California, August 26, 2025
News Summary
California is set to enhance climate accountability through proposed regulations by the California Air Resources Board (CARB). These rules will require companies to report their greenhouse gas emissions based on newly enacted laws, SB 253 and SB 261. These laws mandate large corporations to disclose their Scope 1, Scope 2, and eventually Scope 3 emissions, along with climate-related risk reports. The updated regulatory framework aims to improve transparency in corporate climate actions and is a critical step towards addressing climate change.
California will take significant steps towards climate accountability when the California Air Resources Board (CARB) issues a notice of proposed rulemaking for climate disclosure laws on October 14, 2023. This development comes after Governor Gavin Newsom enacted two landmark laws earlier in 2023, namely SB 253 and SB 261, which set the stage for comprehensive corporate climate reporting.
SB 253, also known as the Climate Corporate Data Accountability Act, mandates that companies with revenues exceeding $1 billion disclose their Scope 1 and Scope 2 emissions, with a future requirement for Scope 3 emissions reporting. Meanwhile, SB 261 requires firms with at least $500 million in revenues to prepare biennial climate-related risk reports. These initiatives reflect California’s ongoing commitment to mitigating climate change and enhancing transparency among businesses.
Initially, CARB intended to have final regulations finalized by July 1, 2023, but the latest timeline suggests that board consideration will take place on December 11-12, 2023, following a 45-day comment period for public feedback. This change comes after earlier legal challenges to the laws, which have so far been upheld, including a recent decision by a federal judge to deny a preliminary injunction against the regulations.
According to CARB estimates, approximately 4,160 firms will be compelled to comply with SB 261 while another 2,596 companies will be subject to the emissions reporting requirements outlined in SB 253. This indicates a significant number of businesses in California will soon need to adjust their operations to adhere to the new sustainability regulations. CARB is also in the process of confirming the preliminary list of companies impacted by these laws.
The implementation of these regulatory requirements is projected to lead to a one-time expenditure of approximately $20.7 million. This funding will be temporarily supported by the Greenhouse Gas Reduction Fund from the Inflation Reduction Act, in addition to ongoing annual costs estimated at $13.9 million. Moreover, companies under SB 253 will face annual fees of $3,106, while those falling under SB 261 will incur fees of $1,403. Firms with revenues exceeding $1 billion will be required to pay both fees.
It’s noteworthy that certain entities, including non-profits, teleworking-only companies, government organizations, and specific wholesale electricity businesses, will be excluded from the laws’ prerogatives. During the first year of implementation, CARB has stated they will not impose sanctions for incomplete data as long as organizations demonstrate a good faith effort in collecting the relevant emissions information.
Following a public workshop held by CARB in May, leading sustainability figures indicated that the original 2026 reporting timelines will remain intact despite potential future political shifts that may alter the landscape for environmental, social, and governance (ESG) investing in California. With updated financial outlooks pointing towards a potentially more adversarial perspective on ESG issues by 2025, the ability of businesses to adapt and conform to these requirements has never been more critical.
In preparation for the upcoming regulations, CARB has actively sought public input through workshops held until September 11, 2023, and has made available a FAQ document to assist companies in understanding compliance protocols.
FAQ
What are the new regulations proposed by CARB?
The California Air Resources Board is proposing new climate disclosure regulations requiring large corporations to report their greenhouse gas emissions and climate-related risks.
When will the formal proposal for these regulations be announced?
The formal proposal is scheduled for October 14, 2023.
Who will be affected by SB 253 and SB 261?
Approximately 4,160 firms will be impacted by SB 261’s climate-related risk reporting, while 2,596 companies will be affected by SB 253’s emissions reporting requirements.
What types of companies are exempt from these regulations?
Exempt entities include non-profits, teleworking-only companies, government organizations, and certain wholesale electricity businesses.
What is the estimated cost of implementing these regulations?
The implementation is estimated to incur a one-time cost of $20.7 million, plus ongoing annual costs of $13.9 million.
Will companies face penalties for incomplete data in the first year?
No, CARB will not impose sanctions for incomplete data in the first year if companies make a good faith effort to gather emissions data.
Deeper Dive: News & Info About This Topic
- ESG Dive: California Climate Risk Disclosure Rules
- Wikipedia: Climate Change Disclosure
- Wolters Kluwer: California Climate Disclosure Laws
- Google Search: California Climate Disclosure Laws
- ESG Today: California FAQ for Climate Reporting
- Google Scholar: California Climate Reporting
- Mayer Brown: California’s Climate Disclosure Laws
- Encyclopedia Britannica: Climate Change
- Spencer Fane: ESG Compliance in U.S. Businesses
- Google News: California Climate Regulations
Author: STAFF HERE HOLLYWOOD
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