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California climate disclosure rules are shifting from voluntary to mandatory. The Governor of California recently signed the climate disclosure bill with a 2026 start date. But new laws in California don’t stop here as the California Climate Accountability Package comes with its own set of acts.
To keep up, we’re taking a high-level look at the most essential California climate disclosure requirements and showing you how to stay compliant with all of them.
Top California climate disclosure laws to follow in 2024
While many California climate disclosure bills have repeatedly been contested and litigated, the ones below are bound to change the future of climate disclosure. We’re exploring what each of them implies, who needs to comply, and how to prepare for the changes.
California climate disclosure SB 253: Climate Corporate Data Accountability Act (CCDAA)
The SB 253 climate reporting regulation requires yearly reporting of information related to Scopes 1,2 and 3, offering shareholders visibility into everything including outsourcing and constantly moving supply chain efforts. Compliance starts in 2026 for Scope 1 and 2 while Scope 3 comes into force in 2027. It’s important to note that reporting on Scope 3 greenhouse gas emissions requires companies to start collecting data starting today, before the bill comes into force and verifications happen.
Note on Scope emissions:
- Scope 1: Coming directly from a company’s operations such as the influence of your company’s vehicles or organization facilities.
- Scope 2: Indirect ones derived from energy an organization has purchased.
- Scope 3: Occurring throughout the supply chain or when customers use a company’s products.
Who needs to comply:
It applies to both public and private companies with business in California making more than a billion dollars annually.
How to prepare for SB 253 disclosure:
- Prepare Scope 1-2-3 emissions per the GHD Protocol standards (including data from business partners)
- Increase the emissions data requests you’re sending to suppliers and vendors
- Provide your Scope 1-2 emission data to clients so the latter can add your data to their own reports
- Find any data gaps and review your tech stack to make sure the data you’ll provide is going to be accurate
California climate disclosure SB 261: Climate-Related Financial Risk Act (CRFRA)
SB 261 requires reporting on the climate impact of your operations. Companies will have to publish a climate-related financial risk report every two years based on Task Force on Climate-Related Financial Disclosures (TCFD). Examples of risks you need to report on for this disclosure include harm due to transitional or physical risks as well as risks related to transportation, workers' health, security, and capital investments.
Compliance starts in 2026 for Scope 1 and 2 while Scope comes into force in 2027. CSRD disclosures can be used in California instead of the TCFD report if your company is based in Europe. You can also use SEC disclosures in the process as well as ISSB frameworks.
Who needs to comply:
The risk disclosure framework applies to public and private companies doing business in California and making more than $500 million in yearly revenue (for the past fiscal year).
How to prepare for SB 261 disclosure:
- Analyze your data to identify climate-related risks your company faces across the entire value chain
- Prioritize these risks and identify potential future vulnerability areas so you can prepare different scenarios to act upon these
- Submit ISSB-aligned reporting to the Central California Air Resources Board (CARB)
- Post all reporting publicly on your website
California climate disclosure AB 1305: Voluntary Carbon Market Disclosures Business Regulation Act (VCMDA)
In case you missed the update, AB 1305 was signed into law by California Governor Gavin Newsom on October 7, 2023, and is effective as of January 1, 2024.
The California AB 1305 bill provides a reporting framework for companies involved in carbon markets. It promotes transparency, standardizes disclosures, and ensures the credibility of carbon credits used to offset emissions.
According to the bill, companies must report on the details of the size and source of carbon credits. They're also expected to use recognized certifiers to analyze the credibility of these credit sources and show how the credits align with general emission reduction goals. You should publicly disclose the reports and send them to the California Air Resources Board.
Who needs to comply:
Any company operating in California that's part of voluntary carbon markets should comply. The main reason for staying compliant with this act, other than it’s now mandatory, is that it can show how committed your organization is to climate action and carbon reduction efforts.
How to prepare for AB 1305 disclosure:
- Analyze what your company's current involvement in carbon markets is and the types of credits you’ve purchased or sold
- Make sure all carbon credits you've used and are going to sell/purchase adhere to recognized standards
- Launch a reporting strategy to better collect, verify, and share information publicly on your carbon market participation
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