How to Navigate California Climate Disclosure Requirements

The California Climate Disclosure and Why It Matters

California is reshaping corporate accountability with two landmark laws: SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act). Together, these measures will require thousands of companies doing business in the state to disclose both their greenhouse gas emissions and their exposure to climate-related financial risks.

Starting in 2026, large companies must begin submitting reports. Analysts estimate that more than 6,500 entities will be subject to the new requirements across both laws, making California’s initiative the most ambitious climate disclosure framework in the U.S.

Yet confusion is widespread. Surveys show 83% of companies intend to begin reporting, but nearly half admit they are unsure how to interpret the rules. Recent state updates include new FAQs, draft checklists, and enforcement guidance—all meant to help organizations navigate this evolving landscape.

This uncertainty creates risk, but also opportunity. Regulators have already signaled they will allow flexibility in the first reporting cycle for companies that demonstrate “good-faith” effort. Acting early can turn compliance into a driver of resilience and leadership.

Benefits of California Climate Disclosure

Far from being just another compliance hurdle, California’s disclosure laws bring several strategic benefits:

• Regulatory readiness – Early alignment with CARB’s draft guidance reduces last-minute surprises.

• Transparency and trust – Publicly available reports strengthen credibility with investors, lenders, and customers.

• Operational insight – Emissions tracking often reveals inefficiencies and cost-saving opportunities across supply chains.

• Risk management – Identifying climate-related risks supports more resilient long-term planning.

• Reputation and leadership – Companies that disclose early will be seen as industry leaders, setting benchmarks for others.

Put simply, disclosure builds both compliance security and competitive advantage.

Practical Steps and Tools for Compliance

With reporting deadlines approaching, organizations should start preparing now. Here are three actionable steps:

1. Understand applicability
   Review whether your company meets the thresholds under SB 253 ($1B+ annual revenue) or SB 261 ($500M+ annual revenue). Recent CARB FAQs clarify what counts as “doing business in California.”

2. Leverage readiness tools
   Resources like Nasdaq’s California Climate Gap Assessment help companies benchmark progress and identify gaps in emissions data or financial risk reporting.

3. Invest in systems and training
   According to Covington, CARB will exercise enforcement discretion for the first reporting cycle if firms make good-faith efforts. This makes 2025 the year to train teams, pilot reporting systems, and strengthen supply chain engagement for Scope 3 data.

Common Mistakes to Avoid

• Waiting until deadlines loom – Companies that delay preparation face higher costs and greater compliance risks.

• Overlooking Scope 3 emissions – These indirect emissions are challenging but unavoidable under SB 253.

• Treating disclosure as PR – Regulators and stakeholders expect verifiable data, not just polished sustainability reports.

Real-World Applications and Case Studies

Industries are already adapting to California’s climate rules:

• Tech companies are mapping supplier networks to prepare for Scope 3 disclosures, especially given their global reach.

• Retailers are piloting lifecycle analysis tools to quantify emissions embedded in product supply chains.

• Financial firms are embedding climate risk disclosures into investment decisions, aligning portfolios with future risks.

At CARB’s August 2025 workshop, regulators previewed fee structures, compliance dates, and even a draft checklist for SB 261. These tangible steps help companies translate legislative requirements into internal processes.

The California Legislative Analyst’s Office also emphasizes that disclosure laws aim to strengthen economic resilience in the face of climate change—a reminder that compliance serves both corporate and public interest.

FAQs

What is California Climate Disclosure in simple terms?
It’s a pair of laws—SB 253 and SB 261—that require companies doing business in California to disclose their greenhouse gas emissions and climate-related financial risks.

How long does it take to get disclosure-ready?
Most companies need 6–18 months to prepare, depending on data quality and internal capacity. BDO recommends starting immediately, given the complexity of Scope 3 data collection.

Is climate disclosure worth it for career growth?
Yes. Professionals who understand California’s disclosure rules are in high demand. Training in emissions accounting and climate risk reporting opens opportunities in compliance, sustainability, and corporate leadership.

Start Learning Today!

California’s disclosure laws are not just about compliance—they are about leadership. With deadlines approaching, now is the time to act.

👉 Enroll in the Certified Sustainability Practitioner Program – Advanced Edition to gain the knowledge and tools needed to meet California’s requirements. Register here via Eventbrite.