Introduction
California has long been a trendsetter for environmental laws in the U.S., and its climate legislation often influences policies nationwide. A new law, known as SB 253, establishes a high standard for how companies must report their greenhouse gas (GHG) emissions. If your company does business in California or plans to, you may need to prepare for significant changes soon.
With increasing global pressure on businesses to address climate change, SB 253 serves as an early test of corporate climate accountability in the U.S. This blog explains what SB 253 requires, why it matters, the challenges ahead, and how companies can prepare effectively.
What Is SB 253?
SB 253 is officially called the Climate Corporate Data Accountability Act. It requires all U.S.-based companies with more than $1 billion in annual revenue that do business in California to report their GHG emissions. This law applies to both public and private companies (including partnerships and LLCs), regardless of whether they are headquartered in California.
It’s estimated that around 5,400 businesses will need to comply with SB 253. The law was signed in October 2023 and is scheduled to take effect in 2026.
Key Reporting Requirements of SB 253
Under SB 253, companies must disclose the following types of emissions:
- Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles or manufacturing plants).
- Scope 2: Indirect emissions from purchased energy (e.g., electricity, heat, or steam).
- Scope 3: All other indirect emissions across the value chain (e.g., suppliers, product use, business travel, and waste).
Here’s the timeline for reporting:
- By June 30, 2026: Report Scope 1 and Scope 2 emissions from 2025.
- By 2027, start reporting Scope 3 emissions based on 2026 data.
- Companies must get third-party verification for these reports, following the Greenhouse Gas Protocol, a global standard for measuring carbon footprints.
Why Does SB 253 Matter?
Unlike many other regulations, SB 253 covers Scope 3 emissions, which often account for over 90% of a company’s total climate impact. This means companies must look beyond their own operations to their value chain and suppliers.
SB 253 requires that third parties independently verify public disclosures. Non-compliance can result in administrative penalties (up to $500,000 per year) depending on history and circumstances. The California Air Resources Board (CARB) is responsible for adopting and implementing regulations.
Why SB 253 is a Big Deal?
SB 253 is one of the most comprehensive climate disclosure laws in the world, and it’s changing how companies think about sustainability.
- Transparency & accountability
The law brings emissions data into the public domain, enabling investors, regulators, and customers to compare companies consistently. - Strategic risk & planning
Emissions performance will increasingly influence business decisions — from supply chain partnerships to investment and capital allocation. - Setting precedent
California often sets a precedent for federal and state-level regulation. Other states and agencies are expected to follow with similar disclosure rules. (source: https://www.regulatoryandcompliance.com/2025/04/state-climate-disclosure-bills-a-growing-trend/)
Challenges & Risks for Companies
While SB 253 represents progress, compliance won’t be easy.
- Data collection & completeness
Especially for Scope 3, which covers indirect emissions (suppliers, product use, travel). Many companies struggle here. - Quality & assurance
Getting third-party verification and building audit-grade processes is complex and costly. - Legal & jurisdictional complexity
Determining what “doing business in California” means and applying state law to interstate companies may invite legal challenge. Indeed, business groups have sued, challenging the authority of SB 253. - Implementation burden & cost
Building the systems, hiring talent, training, and managing change can be expensive.
How to Prepare: A Practical Roadmap
To get ready for SB 253 compliance, companies should act now:
- Scope & boundary assessment
Identify all legal entities, operations, and revenue streams relevant to California. Determine whether your firm meets the revenue threshold or the “doing business” test. - Data systems and governance
Establish internal ownership, roles, and process flows for emissions data (Scope 1, 2, and 3). - Emissions inventory & modelling
Use recognized standards such as the GHG Protocol. Estimate missing data where needed, begin modelling. - Assurance readiness
Engage third-party assurance providers early to design audit-friendly processes. - Public disclosure & reporting
Prepare reports that are clear, consistent, and accessible to stakeholders. - Continuous improvement & resilience
Use emission data to guide reduction targets, investments, and climate strategy.
Conclusion
California’s SB 253 represents a foundational shift in U.S. climate disclosure. It pushes businesses to examine their entire carbon footprint — not just their direct emissions — and to act transparently. For corporate leaders and sustainability teams, this law is both a challenge and an opportunity: a chance to strengthen credibility, reduce climate risks, and attract investor trust.
Companies should not wait until 2026; begin your data readiness, reporting, and assurance planning today. If you’d like to understand how your organization can prepare, book a demo of Credibl’s AI-powered ESG and Climate Risk platform to simplify compliance and reporting.
FAQ
What qualifies as “doing business in California”?
The law aligns with California’s tax code, Section 23101, covering thresholds for sales, property, and payroll.
Do we face fines immediately?
CARB’s enforcement guidance suggests that penalties will be waived in 2026 for companies demonstrating a good-faith effort toward compliance.
Who does SB 253 apply to?
All U.S.-based companies with over $1 billion in annual revenue that do business in California.
What standard should be used?
The Greenhouse Gas Protocol, along with CARB’s forthcoming implementation rules.
How severe are penalties?
Up to $500,000 per year, depending on the severity and frequency of violations.
