California passed two senate bills and an assembly bill requiring public and private organizations with California operations to report greenhouse gas (GHG) emissions, climate-related financial risks, voluntary carbon offsets (VCO), and other climate-related emission claims.
- SB-253—Climate Corporate Data Accountability Act
- SB-261—Climate-Related Financial Risk Act
- AB-1305—California Voluntary Carbon Market Disclosures Act
Companies doing business in California should have accurate, up-to-date data on their GHG emissions and climate-related financial risks to avoid potential penalties and reputational damage.
See the below tables to understand what these bills, enacted in October 2023, mean and the potential impacts to your organization.
SB 253—Climate Corporate Data Accountability Act
The Climate Corporate Data Accountability Act, or SB-253, aims to increase transparency and accountability regarding greenhouse gas (GHG) emissions from large corporations.
Key Details of SB-253
Revenue Threshold
All organizations exceeding $1 billion in annual revenue with operations in California.
The Senate bill does not define doing business in California but it’s likely to be defined similar to the California tax law with further clarification in the near term.
Required Reporting and Disclosures
Scope 1, Scope 2, and Scope 3 GHG emissions
Scope 1 emissions. Direct greenhouse gas emissions that stem from sources that a reporting entity owns or directly controls.
Scope 2 emissions. Indirect greenhouse gas emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity.
Scope 3 emissions. Indirect upstream and downstream greenhouse gas emissions, other than those emissions reported in Scope 2.
Timing Requirements
Scope 1 and Scope 2 GHG emissions must be disclosed starting in 2026 for the prior fiscal year.
Scope 3 GHG emissions must disclosed starting in 2027 for the prior fiscal year within 180 days of disclosing Scope 1 and Scope 2 GHG emissions.
Frequency
Annual
Frameworks Utilized
All emissions must be reported in line with the GHG Protocol—the most widely used greenhouse gas accounting standards.
Location of Reporting Deliverables
Entities will have to submit their emissions information to an emissions reporting organization that will be designated by the California Air Resources Board (CARB).
The organization will develop a publicly accessible digital platform for the emissions data.
Assurance Requirements
Limited assurance is required for Scope 1 and Scope 2 emissions starting in 2026.
Reasonable assurance is required for Scope 1 and Scope 2 emissions starting in 2030.
On or before January 1, 2027, the state board may establish an assurance requirement for third-party assurance engagements of scope 3 emissions. The assurance engagement for scope 3 emissions shall be performed at a limited assurance level beginning in 2030.
Penalty for Noncompliance
Non-filing, late filing, or other failure to meet requirements will result in a penalty fee, limited to $500,000 per year.
SB-261 Climate-Related Financial Risk Act
SB-261 is a bill that would require certain organizations to prepare and disclose a report on their climate-related financial risks and the measures they've adopted to reduce and adapt to these risks.
Key Details of SB-261
Revenue Threshold
All organizations exceeding $500 million in annual revenue with operations in California
The Senate bill does not explicitly define doing business in California but it’s likely to be defined similar to the California tax law with further clarification in the near term.
Required Reporting and Disclosures
This bill would require an applicable entity to prepare a climate-related financial risk report disclosing the entity’s climate-related financial risk and measures adopted to reduce and adapt to climate-related financial risk in accordance with the 2017 Final Report of Recommendations TCFD Framework guidance.
Timing Requirements
Starting on or before January 1, 2026
Frequency
Biennial
Frameworks Utilized
Task Force on Climate-related Financial Disclosures (TCFD)
Location of Reporting Deliverables
Company website
Assurance Requirements
No attestation requirements
Penalty for Noncompliance
Failure to make report publicly available or publishing an inadequate or insufficient report will result in a penalty fee limited to $50,0000 per year.
California Governor Gavin Newsome commented publicly about the feasibility of these timelines and implementation periods for SB-253 and SB-261. Timelines are expected to be adjusted based on the outcomes of the legislative and regulatory processes in 2024 and 2025, which should add clarity.
AB-1305 Voluntary Carbon Market Disclosures Act
AB-1305 mandates businesses selling, marketing, and purchasing VCOs in California to disclose specific information about the related carbon offset project and any accountability measures on their website. This includes details about the carbon offset project's protocol, location, timeline, type, and annual reduction or removal amounts.
Key Details of AB-1305
Revenue Threshold
No revenue threshold for AB-1305
Definition of VCO
The act defines a VCO as any product sold or marketed in the state that claims to be a GHG emissions offset, voluntary emissions reduction, retail offset, or any like term, that connotes that the product represents or corresponds to a reduction in the amount of GHG present in the atmosphere or prevents the emission of GHG into the atmosphere.
Required Reporting and Disclosures
Market or Sell VCOs. For entities that market or sell VCOs in California the required disclosures include information on the specifics of the carbon offset project such as protocol used in emission estimation, location of offset project set, project timeline, project type and other factors.
Purchase or Use VCOs. For entities that purchase or use VCOs in California and make climate-related emissions claims related to achievement of net zero emissions or similar claims, are required to disclose information on the carbon offset such as the name of the entity selling the offset, offset project type, specific protocol used in emission estimation, independent third-party verification and other factors.
Make emission claims. For entities that operate in California and make California climate-related emissions claims related to the achievement of zero emission or similar claims, are required to disclose how claims such as carbon neutral or net zero emission are determined to be accurate, actually accomplished, or in progress.
Effective Dates and Timing Requirements
AB-1305 disclosures are due on company websites by January 1, 2025. The compliance deadline isn’t explicit in the bill; the deadline is based on the letter from the bill’s sponsor, Assembly Member Jesse Gabriel.
Frequency
At least annually
Location of Reporting Deliverables
Company website
Assurance Requirements
No explicit attestation requirements but disclosures are required about whether there is independent-party verification of company data and claims listed
Penalty for Noncompliance
Each violation is subject to civil penalties of no greater than $2,500 per violation per day, not to exceed a total of $500,000.
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To learn more about how these standards could impact you or your business, contact your Moss Adams professional.
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