SB 253, SB 261 & AB 1305: What California’s Climate Laws Mean for Your Business
Learn how to stay compliant, strengthen your supply chain, and transform reporting into measurable climate action.
California leads the way in corporate climate accountability.
Climate disclosure is entering a new era. Governments around the world are requiring companies to go further and faster in disclosing their carbon emissions, climate risks, and sustainability performance.
In Europe, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) are transforming expectations for supply chain transparency and Scope 3 emissions reporting. Across Asia, countries such as Japan, Singapore, and Australia are embedding climate reporting into financial disclosures.
What Do California’s Climate Disclosure Laws Mean for Business?
California’s SB 253, SB 261 and AB 1305 set a new benchmark for climate disclosure, calling on companies to measure and report their full emissions, including Scope 3, and outline their climate-related financial risks by 2026.
In the United States, California is leading the way. Through the Climate Corporate Data Accountability Act (SB 253), Climate Related Financial Risk Act (SB 261), and Voluntary Carbon Market Disclosures Act (AB 1305), California has introduced the most ambitious climate disclosure framework in the country. Recent updates under SB 219 refined certain elements, but the core requirements remain unchanged: large companies operating in California must disclose their greenhouse gas emissions, including Scope 3, and report their climate related financial risks starting in 2026.
For many organizations, this represents a major shift. Compliance will demand deeper supply chain engagement, stronger data collection systems, and third-party verification. Yet for those who prepare early, California’s laws present more than a regulatory challenge as they offer an opportunity to build resilience, strengthen stakeholder trust, and secure long term competitive advantage.
The Compliance Challenge
The scope of California’s climate disclosure requirements is extensive:
- SB 253 applies to companies with over $1 billion in annual revenue, requiring them to disclose Scope 1, 2, and 3 emissions verified by independent auditors.
- SB 261 covers companies with more than $500 million in annual revenue, mandating biennial reports on climate related financial risks aligned with TCFD standards.
- AB 1305 requires companies marketing or using voluntary carbon offsets to disclose detailed information about their offset claims.
The inclusion of Scope 3 emissions adds the greatest complexity. These indirect emissions arising from suppliers, distributors, customers, and product use often represent over 70% of a company’s total carbon footprint. Collecting accurate Scope 3 data requires collaboration across global supply chains that may lack consistent, reliable, or complete information systems.
This creates two key pressures: suppliers must navigate new administrative demands, while buyers face financial and reputational risks if their reporting falls short.
The Bigger Picture
California’s regulations are part of a broader global movement where transparency and accountability are becoming the new standard. As more jurisdictions integrate climate disclosure into financial reporting, companies will need not only accurate reporting mechanisms but also actionable strategies to reduce emissions and manage climate risks effectively.
Why Businesses Should Act Now
California’s climate disclosure laws are already redefining corporate accountability. For large organizations, compliance is mandatory. For smaller suppliers, the expectation to provide transparent emissions data is quickly becoming standard.
Acting now enables businesses to go beyond compliance by embedding climate action into their core strategy, improving efficiency, reducing costs, and enhancing brand trust.
The companies that treat disclosure as a strategic opportunity rather than a box ticking exercise will be the ones best positioned to thrive in this evolving regulatory landscape.
The time to act is now: build robust data systems, engage your supply chain, and turn climate disclosure into a powerful driver of meaningful climate action.
