How to Comply With California’s SB 253 Climate Corporate Data Accountability Act: What Companies Must Report and When
California’s SB 253 requires many large companies “doing business” in California with $1+ billion in annual revenues to publicly disclose Scope 1, Scope 2, and Scope 3 greenhouse gas emissions beginning in 2026. The law is designed to standardize corporate climate reporting and will be enforced by the California Air Resources Board (CARB). This article explains who is covered, what must be reported, when reporting starts, and how to prepare for compliance.
SB 253 at a Glance: What the Climate Corporate Data Accountability Act Requires
California’s Senate Bill 253, the Climate Corporate Data Accountability Act, creates a statewide, public greenhouse gas (GHG) emissions disclosure regime for certain large businesses. The law directs the California Air Resources Board (CARB) to adopt implementing regulations and to oversee annual reporting and disclosures.
At a high level, SB 253 requires covered companies to:
(1) measure and report Scope 1 (direct) and Scope 2 (purchased energy) emissions annually, beginning with reporting in 2026 (for prior-year data);
(2) measure and report Scope 3 (value chain) emissions annually, beginning with reporting in 2027 (for prior-year data); and
(3) obtain third-party assurance for reported emissions, with assurance requirements expected to phase in over time under CARB’s rules.
Who Must Comply: Covered Entities and the “Doing Business in California” Trigger
SB 253 applies to a “reporting entity” that meets the statute’s thresholds. While CARB regulations will supply key details, companies should evaluate coverage now using the statute’s core criteria:
1) Revenue threshold: $1 billion+
SB 253 generally covers entities with total annual revenues exceeding $1 billion. Companies should review how “total annual revenues” is determined (including consolidated or affiliate revenue treatment, if applicable) and monitor CARB rulemaking for clarifications that may affect parent/subsidiary structures and revenue attribution.
2) “Doing business” in California
SB 253 applies to companies doing business in California, a concept that often aligns with California tax and registration standards (for example, significant sales, property, payroll, or other presence in the state). Even businesses headquartered elsewhere can be covered if they have a meaningful California footprint.
Practical example: A global manufacturer with $6B in annual revenue and a California distribution center, California sales team, and significant in-state sales may be deemed “doing business” in California and therefore be a reporting entity.
3) Public and private companies can both be covered
SB 253 is not limited to publicly traded issuers. Large privately held businesses that meet the revenue and California nexus criteria may also be required to disclose emissions publicly.
What Must Be Reported: Scope 1, Scope 2, and Scope 3 Emissions
SB 253 requires reporting across the widely used GHG Protocol framework—Scope 1, Scope 2, and Scope 3. Companies should expect CARB to align reporting mechanics with recognized methodologies while specifying California-tailored requirements.
Scope 1: Direct emissions from owned or controlled sources
Scope 1 typically includes emissions from sources a company owns or controls, such as:
- Fuel combustion in boilers, furnaces, and generators at facilities
- Company-owned vehicles (fleet emissions)
- Process emissions (e.g., industrial chemical processes)
- Fugitive emissions (e.g., refrigerants, methane leaks)
Example: A food processing company’s natural gas boilers at its California plant, plus fleet delivery trucks it owns, would generally fall under Scope 1.
Scope 2: Indirect emissions from purchased electricity (and other energy, if applicable)
Scope 2 generally covers emissions associated with purchased electricity consumed by the company (and, depending on methodology and CARB requirements, potentially purchased steam, heating, and cooling).
Example: A software company leasing office space in San Diego may have minimal Scope 1 emissions but significant Scope 2 emissions tied to electricity consumption in offices and data centers it controls or contracts for.
Scope 3: Indirect value chain emissions upstream and downstream
Scope 3 is the most expansive category and typically includes upstream and downstream emissions not captured in Scopes 1 and 2. Common categories include:
- Purchased goods and services
- Capital goods
- Fuel- and energy-related activities (not included in Scope 1 or 2)
- Upstream transportation and distribution
- Waste generated in operations
- Business travel and employee commuting
- Upstream leased assets
- Downstream transportation and distribution
- Use of sold products
- End-of-life treatment of sold products
- Downstream leased assets, franchises, and investments (as applicable)
Example: A consumer electronics brand may report Scope 3 emissions from suppliers manufacturing components overseas (upstream) and from the electricity consumers use to charge devices (downstream “use of sold products”).
When Reporting Starts: Key Deadlines and Phase-In Expectations
SB 253 establishes a staggered timeline, with Scope 1 and Scope 2 disclosures first, followed by Scope 3. While CARB’s regulations will govern the specifics (reporting platform, measurement approach, and assurance cadence), companies should plan around these statutory start dates:
2026: First annual reporting for Scope 1 and Scope 2
Covered entities must begin annual public disclosure of Scope 1 and Scope 2 emissions starting in 2026 (generally for the prior fiscal or calendar year, as specified by CARB).
2027: First annual reporting for Scope 3
Covered entities must begin annual public disclosure of Scope 3 emissions starting in 2027.
Assurance: third-party verification requirements will matter early
SB 253 contemplates independent third-party assurance of emissions disclosures. Even if CARB phases assurance levels in over time, companies should treat assurance readiness as a near-term requirement—because controls, documentation, and methodological consistency are what make assurance feasible.
How Disclosures Will Be Made Public: CARB Oversight and Accessibility
SB 253 directs CARB to develop a program that results in publicly accessible emissions disclosures. In practical terms, companies should anticipate:
- Standardized submission formats and deadlines
- Public posting through a CARB-managed platform or approved registry
- Comparable reporting across covered entities, enabling benchmarking
This public nature is a major risk driver: SB 253 data will be visible to regulators, investors, customers, competitors, activists, and plaintiffs’ lawyers. Consistency between SB 253 disclosures and voluntary ESG reports, SEC-facing statements, website claims, and marketing materials will be critical to reduce misrepresentation and “greenwashing” exposure.
Penalties and Enforcement Risk: Why “Reasonable” Data Isn’t Enough
SB 253 authorizes CARB enforcement and administrative penalties for noncompliance. While regulations will define how CARB evaluates violations, companies should assume enforcement focus will include:
- Late reporting or failure to file
- Incomplete scopes or missing categories (especially Scope 3)
- Unsupported methodologies or poor documentation
- Material inconsistencies across years or between disclosures and public statements
Even beyond CARB penalties, inaccurate emissions reporting can create collateral risk: contractual disputes with customers requiring climate disclosures, shareholder or consumer claims tied to sustainability statements, and supply-chain fallout if reported Scope 3 figures implicate key vendors.
Compliance Challenges Companies Underestimate (Especially Scope 3)
Many companies can estimate Scope 1 and Scope 2 with existing utility and fuel data, but SB 253’s Scope 3 requirement is where compliance programs often break down. Common pitfalls include:
Supplier data gaps and leverage limits
Companies may not have contractual rights to demand emissions data from suppliers—particularly overseas or sole-source suppliers. SB 253 readiness often requires updating procurement terms, onboarding processes, and supplier scorecards.
Double counting and category boundary confusion
Scope 3 accounting can lead to double counting within an organization (e.g., overlapping business units) or category misclassification. Consistent boundary setting across subsidiaries and product lines is essential.
Acquisitions and organizational change
M&A can significantly alter the emissions profile and baseline year comparability. Buyers should integrate SB 253 due diligence: emissions data quality, methodologies used, supplier contracts, and assurance readiness.
Data governance and internal controls
Because disclosures become public and assured, emissions data needs controls similar to financial reporting: defined owners, change management, audit trails, and documented assumptions.
Practical Compliance Roadmap: Steps to Take Now
Companies that wait for final CARB regulations may find themselves behind on data, contracts, and systems. A practical SB 253 readiness plan typically includes the following workstreams:
1) Confirm coverage and entity boundary
Assess whether the organization meets the $1B threshold and “doing business” nexus, and determine which entities are included in the reporting boundary (parent/subsidiary treatment, joint ventures, and controlled operations).
2) Select methodologies and establish a baseline
Align measurement with the GHG Protocol and any CARB-specific requirements. Document emissions factors, calculation approaches (market-based vs. location-based electricity accounting, where applicable), and baseline year logic.
