopes 1 and 2 and creates automated report drafts formulated to comply with the California Climate Disclosure regulations. Simply upload energy data sources, such as utility bills, to the Carson portal, and let Carson do the rest! Access emissions analytics and downloadable reports at your fingertips anytime.
3. Collaborate Across Departments
Utilizing the full spectrum of your organization’s expertise is crucial for climate reporting. Coordinate across departments to ensure data flow and align company sustainability efforts with business operations. For example, IT likely has data about on-site server energy use, whereas the procurement team may have the best information on Scope 3 supplier emissions. Your finance and internal audit groups will be vital in assessing climate-related financial risks and opportunities.
4. Scale Up Emissions Tracking
As your organization becomes more comfortable with its initial GHG data reporting process, you can begin to scale up and capture a wider picture of your emissions data. For example, if your organization utilizes a hybrid work model, you may add Green Impact’s Hybrid Work Wizard app to Carson to automatically gather self-reported data that captures office usage and work-from-home emissions. Iterative improvements that can automate certain areas of data collection will be the most impactful to enable full-scale data collection without straining internal resources.
5. Establish Internal Controls and Governance
Like financial data, climate data requires meticulous governance. Establish clear reporting lines, data ownership, and control mechanisms. For example, an internal sustainability officer may be designated the authority to enforce internal reporting deadlines, while a financial analyst could be responsible for risk reporting. Create processes to ensure your data is verified and regularly cleaned of any duplicates or mistakes, as well as documents outlining the proper procedure if any data gaps or discrepancies are discovered.
6. Prepare for Assurance
SB 253 calls for businesses to hire independent auditors to verify their emissions reports. To prepare for third-party assurance, conduct an internal audit of emissions data and ensure technical tools and controls are operating effectively. Miscalculations or errors can lead to fines and reputational damage, so it is crucial to apply rigorous internal scrutiny prior to assurance. To mitigate these risks, emissions data must be transparent, traceable, and reliable.
7. Create Organizational Buy-in
Effective GHG emissions reporting requires effort from every level of the organization. Consider holding educational sessions to explain the importance of climate disclosure, the benefits to the organization, and how this impacts everyone’s role. For example, even though the marketing department may not be directly involved in reporting, they will need to understand how to effectively communicate the company’s ESG initiatives and progress without greenwashing, as well as comprehend the environmental impacts of things like printed materials, event travel, etc. Additionally, organizational leaders can create incentives for departments to meet data collection or energy reduction goals and integrate these goals into performance metrics.
With California’s new climate regulations on the horizon, as well as increases in international reporting requirements, organizations will need to maintain close control over their climate data. Therefore, creating a single source of truth to organize ESG data is vital. Green Impact offers an enterprise-level environmental data platform that is cost-accessible and easy to use for organizations that want a simple, automated solution for their climate reporting needs. With powerful analytics, automated reporting, and built-in sustainability expertise, Carson makes ESG compliance easy.
Learn how Green Impact can help you prepare for the California Climate Disclosure at www.greenimpacttech.com/carson.