California Climate Reporting Changes Leave Companies with Less Time to Prepare

This article was originally published in October 2024. An update has been added to reflect the September 2025 CARB workshop and legislative changes to California’s climate reporting requirements.

Update September 2025

The California Air Resources Board (CARB) recently hosted a workshop to clarify how it plans to implement the state’s climate disclosure laws. They provided critical updates on thresholds, reporting structures, exemptions, scope 3 timing, assurance requirements and potential fees. Key updates include:

• CARB proposed using gross receipts or total global revenue to define the thresholds for companies doing business in California. It now includes entities with sales exceeding $735,019.
• Companies can consolidate their emissions reporting at the parent company level.
• Entities such as not-for-profits, government agencies and companies with only remote employees in California are exempt.
• Scope 3 reporting is required to start in 2027, but CARB is still determining the specific schedule and phasing.
• Assurance requirements are beginning with limited assurance for scope 1 and 2, while scope 3 assurance will be phased in at a later date.
• The fee structure CARB is considering will be a flat annual fee per regulated entity.
• On December 1, 2025, CARB will post a public docket for reporting entities to post the location of their public link to their initial climate-related financial risk report under this program. CARB will keep this open until July 1, 2026.
• Emissions reports are due June 30, 2026.

Organizations that do business in California with over $1 billion in annual revenue (SB 253) or over $500 million (SB261) must act quickly to establish GHG tracking system that align with the GHG Protocol, prepare for third-party assurance engagements and develop climate risk disclosures aligned with frameworks like ISSB. With the first reports due in 2026, companies must accelerate their data collection, reporting infrastructure and governance processes.

California Governor Gavin Newsom signed into law Senate Bill (SB) 219, extending by six months the deadline for the California Air Resources Board (CARB) to develop rules for the state’s two climate reporting laws, known as the Climate Accountability Package. Companies must still begin reporting scope 1 and 2 greenhouse gas (GHG) emissions in 2026 and scope 3 GHG emissions in 2027. Disclosures of climate‑related financial risks will still begin in 2026.

With the six-month delay for the rules only, the new law effectively leaves organizations with less time to prepare than under the original timeframe. Newsom previously proposed a two-year delay for both rule development and the reporting deadline to give organizations additional time to refine their data and reporting processes (see Weaver article). Legislators, however, opposed delaying implementation of the law. The new compressed timeframe increases the urgency for organizations to develop the emissions tracking and climate risk reporting systems needed for compliance.

Key Changes

The Climate Accountability Package includes SB 253, which requires companies to disclose their direct and indirect GHG emissions, and Senate Bill 261, which mandates companies to disclose their climate-related financial risks. SB 219 makes several changes to these laws, including:

• Six-month rule delay: CARB has an extension from January 1, 2025 to July 1, 2025 to develop and adopt regulations for SB 253 that will mandate reporting entities to disclose annually their scopes 1, 2 and 3 emissions and obtain a third-party assurance engagement.
• Consolidated reporting: Companies can now consolidate reporting scopes 1, 2 and 3 emissions at the parent company level, and subsidiaries are exempt from preparing a separate report if the parent company qualifies as a reporting entity. This aligns SB 253 with SB 261 in that the latter already allowed for parent level reporting.
• New scope 3 schedule: CARB can now determine when companies must report scope 3 emissions. Originally, SB 253 required companies to report scope 3 emissions no later than 180 days after they report scope 1 and scope 2 emissions.
• Change to climate reporting organizations: CARB has the option, but no longer the requirement, to contract with a third-party climate reporting organization to develop and manage several elements of the program under SB 253 and SB 261.
• No annual fee: companies are no longer required to pay an annual fee when filing climate disclosures under SB 253 and SB 261.

How Organizations Can Prepare

Although CARB will not release the specific regulatory requirements of the Climate Accountability Package until mid-2025, there are several steps companies can take now to prepare. First businesses must determine whether they fall within scope of these regulations. If the regulations are applicable, then conducting readiness assessments for emissions and climate risks reporting is essential to identify any gaps between what they already disclose and what the regulations may require. The Greenhouse Gas Protocol and the Task Force on Climate-Related Financial Disclosures (TCFD) will serve as the key guiding frameworks for compliance with California’s climate laws:

• Greenhouse Gas Protocol: SB 253 requires GHG reporting in conformance with the Greenhouse Gas Protocol standards and guidance. This includes the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain Accounting and Reporting Standard.
• Task Force on Climate-Related Financial Disclosures (TCFD): SB 261 requires companies to report climate-related financial risk in accordance with the TCFD’s Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures, released in June 2017.

Companies should also continue to monitor the ongoing regulatory developments and legal challenges related to the law. While the laws are currently under litigation, unlike the SEC’s regulations, they have not been stayed pending the final verdict. They are proceeding as planned and companies should take note. With the reporting deadline just over a year away, businesses should start preparing now, despite the legal challenges.

The importance of proactive engagement cannot be overstated, as the Climate Accountability Package may serve as the model for future climate laws in other states. Focusing on the Greenhouse Gas Protocol and the TCFD is a key step toward staying ahead of the regulatory curve in California as well as in other jurisdictions with emerging climate laws.

Key Dates

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©2024

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