Climate activists have been asking for a systemic change, and the California Climate Package is certainly a BIG step towards a green future for the planet!
The California Climate Package comprises two bills – Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261), signed into law by the Governor of California in October 2023. The first of the two bills, SB 253, will require most of the world’s largest companies (with an annual revenue of $1bn or more) to report all of the Greenhouse Gases that they emit. Previous federal rules required these companies to only report part of their emissions – the ones from the companies’ direct operations, also known as Scope 1 Emissions.
With SB 253, companies will also be required to report Scope 2 and 3 Emissions i.e. indirect emissions from their electricity consumption and from their upstream & downstream activities, respectively. Scope 2 and 3 combined constitute about 90% of any company’s total emissions – which mostly went unreported earlier! This law will help bring more transparency and environmental consciousness to businesses.
SB 261, on the other hand, asks companies (with annual revenue of $500mn or more) to report possible financial risks they may face due to climate change. This will help businesses identify, evaluate, and address climate-related problems. It also better informs investors, employees, and other associates about the climate-resilience of the company.
Check out the table below for a quick overview of both the bills:
SB 253
SB 261
Official Name
Climate Corporate Data Accountability Act
Climate Related Risk Disclosure Act
Corporations Impacted
Public and private companies doing business in California with annual revenue in excess of $1 billion – 5,300 US and International companies.
Companies (excluding insurance companies) with an annual turnover in excess of $500 million – More than 10,000 corporations.
Emissions Scope
Scope 1, 2 and 3.
Not applicable directly but any financial impact will likely span all three.
Filing Frequency
Annual.
Bi-Annual.
Filing To
Publish the reports publicly – on own website or any other.
Filing Fee
TBD (Expected to be between $1,000-1,500) – Annual.
TBD – Bi-annual.
Effective Date
Beginning of 2026 for Scope 1 and 2, Beginning of 2027 for Scope 3.
2026.
Independent Verification & Assurance Needed
Yes. Limited assurance for Scope 1 and 2 from the onset and reasonable assurance by 2030. Limited assurance for Scope 3 starting 2030.
Yes.
Administrative Penalties
Not to exceed $500,000 per reporting year.
Not to exceed $50,000 per reporting year.
Implementing Agency
California Air Review Board (CARB). An “Emissions Reporting Organisation” to be commissioned by January 1 2025, to develop a digital platform for public disclosure.
California Air Review Board (CARB). A “Climate Reporting Organisation” will be commissioned to prepare a biennial public report summarising reports published by reporting corporations.
These climate laws are excellent – they will increase consumer transparency and encourage companies to compete in environmental friendliness. Given that California is one of the biggest economies globally, this change could influence companies worldwide.
Businesses in California already have a hard deadline to file reports starting January 2026. And while the laws only apply to big corporations, corporations may ask smaller businesses in their upstream and downstream chains to submit their emission data without which the big corporation would be out of compliance.
Even if businesses are not directly affected by climate accountability laws at present, they will likely become the norm soon. Publicly demonstrating this commitment can make businesses appear more personable. It shows that a business cares not only for its own interests but also for the well-being of people and the planet.
While all these developments are great, it may be another big task on the list of important to-dos for companies big and small.
But with Sprih, your work gets easier!
Our platform provides comprehensive capabilities for carbon emissions analysis (even the elusive Scope 3!), science-based target reduction setting, industry benchmarking, and peer comparison. We incorporate all key global reporting frameworks like TCFD, CDP, and GRI so you are ready to generate reports for filing. These features are especially valuable for organizations preparing to comply with the California Climate Package, which demand transparent and accurate emissions reporting.
We’re also excited to make you true environment champions by helping you identify actions that reduce and offset your environmental impact by connecting you to climate solution partners.
With Sprih, you can take the sustainability burden off your head and focus on running the business. Let us handle your climate accountability while together we strive to a greener future for our planet!
FAQs
What is the California Climate Package?
The California Climate Package refers to two landmark laws—Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261)—enacted to enhance corporate transparency on greenhouse gas emissions and climate-related financial risks.
Who is required to comply with SB 253 and SB 261?
SB 253 applies to U.S. public and private companies with annual revenues exceeding $1 billion that do business in California. SB 261 targets companies with annual revenues over $500 million operating in the state. Both laws encompass a broad range of businesses, including public and private entities.
What are the key disclosure requirements under SB 253?
SB 253 mandates that covered companies publicly disclose their Scope 1 (direct), Scope 2 (indirect from energy consumption), and Scope 3 (indirect from supply chain and other activities) greenhouse gas emissions. These disclosures aim to provide a comprehensive view of a company’s carbon footprint.
What does SB 261 require regarding climate-related financial risks?
SB 261 requires companies to biennially disclose climate-related financial risks they face and the measures they have adopted to mitigate and adapt to these risks. The disclosures should align with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD).
When do the reporting requirements for SB 253 and SB 261 take effect?
For SB 253, reporting of Scope 1 and Scope 2 emissions begins in 2026, with Scope 3 emissions reporting starting in 2027. SB 261 requires the first climate-related financial risk reports to be submitted by January 1, 2026, and biennially thereafter.
