California is moving faster than the federal government when it comes to corporate climate accountability.
With the passage of Climate Corporate Data Accountability Act (or senate bill California SB-253) in 2023, thousands of companies and their subsidiaries that do business in the state will need to disclose their emissions on January 1, 2026 — then on a biennial basis following that.
For executives and sustainability teams, this is not just a new reporting requirement: it’s a signal that the transparency around efforts to thwart climate change is becoming a cost of doing business.
If your company generates more than $1 billion in revenue within a fiscal year and operates in California, you are likely in scope. But many leaders are still asking what “in scope” actually means, what the disclosure requirements look like, and how they should start preparing.
This article breaks down who SB-253 applies to, what the law requires, the role of the California Air Resources Board (CARB), and why it’s worth acting early.
What California SB-253 requires
SB-253 requires companies that qualify as reporting entities to disclose their greenhouse gas emissions on an annual basis. The disclosures must follow the Greenhouse Gas Protocol, which sets standards for how these GHG emissions are measured and reported.
The law covers three categories of emissions:
- Scope 1 emissions are direct emissions from sources a company owns or controls, such as company vehicles, boilers, or on-site fuel combustion.
- Scope 2 emissions are indirect emissions from purchased energy, including electricity, steam, heating, or cooling.
- Scope 3 emissions cover all other indirect emissions in a company’s value chain. This is the broadest and most complex category, spanning purchased goods and services, employee travel, logistics, product use, disposal, and other supply chain activities.
To ensure credibility, disclosures must also be verified by an independent, experienced third-party assurance provider. Limited assurance is required beginning in 2026 for Scopes 1 and 2, with reasonable assurance phased in by 2030. Scope 3 reporting begins in 2027, with limited assurance following in 2030.
Who is in scope under California SB-253?
The law applies to any U.S.-formed corporation, partnership, limited liability company, or other business entity that meets two conditions: it has total annual revenues above $1 billion, and it is considered to be doing business in California.
The revenue threshold is based on global revenue, not just income earned within California. A company could have limited sales or a small presence in the state but still qualify if its worldwide revenue exceeds the threshold, even if the parent company is headquartered elsewhere.
“Doing business” is defined broadly by California’s franchise tax board. It can mean engaging in transactions for financial gain within the state, maintaining employees or property, or reaching certain thresholds for California-based sales, property, or payroll. The bar for being considered active in the market and generating California revenue is lower than many executives might assume.
When CA SB-253 requirements take effect
Although California’s climate disclosure laws were passed in 2023, the requirements are phased in over several years to give companies time to adapt. The first reporting year falls in 2026.
- By 2026: Reporting entities must disclose Scope 1 and Scope 2 emissions with limited assurance.
- By 2027: Companies will need to include Scope 3 emissions in their disclosures.
- By 2030: Scope 1 and 2 disclosures must have reasonable assurance, and Scope 3 must meet limited assurance requirements.
These staggered deadlines reflect the complexity of emissions reporting, especially for Scope 3. They also give companies a short runway to build robust systems before the rules tighten.
CARB’s role in enforcement
Implementation of SB-253 falls under the California Air Resources Board (CARB). CARB is responsible for creating a public digital platform where companies will upload all disclosures and gross receipts, setting assurance standards, and overseeing compliance.
To fund this work, companies will pay a fee when submitting their first reports, and any subsequent ones after that.
CARB also has the authority to impose penalties for non-compliance, with fines of up to $500,000 per year. Until 2030, Scope 3 penalties will only apply if a company fails to report at all. After that, CARB will also assess whether Scope 3 disclosures are based on reasonable methods and were made in good faith efforts.
This gives CARB significant discretion to evaluate how companies are approaching the challenge of emissions reporting, particularly when data quality for Scope 3 is uneven across industries.
💡 The public comment period for California SB 253 closed on September 11, 2025. CARB is no longer accepting input or feedback on implementing regulations or the rulemaking process for this and other reporting standards. They’ll issue proposed rules for fee regulations on October 14, 2025, and will hold a 45-day comment period before submitting them for consideration in December 2025.
Why Scope 3 is the game changer
While Scopes 1 and 2 reporting is relatively straightforward, Scope 3 is where things get complicated. These emissions often account for more than 70 percent of a company’s total footprint, yet they occur outside of direct operational control.
For sustainability teams, Scope 3 reporting requires building data-sharing relationships with suppliers, estimating emissions where actual data isn’t available, and documenting every assumption. Assurance providers will expect to see a transparent methodology, even if some data gaps remain.
This is why it’s critical to have partnerships with sustainability reporting software to help measure or make accurate predictions for all scopes, especially Scope 3 reporting, with applicability across multiple reporting frameworks. Waiting until 2027 to begin gathering this data will almost certainly lead to gaps, higher costs, and last-minute scrambles.
The risks of waiting to prepare or missing key reporting deadlines for California SB-253
Some companies may be tempted to take a wait-and-see approach, hoping that lawsuits challenging Senate Bill 253 will delay implementation. But banking on delays is risky. Even if deadlines shift, the global trend toward climate disclosure is clear.
Failing to prepare now carries several risks: Companies could face significant financial penalties, but the reputational damage may be even greater. Investors, customers, and other stakeholders are increasingly demanding transparent emissions data. Falling behind peers who are already reporting could signal to the market that your company is lagging on climate responsibility.
There’s also the operational risk of fragmented data systems. Trying to build a complete inventory of emissions under the GHG protocol while up against deadline pressure often results in errors, inconsistency, and high assurance costs.
How to prepare for CA SB-253 now
For companies that are in scope, the next two years are critical. There are several practical steps sustainability leaders can take to set themselves up for success.
Map your organizational boundaries
Start by confirming whether your company meets the $1 billion revenue threshold and qualifies as doing business in California. For multinational corporations with complex structures, this may require legal review and coordination with finance teams.
Establish your baseline emissions inventory
A reliable GHG emissions inventory is the foundation of compliance. If your company hasn’t already measured emissions across all three scopes, begin now. Even a rough estimate will highlight where your largest data gaps are.
Build governance and assign ownership
Compliance cannot live only within the sustainability team. Legal, finance, procurement, and operations leaders all play a role in ESG (environmental, social, and governance).
Clear accountability will make it easier to integrate emissions reporting into existing corporate processes.
Work with suppliers early
Because Scope 3 emissions are so critical, supplier engagement should start now across all of your business units and jurisdictions. This includes training, requests for data, and investments in supplier capacity. Companies that build partnerships early will find reporting much smoother.
Explore technology solutions
Manual spreadsheets may work for a limited GHG inventory, but they cannot support the scale of SB-253 compliance.
Enterprise-level software for emissions reporting offers centralization, audit trails, and alignment with multiple frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD), the Corporate Sustainability Reporting Directive (CSRD), and the International Sustainability Standards Board (ISSB).
Plan for assurance
Assurance providers will expect to see transparent methodologies and clear documentation of assumptions. Building these processes early reduces costs and the risk of disputes later.
Turn CA SB-253 compliance into an advantage
Although SB-253 is a regulatory requirement, it also presents an opportunity. Companies that approach compliance strategically can strengthen their credibility with investors, customers, and employees. Transparent emissions disclosures help build trust and can differentiate a company in competitive industries.
Moreover, emissions data is more than a compliance exercise. It can uncover operational inefficiencies, highlight areas for cost savings, and inform corporate strategy. By treating SB-253 as part of a broader sustainability journey, companies can transform reporting into value creation.
Is your company in scope for California SB-253? Pulsora can help
If your organization has more than $1 billion in annual revenues and engages in business activity in California, it is almost certainly in scope for SB-253. That means you need to prepare for annual emissions disclosures beginning in 2026, overseen by CARB and subject to third-party assurance.
SB-253 is more than a compliance deadline. It is a chance to strengthen transparency, manage risk, and show stakeholders that your company is serious about accountability in a changing climate.
Ensure preparedness for California's upcoming climate compliance with our readiness checklist.
Ready to consider a solution to help with California compliance? See our roundup of the best California climate software.
See how Pulsora can help ensure compliance with California SB-253, SB-261, and any other reporting requirements you’re up against by booking a personalized demo.
