Navigating California's New Climate Disclosure Rules
With the SEC’s federal climate rule in flux, California’s own climate disclosure laws are creating compliance uncertainty for national manufacturers. In response, new strategic guides are emerging to help companies navigate the state's specific and sometimes overlapping requirements.
- California's climate disclosure package consists of two distinct laws: SB 253, which mandates annual reporting of Scope 1, 2, and 3 greenhouse gas emissions for companies with over $1 billion in revenue, and SB 261, which requires biennial reporting on climate-related financial risks for companies with over $500 million in revenue. - Unlike the SEC's proposed rule, which only applied to publicly traded companies, California's requirements extend to both public and private entities that are "doing business" in the state and meet the revenue thresholds. - A critical divergence for manufacturers is California's requirement under SB 253 to disclose Scope 3 emissions, which include indirect emissions from supply chains and product use. The final version of the SEC's now-stalled federal rule had dropped the broad Scope 3 mandate. - The SEC's federal climate rule is stayed nationwide by the U.S. Court of Appeals for the Eighth Circuit pending the outcome of numerous legal challenges. In a significant development, the SEC announced in March 2025 that it would no longer defend its own rule in court. - The first disclosures for Scope 1 and 2 emissions under SB 253 are required in 2026, covering the 2025 fiscal year. However, the California Air Resources Board (CARB) is still finalizing the implementation regulations, with the rules not expected to be finalized until the first quarter of 2026. - The initial January 1, 2026, deadline for the first climate-related financial risk report under SB 261 has been impacted by legal action. The U.S. Court of Appeals for the Ninth Circuit issued an injunction, and CARB has stated it will not enforce the deadline while the appeal is pending. - SB 253 requires independent third-party assurance of emissions disclosures, beginning with limited assurance for Scope 1 and 2 emissions in 2026 and phasing to a "reasonable assurance" level by 2030, creating a new compliance workstream for audit and finance teams. - Both California laws face legal challenges from groups including the U.S. Chamber of Commerce, which argue the laws unconstitutionally compel speech and regulate activity beyond California's borders. Non-compliance penalties can be up to $500,000 per year for emissions reporting failures under SB 253.
