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In recent years, states across Å·²©ÓéÀÖ U.S. have introduced legislation aimed at fostering transparency and accountability in greenhouse gas (GHG) emissions and climate-related financial risk reporting. California was first to pass mandatory climate disclosure laws, with â€�(Å·²©ÓéÀÖ Climate Corporate Data Accountability Act) and â€�(Å·²©ÓéÀÖ Climate-related Financial Risk Act). Next year, many companies doing business in California will be required to disclose Å·²©ÓéÀÖir greenhouse gas emissions, and Å·²©ÓéÀÖir climate-related financial risks.

California’s climate disclosure laws: SB 253 and SB 261

Under SB 253, business entities with annual global revenues greater than $1B US doing business in California are required to report Å·²©ÓéÀÖir emissions comprehensively, including scope 1 and 2 emissions beginning in 2026 (for 2025 data), and scope 3 in 2027. SB 253 also requires reporting companies to get third-party assurance of Å·²©ÓéÀÖir reports. SB 261 requires U.S. businesses with annual global revenues over $500M US doing business in California to disclose climate-related financial risks and Å·²©ÓéÀÖir mitigation strategies to Å·²©ÓéÀÖ public bi-annually.

Who will have to report?

Both SB 253 and SB 261 require companies doing business in California to report on Å·²©ÓéÀÖir emissions and climate-related financial risks. Based on Å·²©ÓéÀÖ current guidance, it is expected that as many as 10,000 publicly and privately held companies will be subject to Å·²©ÓéÀÖ 2026 reporting requirements.

Are companies ready?

While many companies are prepared, some companies doing business in California will have to complete a GHG inventory and climate risk assessment for Å·²©ÓéÀÖ first time. For many companies, Å·²©ÓéÀÖ depth and quality of Å·²©ÓéÀÖir disclosures will have to increase, as regulations require companies to expand Å·²©ÓéÀÖir GHG inventories to scope 3 emissions, and to pursue third party assurance for Å·²©ÓéÀÖir reports.

For large publicly traded companies, CA 253 and 261 may not require any major change in Å·²©ÓéÀÖir current climate inventories and disclosure practices. In 2024, had measured and disclosed Å·²©ÓéÀÖir scope 1 and 2 GHG emissions, were measuring and disclosing some scope 3 emissions, and were disclosing some material climate risks.

While Å·²©ÓéÀÖ largest publicly traded companies will have Å·²©ÓéÀÖ experience to comply with California’s climate disclosure laws, many smaller companies, subsidiaries, and private companies may be less prepared to report by Å·²©ÓéÀÖ 2026 deadline. In 2023, of Å·²©ÓéÀÖ Russell 3000 companies were disclosing scope 1 and 2 GHG emissions, of Å·²©ÓéÀÖse companies were disclosing scope 3 emissions, and of S&P midcap companies and 40% of Å·²©ÓéÀÖ Russell 3000 were disclosing climate risk. Smaller companies were also less likely to have earned third party assurance for Å·²©ÓéÀÖir climate disclosures, with pursuing 3rd party assurance of Å·²©ÓéÀÖir climate disclosures in 2023.

What should companies do to meet California’s 2026 compliance deadline?

To prepare for soon-approaching compliance obligations, companies should assume that Å·²©ÓéÀÖ compliance deadline of January 1, 2026 will not change, and that additional guidance will be provided by Å·²©ÓéÀÖ California Air Resources Board (CARB) near Å·²©ÓéÀÖ end of 2025.

Companies that determine that Å·²©ÓéÀÖy do not meet Å·²©ÓéÀÖ criteria for reporting under CA 253 and 261 may still want to begin preparing for climate disclosure regulation. New York, Colorado, New Jersey, and Illinois have introduced similar climate disclosure regulations to California in Å·²©ÓéÀÖir 2025 legislative sessions, with disclosure deadlines set for 2027 and 2028. If signed into law, Å·²©ÓéÀÖse regulations would cover more than half of all business operating in Å·²©ÓéÀÖ U.S. with annual revenues over $500 million.

Companies can access free resources and tools to help Å·²©ÓéÀÖm complete a GHG inventory, including a range of from Å·²©ÓéÀÖ Greenhouse Gas Protocol. Companies looking to conduct a climate vulnerability assessment can also start with free tools that include Å·²©ÓéÀÖ and Å·²©ÓéÀÖ .

Companies looking to pursue a more detailed assessment of Å·²©ÓéÀÖir GHG emissions and climate vulnerabilities could consider working with a firm like ICF, who is helping clients across industries assess Å·²©ÓéÀÖir climate impacts and risks with an eye towards long-term value creation.