SB 253 and SB 261: A Guide for Employers Operating in California

SB 253 and SB 261: A Guide for Employers Operating in California

California’s new Climate Accountability Package, consisting of Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261), will significantly impact employers that conduct business or have operations in the state of California. Signed by Governor Gavin Newsom on October 7, 2023, these pioneering laws require businesses to disclose greenhouse gas emissions and climate-related financial risks, with the first reports due in 2026.

As California aims to become a leading global economy, these regulations will affect companies worldwide that conduct business in the state.

SB 253 mandates detailed emissions reporting, while SB 261 focuses on climate-related financial risk disclosures. Both laws will be implemented by the California Air Resources Board (CARB) in phases.

Understanding and complying with these laws is crucial to avoid fines and demonstrate your organization’s commitment to sustainability. Additionally, effective operational sustainability management ensures compliance and audit readiness, showcasing proactive environmental stewardship.

Clear guidelines and practical steps for compliance will help your business transition smoothly, submit all required data to and meet these new requirements on time.

What are SB 253 and SB 261?

With increasing concerns about wildfires, sea-level rise, and extreme weather in California, new laws SB 253 and SB 261 will soon require U.S. public and private companies with operations in California to report their greenhouse gas emissions and climate-related financial risks. These regulations impact companies of a certain size and revenue. By following these laws, your business helps improve transparency and demonstrate its commitment to sustainability.

What is SB 253?

SB 253, also known as the Corporate Climate Accountability Act, requires your organization to report its greenhouse gas emissions if it does business in California and has annual revenue over $1 billion. By 2026, your company must disclose its Scope 1 and Scope 2 emissions, with Scope 3 emissions reporting to follow. CARB will provide additional clarity regarding the disclosure requirements for reporting entities by January 1, 2025. This law aims to improve transparency and accountability, affecting over 5,000 companies.

The State Board can fine your organization up to $500,000 for violations. However, amendments provide a safe harbor for Scope 3 emissions, meaning companies won’t be penalized for reasonable misstatements. Complying with SB 253 shows your business’s commitment to sustainability and benefits your community, investors, and stakeholders.

What is SB 261?

SB 261 requires your organization to disclose climate-related financial risks. If your business operates in California and has total annual revenue of at least $500 million, you must prepare and submit these reports. You will need to send them to the California Air Resources Board and post them on your website. Companies regulated by the California Department of Insurance (CDI) or those in the insurance business in other states are excluded.

The first reports will be due in 2026. Simplifying environmental data tracking and keeping detailed records of your organization’s data are crucial to ensure accurate and timely reporting. These steps help you identify and address potential issues early, reducing the risk of non-compliance.

How You Can Comply with SB 253 and SB 261

Preparing sustainability reports can be challenging if you’re not sure where to start. Here is a comprehensive list of how your organization can comply with California’s new SB 253 and SB 261 requirements:

For SB 253:

1. Understand the Emission Types:

• Scope 1: Direct emissions from your organization’s activities.
• Scope 2: Indirect emissions from purchased electricity.
• Scope 3: All other indirect emissions from your supply chain (reporting starts in 2027).

2. Set Up Emissions Reporting:

• Start reporting Scope 1 and 2 emissions by 2026.
• Prepare for Scope 3 emissions reporting by 2027.
• Ensure your company’s emissions data is independently verified. Limited assurance for Scope 1 and 2 emissions begins in 2026, moving to reasonable assurance by 2030. Scope 3 emissions will need limited assurance starting in 2030.

3. Use the CARB Registry:

• Submit your verified emissions data to the digital platform that the state will set up by January 1, 2025.

For SB 261:

1. Prepare Climate-Related Financial Risk Reports:

• If your business has annual revenue of at least $500 million, it must report on climate risks, budget allocations for compliance and insurance, and strategic opportunities.
• Follow the Task Force on Climate-Related Financial Disclosures (TCFD) framework.

2. Submit Reports:

• Submit your organization’s first report by January 1, 2026, and then every two years.
• Make these reports available on your company website.

General Steps for Compliance:

1. Simplify Data Tracking: Implement systems to accurately measure and report all required emissions data.
2. Keep Detailed Records: Maintain comprehensive records to ensure accurate and timely reporting.
3. Plan for Assurance: Prepare for independent verification of your emissions data as required by the timelines.
4. Stay on Schedule: Ensure timely submission of both annual emissions and biennial financial risk reports starting in 2026.

Simplified Operational Sustainability Management

Simplifying your operational sustainability management is key to meeting new requirements efficiently. Automated systems for environmental data capture and emissions reporting help your organization track its environmental footprint accurately and in real-time, reducing manual errors and ensuring consistent reporting.

Detailed records ensure compliance with auditing requirements, giving you peace of mind. Simplified tracking means your records are always audit-ready, making the verification process easier and quicker.

A streamlined approach enhances transparency, reduces administrative work, and minimizes errors. This allows your team to focus on strategic initiatives rather than data collection, enabling informed, data-driven decisions to improve sustainability performance.

Ultimately, simplifying your organization’s operational sustainability management supports its environmental goals, strengthens your company’s reputation, and shows its commitment to responsible business practices.

Simplify and Automate Sustainability Reporting

An effective sustainability reporting program is essential for any organization. Sustainability reporting solutions streamline the reporting process, enhancing data accuracy and transparency, and leading to improved environmental performance and compliance. By managing your sustainability data thoroughly, you can protect your company’s reputation and ensure long-term success. Learn more about how Benchmark Gensuite’s Sustainability and Disclosure Reporting Solutions can benefit your organization.