California is a global leader in addressing climate risk through state policy. The state is now setting the precedent for climate reporting in the U.S. by passing the Climate Accountability Package on Oct. 7, 2023. Comprehensively, the package will require many middle market companies to disclose greenhouse gas (GHG) emissions and climate-related financial risks, which is a major step towards increased transparency and accountability. Failing to prepare and report could result in financial penalties, profitability issues and compliance risks.
California’s Climate Accountability Package includes two pieces of regulations, SB 253 and SB 261, that require U.S.-based public and private companies that do business in California to report their GHG emissions (SB 253) and disclose their climate-related financial risk (SB 261). Reporting would begin in 2026 for 2025 reporting, including assurance over reported GHG emission data.
Even if your company is under the revenue threshold, the trickle-down need for information to be provided to your customers and clients is evident. Companies that meet the threshold will likely require climate-related information from companies in their supply chain, particularly regarding GHG emissions.
Senate Bill 253 applies to U.S. businesses with over $1 billion in revenue that conduct business in California (reporting entities ). These entities will be required to annually report their GHG emission inventories (scope 1, 2 and 3 emissions) in line with the GHG Protocol Corporate Accounting and Reporting Standard and Corporate Value Chain (scope 3) standard. The act requires gradual increases in the level of assurance to ensure the credibility of information. Additionally, to ensure transparency, the act requires reporting entities to provide a copy of the completed assurance provider’s report and the provider’s name to the digital platform that will be utilized, ensuring public access to the data.
* The above table illustrates a reporting requirement for the prior fiscal year end reporting period.
Senate Bill 261 applies to U.S. businesses with over $500 million in revenue that conduct business in California (covered entities ). Beginning on or before January 1, 2026, these entities will be required to prepare a climate-related financial risk report disclosing:
Covered entities are required to report biennially and make a copy of the report available to the public via their website. If a covered entity does not complete a report consistent with all required disclosures, the entity will need to provide the recommended disclosures to the best of its ability, provide a detailed explanation for any reporting gaps and describe steps it will take to prepare complete disclosures.
For companies that do not comply with the California Climate Corporate Data Accountability Act or Greenhouse gasses: climate-related risk, penalties of up to $500,000 and $50,000, respectively, can be imposed. Penalties assessed on scope 3 reporting, between 2027 and 2030, will only occur for non-filing. In addition to penalties, companies that do not report may experience reputational risks, which can have financial impacts.
It is no longer a waiting game. Companies impacted, both directly and indirectly, by the California Climate Accountability package will be subject to disclosures as early as 2025. Get started with these 3 steps.
The announcement of the California climate-related regulation and related requirements for your company may feel overwhelming. But by taking action today, your company can strategically prepare. Lean on our specialists to meet you where you are, help navigate reporting requirements one step at a time, and turn compliance activities into business opportunities. Get started today.
 Reporting entity refers to a corporation, partnership, limited liability company or other business entity formed under the laws of the state, the laws of any other state of the United States or the District of Columbia or under an act of the Congress of the United States with total annual revenues in excess of one billion United States dollars ($1 billion) (SB 253).
 Covered entity refers to a corporation, partnership, limited liability company or other business entity formed under the laws of the state, the laws of any other state of the United States or the District of Columbia or under an act of the Congress of the United States with total annual revenues in excess of five hundred million United States dollars ($500 million) (SB 261).