Climate change is one of the most significant challenges facing businesses today, and it has prompted regulatory bodies to take action. California, a leader in environmental regulation, has passed two new climate laws (SB 253 and SB 261) — landmark pieces of legislation mandating comprehensive climate-related disclosures for large corporations. To meet these new requirements, businesses must ensure that their GHG emissions data is traceable, transparent, and reliable.
This guide will walk you through the steps to prepare for California climate disclosure — ensuring that your organization is not just compliant, but also positioned to gain investor confidence and demonstrate corporate responsibility. And, if you missed it, here are some additional takeaways from our recent webinar on SB 253 and SB 261.
Understanding SB 253 and SB 261
The Climate Corporate Data Accountability Act (Senate Bill 253) and the Climate-Related Financial Risk Act (Senate Bill 261) reflect California's aggressive push for climate accountability. SB 253 requires businesses (both public and private) with revenues exceeding $1B USD operating in California to report their emissions comprehensively, including scopes 1, 2, and 3. They will start reporting in 2026 on 2025 data — and the law mandates that these reports receive third-party assurance to ensure their accuracy.
SB 261 broadens the net by requiring large US businesses with annual revenues over $500M USD operating in California to publicly disclose climate-related financial risks and mitigation strategies, irrespective of their operational jurisdiction within the United States. As with SB 253, this law applies to both publicly traded and private companies. The two laws require intention and action by businesses — starting now.
Key Steps to Prepare for California Climate Disclosure
Preparing for California climate disclosure will take time and resources. Businesses should make sure they thoroughly understand the new requirements and have a roadmap for gathering emissions data. A solid plan will prioritize cross-functional collaboration and establish processes and internal controls to ensure data is audit-ready. To get started, you can focus on these key steps:
1. Educate Yourself and Assemble a Cross-Functional Team
The complexity of climate reporting demands a thorough understanding of relevant policies. Begin by getting to know SB 253 and SB 261. What do they entail for your specific operations? How do they differ from previous regulations? For instance, SB 253's inclusion of scope 3 emissions will prompt affected organizations to closely examine indirect emissions from their value chains — including business travel, purchased goods, and waste disposal.
With these insights, form a cross-functional team. If your company manufactures electronics, your team might include staff who work with suppliers (for scope 3 emissions), facilities management (for scope 1 and 2), and finance (for risk disclosure and audit preparation). This team should work closely together to define each department's responsibilities, ensuring all stakeholders clearly understand their roles.
2. Outline a Plan for GHG Data Gathering
Creating a plan for gathering GHG data starts with understanding what information you need to collect — and how. For example, a logistics company’s scope 1 emissions data might include fuel used in company vehicles, while scope 2 would cover the electricity consumed in warehouses, and scope 3 would account for emissions from outsourced transportation services.
Equip yourself with the appropriate tools for data gathering. Persefoni’s platform can be pivotal here, streamlining data collection across scopes 1, 2, and 3. Develop a workflow that identifies data sources, such as fuel receipts or utility bills, and details the process for data entry and calculation. The workflow should also include timelines and responsibilities for data collection to avoid last-minute rushes that can lead to errors.
3. Collaborate Across Departments
Efficient collaboration across departments is non-negotiable. For instance, your IT department likely has data about on-premises server energy use (scope 2), while your procurement team knows the ins and outs of supplier emissions (scope 3). You should coordinate across departments to ensure data flow and to align the company’s sustainability efforts with its business operations. Implementing a software platform for sharing data (and ensuring its integrity) will facilitate coordination. As climate data moves from the voluntary to the regulated reporting space, it will be treated more and more like financial data. Companies will want to include their finance and internal audit groups in their cross-functional teams.
4. Mature Your Processes
Maturity in processes comes from iterative improvement. Say your company has been tracking scope 1 emissions by collecting fuel usage data and applying emission factors manually. To mature the process, you might start using fuel cards that automatically log gas consumption data, reducing errors and saving time. That usage data can be linked to the Persefoni platform, with appropriate emission factors applied, in order to calculate and track greenhouse gases with precision.
5. Establish Internal Controls and Governance
As with financial data, climate data requires rigorous governance. Establish clear reporting lines and control mechanisms. For example, you might designate a sustainability officer with the authority to enforce reporting deadlines and procedures and a climate data analyst responsible for data verification. These data owners would work with the cross-functional teams described above to ensure the reporting of complete and accurate data.
Companies can develop a governance charter specifically for climate disclosure that includes policies on data accuracy, completeness, and consistency. It should lay out the steps to be taken in the case of discrepancies or data gaps, ensuring they are addressed promptly and transparently. For guidance, look at COSO’s new framework for internal controls over sustainability data.
6. Get Ready for Assurance
SB 253 calls for businesses to hire independent auditors to verify their reported emissions. To prepare for third-party assurance, teams need to conduct an internal audit and make sure their technical tools and controls are well-designed and operating effectively. Climate data must now be handled with the same care and attention as financial data; miscalculations and errors can lead to fines and reputational damage. Rigorous internal scrutiny prior to assurance will lead to lower external risk. Most importantly, emissions data needs to be traceable, transparent, and reliable.
7. Get the Entire Organization Onboard
Effective climate disclosure requires buy-in from every level of the organization. Consider holding educational seminars that explain the importance of compliance with SB-253 and SB-261 and how disclosure impacts everyone's role. For instance, the marketing department needs to understand how the transportation of printed materials contributes to scope 3 emissions, and how their team can play a role in selecting lower-carbon options.
You can use concrete examples that resonate with employees’ daily work, like showing the facilities team how changes in energy use directly affect scope 2 reporting. Leaders might create incentives for departments to meet their data collection goals and integrate these objectives into their performance metrics.
With California’s new regulations setting in, companies will need stringent control over their climate data. Robust systems and processes help prepare for audit requirements and instill ongoing confidence in your data. Persefoni's platform, enhanced with cutting-edge software and AI, empowers organizations to measure, report, and reduce their carbon footprints. It aligns climate and business objectives with a foundation of transparency and trust.
With the right tools and a proactive approach, businesses can not only comply with the new mandates — they can lead the way in sustainable business practices. Your efforts today in preparing for California's climate disclosure requirements will set the stage for a more sustainable and responsible corporate environment for years to come.