California’s carbon countdown: Preparing for SB 253 compliance

Over the past two decades, California has introduced a series of ambitious climate initiatives aimed at reducing greenhouse gas (GHG) emissions and promoting environmental accountability. From the Global Warming Solutions Act (AB 32) in 2006, which set the state’s first enforceable emissions reduction targets, to the cap-and-trade program, California has laid the groundwork for addressing climate change through legislation and innovation. Building on this legacy, the Climate Corporate Data Accountability Act (SB 253), signed into law in October 2023, now requires large corporations to publicly disclose their full carbon inventories, including Scope 1, 2, and 3 emissions. This new regulation represents a significant step forward in corporate climate accountability, compelling businesses to adopt rigorous reporting practices and align with global sustainability standards. [1]

What is SB 253?

The Climate Corporate Data Accountability Act (SB 253) is a landmark piece of legislation that requires public and private companies with annual revenues exceeding $1 billion and operating in California to disclose their GHG emissions annually. The law aligns with the Greenhouse Gas Protocol standards, which are widely recognised as the global benchmark for emissions reporting. [2]

Key Reporting Requirements

SB 253 mandates that companies report their emissions across three scopes:

• Scope 1 Emissions: Direct emissions from owned or controlled sources, such as company facilities or vehicles as well as fugitive emissions from refrigerant gases.
• Scope 2 Emissions: Indirect emissions from purchased electricity, steam, heating, or cooling used by the company.
• Scope 3 Emissions: Indirect emissions across the value chain, including those generated by suppliers, customers, and other third parties.

Of these, Scope 3 emissions are often the most challenging to measure due to their complexity and reliance on data from external stakeholders.

Timeline for Compliance

The law introduces a phased timeline for compliance [2]:

• 2026: Companies must begin reporting Scope 1 and Scope 2 emissions for fiscal year (FY) 2025 data.
• 2027: Scope 3 emissions reporting begins for FY 2026 data.

Third-Party Assurance Requirements

To ensure accuracy and credibility, companies must engage independent auditors to verify their reported data with recognized standards such as ISO 14064.Initially, limited assurance will be required for FY 2025–2028 data. From FY 2029 onwards, companies must provide reasonable assurance — a more rigorous standard of verification. [1]

Why SB 253 Matters

California’s climate policies have a far-reaching impact, influencing both national and international approaches to environmental regulation. SB 253, in particular, represents a significant step in corporate climate accountability that extends beyond state lines [3]. This legislation is poised to set a new standard for emissions reporting and transparency, potentially shaping corporate practices globally. By mandating comprehensive greenhouse gas emissions disclosures, including the challenging Scope 3 emissions, California is effectively using its market influence to establish climate disclosures as a standard practice in the U.S. and beyond. By mandating public disclosures of GHG emissions, SB 253 aims to increase transparency around corporate climate impacts. This transparency empowers consumers, investors, and regulators to hold businesses accountable for their environmental performance.

The Financial Stakes of Non-Compliance

Non-compliance with SB 253 can result in significant financial penalties—up to $500,000 per violation. Beyond fines, failure to comply could damage a company’s reputation and erode stakeholder trust. [2]

Aligning with Stakeholder Expectations

Investors and consumers are increasingly prioritising sustainability when making decisions. Transparent climate reporting not only meets regulatory requirements but also enhances a company’s credibility and appeal to environmentally conscious stakeholders.

While SB 253 represents a positive step toward climate accountability, it also poses significant challenges for businesses—particularly when it comes to Scope 3 emissions reporting:

Scope 3 Complexity

Scope 3 emissions often account for more than 70% of a company’s total carbon footprint depending on the industry making them critical to understanding overall climate impact beyond their own operations. However, collecting accurate data for these emissions is notoriously difficult due to the complexity of value chains and limited data transparency. Many suppliers either do not measure their emissions or are hesitant to share data due to confidentiality concerns or inconsistent reporting format, methods and reporting criteria. These challenges require companies to engage deeply with their supply chain while navigating significant resource and time constraints.

Data accuracy and assurance

Accurate data collection is essential for third-party assurance audits mandated under SB 253. However, many companies lack the internal expertise or systems needed to manage the process effectively. Inconsistent methodologies and incongruent data sources further complicate efforts, often leading to inaccuracies that can undermine reporting credibility  . As regulations require independent verification of GHG disclosures, ensuring robust and reliable data becomes paramount.

Best Practices for Navigating SB 253

To overcome these challenges and meet compliance deadlines, businesses should adopt proactive strategies that streamline reporting processes while driving long-term sustainability outcomes

1. Developing a comprehensive emissions tracking framework

Establishing a robust emissions tracking system is crucial for SB 253 compliance. This would involve mapping emission sources, establishing accurate data collection processes, developing custom calculation methodologies, implementing quality control measures, and creating insightful reporting templates. A comprehensive strategy ensures not only compliance but also provides actionable insights for your sustainability goals.

2. Engage stakeholders across the value chain

Collaboration is key when it comes to Scope 3 emissions reporting. Companies should work closely with suppliers and partners to gather accurate data while fostering a shared commitment to sustainability goals. This may include, but is not limited to: 

• Mapping climate maturity 
• Understanding existing strategies 
• Provide context on potential synergies 
• Identify resources and tools to support suppliers in measuring and reducing their emissions

3. Conduct internal audits before third-party assurance

Preparing for third-party assurance audits starts with conducting internal reviews of GHG data. This ensures that any discrepancies are identified and resolved before external verification begins. ISO 14064 is widely recognized as the preferred standard for GHG verification as it provides comprehensive guidelines that align with the GHG Protocol’s requirements and methodologies.

4. Leverage sustainability expertise

Partnering with sustainability consultants like Nexio Projects can provide invaluable support throughout the compliance process—from carbon accounting to supplier engagement strategies.

SB 253 represents a pivotal moment in corporate climate accountability—not just for California but globally. By requiring comprehensive GHG emissions disclosures across all three scopes, this legislation sets a new standard for transparency and environmental stewardship.

For businesses operating in California, preparing for SB 253 compliance may seem daunting at first glance—but it doesn’t have to be. With proactive planning and expert guidance from partners like Nexio Projects, companies can not only meet regulatory requirements but also position themselves as leaders in corporate sustainability.

Our services include:

• Comprehensive carbon accounting aligned with GHG Protocol standards.
• Supplier engagement strategies designed to simplify Scope 3 data collection.
• Preparation for third-party assurance audits.
• Development of tailored sustainability strategies that go beyond compliance requirements.
• Training workshops for internal teams on carbon management best practices.
• Implementation and customisation of carbon management tools to track emissions and monitor progress

Download our factsheet on how to decarbonise your business for more information.
We believe that compliance is just the beginning—our goal is to help you turn regulatory challenges into opportunities for innovation and leadership in sustainability.

[1] UC Berkeley School of Law, Center for Law, Energy & the Environment (CLEE) (2024) California Climate Policy Dashboard. Available at: https://www.law.berkeley.edu/research/clee/research/climate/climate-policy-dashboard/ (Accessed: 11 February 2025). 

[2] EcoVadis Overview: California Climate Corporate Data Accountability Act (SB253). Available at: https://ecovadis.com/regulations/california-climate-corporate-data-accountability-act-sb253/ (Accessed: February 11, 2025). 

[3] GHG Protocol Statement on SB253 Compliance Requirements. Available at: https://ghgprotocol.org/blog/statement-californias-climate-corporate-data-accountability-act-requires-companies-disclose (Accessed: February 11, 2025).