SB 253 and SB 261 don’t reinvent the wheel—they align with existing global frameworks. SB 253 uses the Greenhouse Gas Protocol. SB 261 builds on the TCFD. This alignment signals something bigger: climate reporting is now maturing into a globally consistent, auditable, and comparable discipline. The upshot? If you’re already working toward CSRD, TCFD, or SBTi targets, you’re on the right path. But now, you need to turn guidance into governance.
Why Alignment with Global Frameworks Matters
Here’s the thing: California’s laws could’ve created a compliance headache by inventing brand-new frameworks. They didn’t.
Instead, they locked into the two most widely adopted climate reporting standards:
SB 253 mandates Scope 1, 2, and 3 emissions disclosures based on the Greenhouse Gas Protocol.
SB 261 requires climate-related risk disclosures aligned with TCFD (Task Force on Climate-Related Financial Disclosures).
This isn’t just convenient. It’s strategic. By anchoring themselves in existing global frameworks, California’s laws:
Reduce friction for multinationals already preparing for CSRD, SBTi, or ISSB
Increase comparability across jurisdictions
Move climate disclosures closer to the rigor of financial reporting
Let’s break them down.
SB 253: Built on the Greenhouse Gas Protocol
What the Law Says
SB 253 requires large companies doing business in California to disclose their:
Scope 1 emissions (direct)
Scope 2 emissions (indirect, from electricity use)
Scope 3 emissions (all other indirect emissions across the value chain)
These disclosures must follow the GHG Protocol—the most widely used accounting standard for greenhouse gas emissions globally.
Why the GHG Protocol?
It provides:
A clear methodology for emissions calculation
Sector-specific guidance
A foundation used by SBTi, CDP, and many national frameworks
In short, if you’ve already started a GHG inventory, you’re halfway there.
What You’ll Need
Activity data across operations, suppliers, logistics, and purchased goods
Clear boundaries (organizational and operational)
Emission factors that are region- and activity-specific
A transparent audit trail, especially as limited assurance kicks in (2026)
SB 261: Anchored in the TCFD Recommendations
What the Law Says
SB 261 mandates that companies disclose their climate-related financial risks in line with the TCFD framework. This includes:
Governance: How your board and leadership oversee climate risks
Strategy: How climate scenarios affect your business
Risk Management: How you identify, assess, and manage those risks
Metrics and Targets: What you use to track and act on them
Why TCFD?
It’s widely endorsed by:
The G7 and G20
The International Financial Reporting Standards (IFRS) Foundation
Major regulators including the SEC, UK FCA, and Japan FSA
TCFD turns climate disclosures from a CSR initiative into a financial risk management exercise. That’s a major mindset shift for companies.
What You’ll Need
Board-level oversight documentation
Climate scenario analysis and stress testing
Enterprise risk management (ERM) linkage
Financial impacts, exposure, and adaptation strategies
How These Frameworks Complement Each Other
The GHG Protocol (SB 253) and TCFD (SB 261) aren’t siloed. They’re interlinked:
SB 253 (GHG Protocol)
SB 261 (TCFD)
Measures emissions
Evaluates how emissions create financial risk
Quantitative baseline
Qualitative + financial strategy
Focus: supply chain, operations
Focus: governance, planning, markets
Data collection-heavy
Disclosure narrative-heavy
Together, they give regulators, investors, and stakeholders a full picture:
What are your emissions?
What do those emissions mean for your business resilience?
What Businesses Must Now Operationalize
This alignment demands more than a comms strategy. It requires operational capacity:
1. Cross-functional Coordination
You can’t do this from the ESG team alone. You’ll need:
Finance (for scenario planning and materiality analysis)
Operations (for emissions data)
Procurement (for Scope 3)
Risk & compliance (for TCFD governance and controls)
2. Platform Infrastructure
Spreadsheets won’t cut it. You’ll need systems that can:
Automate GHG Protocol-based emissions tracking
Tag emissions to financial data
Generate investor-grade, audit-ready reports
Keep up with multiple frameworks across markets
3. Assurance Readiness
By 2026, SB 253 requires limited assurance for emissions data. You’ll need to:
Establish version control and change logs
Maintain documentation of assumptions and boundaries
Prove the provenance of your Scope 3 estimates
How This Affects Dual and Global Reporting
If You’re Reporting Under CSRD
CSRD aligns with EFRAG/ESRS, which incorporate GHG Protocol and TCFD
Reporting under SB 253 and 261 gives you a strong CSRD head start
You may still need to tweak for double materiality and digital tagging
If You’re Using Voluntary Standards (CDP, SBTi, ISSB)
You’re on the right track—but voluntary is now becoming mandatory
Standardize documentation, verification processes, and timelines
Upgrade internal controls and stakeholder alignment
FAQs
What does it mean that SB 253 and SB 261 align with existing global frameworks?
They do not introduce bespoke standards; SB 253 uses the Greenhouse Gas Protocol and SB 261 builds on the TCFD recommendations, ensuring companies can leverage familiar reporting methods already in use globally.
Why was it strategic for California to base these laws on the GHG Protocol and TCFD?
Using widely adopted frameworks reduces compliance friction for multinationals, improves comparability across jurisdictions, and elevates climate disclosures to a level of rigor comparable to financial reporting.
How does SB 253 leverage the Greenhouse Gas Protocol for emissions reporting?
Under SB 253, companies must report Scope 1, Scope 2, and Scope 3 emissions using GHG Protocol methodologies, including clear boundaries, sector-specific guidance, regional emission factors, and audit trails to support future assurance.
What are the structural elements SB 261 requires under the TCFD framework?
SB 261 mandates disclosures on governance, strategy, risk management, and metrics & targets—aligning directly with TCFD’s four core pillars, so companies document how climate risk is overseen, assessed, and governed.
How do SB 253 and SB 261 work together to provide a full compliance picture?
SB 253 delivers quantitative emissions data via GHG Protocol and SB 261 provides qualitative risk context under TCFD—together offering clarity on both carbon impact and associated financial risks.
What organizational capabilities should businesses build to meet both SB 253 and SB 261?
Firms must develop cross-functional systems integrating emissions tracking and risk modeling, supported by audit‑ready infrastructure, centralized data platforms, and governance frameworks that connect ESG with finance and operations.
If a company already reports under CSRD, TCFD, or SBTi, how does that help with SB 253 and SB 261 compliance?
Companies already using CSRD, TCFD, or SBTi are largely aligned with the frameworks SB 253 and SB 261 require. They need to move from guidance to formal governance structures, ensuring processes and reporting meet CARB standards and assurance-ready requirements.
