California lawmakers have passed a comprehensive emissions disclosure bill. The new California bill, the Senate Bill 253 (SB 253) Climate Corporate Data Accountability Act, was signed into law on October 7, 2023. It will require large companies (public or private) with annual revenues exceeding $1 billion, to disclose both direct and indirect (Scope 3) emissions. It will also require financial institutions to report on emissions from companies in their portfolio. The new rule is a significant step forward for climate action in the US. Since the SEC continues to delay its climate disclosure rules, it will be the first law in the country requiring emissions disclosures from large businesses.
“To tackle the climate crisis, we need new standards to improve transparency and raise the bar for the business community across the nation – and that’s exactly what the Climate Accountability Package does.”
–Senator Scott Wiener, SB 253 author
What is the SB 253 Climate Corporate Data Accountability Act?
The California Senate Bill 253 (SB 253) was introduced on January 30, 2023, as part of the Climate Accountability Package, a group of bills designed to enhance transparency, standardize disclosures, and align public investments with climate goals. The new California bill mandates that companies with annual revenues exceeding $1 billion, operating in California, disclose their end-to-end emissions across three scopes:
- Scope 1 emissions: Direct emissions from a company’s own operations, such as emissions from its heating systems. Companies would need to start reporting in 2026, based on 2025 data.
- Scope 2 emissions: Indirect emissions linked to consumption of purchased energy a company uses such as coal, natural gas, or solar power. Companies would need to start reporting in 2026, based on 2025 data.
- Scope 3 emissions: This is a crucial aspect of the legislation as it requires reporting on indirect emissions originating from the entire value chain, including emissions related to the transportation of goods, use of products, waste disposal and more. Scope 3 emissions often represent the largest portion of a company’s carbon footprint. Companies would need to start reporting in 2027, based on 2026 data.
The law builds on California’s existing climate policies, such as the cap-and-trade program, which requires large emitters to disclose their direct emissions. With the introduction of comprehensive emissions disclosure, California continues to position itself as a trendsetter in climate action and sustainability. Moreover, the state is aligning with the views of most Americans. A survey of more than 1,100 US adults found that 85% agree that companies need to disclose more about their business practices and impact on society. When it comes to climate specifically, nearly 9 in 10 (87%) support mandatory disclosure by companies.
What will the new California bill mean for businesses?
The passage of SB 253 is expected to have a significant impact on corporate behavior and emissions reduction efforts. Companies subjected to the reporting requirements will face increased pressure to reduce their environmental impact. By enhancing transparency and holding companies accountable for their emissions, California aims to encourage businesses to adopt sustainable practices and contribute to the state’s ambitious goal of achieving net-zero emissions by 2045.
SB 253 has gained significant support from companies like Apple, Salesforce, Microsoft, REI, IKEA, Patagonia, and more. But it has also faced some opposition from business organizations such as the California Chamber of Commerce, Western States Petroleum Association, and agricultural groups. These organizations have argued that the bill imposes burdensome reporting requirements that may lead to higher prices for consumers. However, advocates emphasize that the goal is not to achieve perfect emissions reports but rather to establish a starting point for transparency and emissions reduction. They say that the law will be a catalyst driving companies to assess their environmental impact and explore strategies for reducing emissions.
Which companies will SB 253 apply to?
SB 253 mandates that companies with annual revenues exceeding $1 billion and conducting business in California must report their emissions across all scopes. This includes financial institutions and private equity firms with portfolio companies. According to Ceres, this would impact 5,300 companies, which is unsurprising given California’s position as the fifth-largest economy in the world.
When will the new California bill be enacted into law?
SB 253 was signed into law on October 7, 2023. As a next step, the California Air Resources Board will need to adopt the regulation by 2025 to require the targeted companies to begin disclosures in 2026. Disclosures for Scope 3 emissions would start in 2027.
California is setting the stage for climate action with SB 253
The new California bill for emissions disclosure represents a significant milestone in the fight against climate change. By requiring large companies to disclose their full value chain emissions, it enhances corporate transparency, fosters accountability, and encourages emissions reduction efforts. California’s commitment to climate action sets an example for other states and nations, signaling the importance of sustainable practices and responsible business conduct in addressing the climate crisis. As the world continues to grapple with the urgent need for emissions reduction, California’s far-reaching emissions disclosure bill helps pave the way for a more sustainable future.
How can Cloverly help?
As the regulatory environment continues to evolve, businesses need allies that not only understand the nuances of these new rules but can provide actionable solutions. With Cloverly as a trusted partner, companies will be well-positioned to comply with new climate disclosure regulations. Our ecosystem of carbon accounting partners provides the tools you need to measure, track, and report your Scope 1, 2, and 3 emissions. And the Cloverly platform empowers you to scale meaningful climate action today with trust, access, and ease. Whether you’re just starting your decarbonization journey or are further along, carbon credits should be an integral part of your strategy. They help neutralize your own emissions (immediate and long-term residual) while making a positive contribution to a more sustainable future. This will not only help you comply with current and future climate regulations but demonstrate your commitment to sustainability and climate action for your stakeholders.
To learn more about how you can leverage carbon credits to drive business value, including regulatory compliance, download the white paper: 7 Benefits of Carbon Credits: How to Make the Business Case
About the author:
Shawn Gagné is the Director of Sustainability at Cloverly, where he develops and deploys market risk management strategies aimed at enhancing transparency within the VCM. He has over 20 years of experience in environmental science and climate risk management, as well as extensive expertise across all transaction stages of the VCM. In prior roles, he served as a Climate Consultant and founded several impact-oriented companies. One of his companies, *Urban Offset<s>, developed and implemented a first-of-its-kind carbon bundling product that combined high-quality carbon offsets from global projects with local, community forest programmes. He has a Master of Science in Environmental Science from Wilfrid Laurier University.