April 19, 2024

A Spotlight on the California Climate Disclosures: SB 253 & SB 261

A Spotlight on the California Climate Disclosures: SB 253 & SB 261

The US focus on climate disclosure within financial markets remains centered on the Securities and Exchange Commission (SEC) Climate Disclosure. Before the SEC took federal action, California, which is the United States’ largest economy, enacted two new statewide climate disclosure acts closely resembling the SEC's Climate Disclosure Rules, with some provisions even surpassing them. Both SB 253 and SB 261 were signed into law on October 7, 2023.  These acts will affect over 10,000 businesses that are headquartered in or do business in California. 

California’s Senate Bill 253, the Climate Corporate Data Accountability Act, and Senate Bill 261, the Climate-related Financial Risk Act, will promote corporate sustainability, transparency, and keep businesses accountable. 

In this article, we’ll show you stipulations, deadlines, timelines, and how Net0 streamlines climate-related data, making it easy for your business to produce accurate and precise reporting in real-time using automation. 

California’s Senate Bill 253 (SB 253) - the Climate Corporate Data Accountability Act (CCDAA) requirements

SB 253 requires any US company with USD $1 billion or more in annual revenue operating in California to report their Scope 1 & 2 emissions regardless of location starting in 2026, and Scope 3 emissions in 2027. Here is a flow chart of scope 1, 2, and 3 emissions:

flow chart of scope 1 2 and 3 emissions

The State of California has recommended reporting to the GHG Protocol (GHGP) for all scope emissions reporting. 

It is required that annual, full-scope GHG emissions data reporting to an emissions reporting organization is done by all United States companies that also generate total annual revenues of more than USD $1 billion that do business in California as well as disclosing the data to the public in a way that is simple to understand and readily accessible, that will make information transparent to investors, be clear to conscious consumers, and evoke companies to improve their level of climate risk to shift into a net-zero carbon economy.

Emissions disclosures will need to be independently verified and will be available on a new public digital registry managed by an organization contracted by the California State Air Resources Board (CARB). This registry will enable users to view business’ disclosures and analyze the reported data in different ways.

Violations of SB 253 may incur fines up to USD $500,000. 

What is the SB 253 reporting schedule?

CCDAA Reporting Schedule

2025 - Companies are to report on the prior fiscal year so they will begin collecting mandatory scope 1 and 2 emissions data in 2025.

2026 - Companies are to file their first obligatory report on scope 1 and 2 emissions. They will also need to collect data on their scope 3 emissions.

2027 - Companies are required to report scope 3 emissions no later than 180 days after their scope 1 and 2 emissions. 

California’s Senate Bill 261 (SB 261) - the Climate-Related Financial Risk Act (CRFRA)

SB 261 requires any US company with USD $500 million or more in annual revenue operating in California to disclose climate-related financial reports with the first submission due January 1, 2026 and every other year thereafter.

As with all other climate-related financial disclosures around the world, SB 261 is based on the four pillars of disclosure recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

TCFD Disclosure Recommendations

What information do businesses have to disclose for SB 261?

On top of the climate-related financial metrics that are expected in the outline of the TCFD, businesses will have to disclose if they’ve budgeted for enhanced sustainable business measures regarding climate change, insurance costs, calculated additional opportunities to mitigate climate risk, and their strategy for prioritizing them. 

In addition to the reporting being required for SB 261, investors are now evaluating ESG risks and opportunities based on ESG scores. Climate-related financial data and other corporate sustainability metrics and plans are now a must have instead of a nice to have when investors are considering backing a company. 

The violation of SB 261 is up to a maximum of USD $50,000 for not submitting a report and not making it publicly available at an accessible location such as the company’s website. 

Related content

For more information about setting targets and reduction planning, check out our following resources:

• Article: How Are Carbon Emissions Measured?
• Article: How to Reduce Upstream Emissions With the Gold Standard Framework for Supplier Engagement

Comparing California climate disclosure acts SB 253 vs. SB 261

To compare SB 253 and SB 261, a noteworthy mention is that the annual revenue requirement set by SB 261 ($500M) is significantly lower than the SB 253 threshold (>$1B). Consequently, many more companies will only be reporting under SB 261. However, collecting the scope 1, 2, and 3 emissions data that is required for SB 253 is a significant help when reporting for SB 261. It is impossible to honestly disclose benchmarks, strategies, opportunities and risk, without having quantifiable data. Climate strategies are not verifiable and couldn’t be proven viable without emissions data. 

A comparison of the requirements for SB 253 vs. SB 261 is shown below:

California climate disclosure timeline for SB 253 and SB 261

The timeline for SB 253 and SB 261 is as follows:

Timeline of requirements for CaliforniaClimate Disclosure Acts

How Net0 can help with SB 253 and SB 261 disclosures

Net0 exceeds traditional carbon calculation methods, offering an AI-enhanced GHG emissions management platform leveraged by businesses and governments to take serious action on their carbon mitigation strategies. With a growing consumer demand for environmentally friendly products and services, alongside investor needs for concrete, long-term climate data on ESG progress, emissions reporting has become an essential, non-negotiable aspect of operating within the climate-conscious California economy.

Utilizing automation, Net0 captures raw data and converts it into quantifiable emissions data across all 3 scopes, facilitating precise tracking so reports are precise and accurate in real-time. Its rapid analysis, incorporating over 50,000 emissions factors, empowers organizations to formulate and implement targeted strategies to reduce carbon emissions. This results in verifiable, audited carbon reporting that meets the standards expected by California SB 253 and SB 261 as well as investors. Net0's reporting complies with all major regulatory frameworks worldwide, including the GHG Protocol, the SECR, the SEC Climate Disclosure, the CSRD, and more, ensuring credibility and reliability in carbon management efforts.

Schedule a demo with Net0 to discover how we can streamline your emissions data management, resulting in impeccable carbon reports that fully comply with all SB 253 and SB 261 guidelines.

Written by:

Kristin Irish

As a content writer for Net0, Kristin harnesses her expertise and enthusiasm for carbon emissions reduction, merging it with her other passion: the B2B SaaS industry. Her global outlook and dedication enrich the sustainability sector with insightful perspectives.
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