CLIMATE CORPORATE DATA ACCOUNTABILITY
ACT: SB 253 BILL
ABOUT THIS LEGISLATION
SB 253 requires certain companies to report
direct emissions from operations (scope 1),
indirect emissions from energy use (scope 2),
and indirect upstream and downstream
supply-chain emissions (scope 3 emissions).
PROCEDURES:
Reporting should adhere to the Greenhouse
Gas Protocol standards, and all data should
be assured or verified by an independent and
experienced third-party provider.
These reports must be submitted to the
California State Air Resources Board (CARB)
and reporting entities must pay a fee for
CARB's implementation efforts.
COVERED ENTITIES:
Under Bill 253, any company with greater than $1
billion in annual revenue and doing business in
the state is obligated to comply and publicly file
reports every year. This accounts for
approximately 5500 companies.
TIMELINE FOR COMPLIANCE:
Starting in 2026, subject companies will have to
report scope 1 and scope 2 emissions from the
prior fiscal year (data should be collected
throughout the year in 2025). Starting in 2027,
subject companies must report scope 3
emissions from the prior fiscal year.
PENALTIES:
Subject companies that fail to file, file late, or
otherwise violate these provisions may face up to
$500,000 per year in penalties and only through
a formal administrative hearing process.
Companies will only face immediate financial
penalties if they fail to file the report but will not
face financial penalties for non-compliance with
emissions standards until 2030. Factors
impacting the ultimate penalty include whether
the company undertook good faith measures to
comply, and the company's past and present
compliance.
PURPOSE AND CONTEXT:
The law declares that current voluntary corporate
disclosures "lack the full transparency and
consistency needed by residents and financial
markets to fully understand these climate risks,"
and explains that Californians "have a right to know
about the sources of carbon pollution. . . to make
informed decisions." 2023 has seen a worldwide
consensus take place when it comes to embracing
climate disclosure requirements as an important
legal tool in driving stronger emission reductions.
With the the European Union finalizing the
European Sustainability Reporting Standards (ESRS)
under the CSRD, and the ISSB releasing their SFRS
standards, the effort to consolidate, standardize,
and regulate the frameworks for reporting is solidly
underway. SB 253 is the first corporate GHG
emissions disclosure law to go into effect in the
United States.
SUMMARY OF KEY PROVISIONS
Public and private companies are
covered: SB 253 applies to partnerships,
private corporations, and limited liability
companies.
It will impact thousands of companies:
The Assembly and Senate Floor Analyses
estimate that SB 253 will cover 5,344
entities.
Interoperability between standards: Like
the federal proposals, SB 253 builds upon
established standards, including the GHG
Protocol and TCFD.
Flexibility with Scope 3 emissions: In
addition to a later compliance date,
misstatements of Scope 3 emissions cannot
give rise to a penalty through 2030, and
even afterward, a reporting entity cannot
be subject to penalties for good-faith
disclosures. The law also provides CARB
with significant discretion and flexibility to
adjust implementation details as Scope 3
best practices evolve in the coming years.
Sustainability & Energy Management Simplified
