In the context of Senate Bills 261 and 253, amended to SB 219, The California Air Resource Board (CARB) has been designated as the regulatory and enforcement authority:
- Under SB 253 (Climate Corporate Data Accountability Act), CARB is tasked with developing and implementing rules that require large public and private companies doing business in California to publicly disclose their GHG emissions—including Scope 1, Scope 2, and Scope 3 emissions—on an annual basis.
- Under SB 261 (Climate-Related Financial Risk Act), CARB is responsible for establishing regulations that require similar companies to biennially disclose climate-related financial risks and explain how they are managing those risks, aligned with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD).
CARB is the state agency responsible for protecting public health by reducing air pollution and overseeing climate policy implementation in California. As part of its broader mandate, CARB plays a key role in advancing the state’s climate goals and ensuring compliance with greenhouse gas (GHG) emissions regulations.
CARB is currently in the process of developing guidance, timelines, and reporting standards for both bills, with public workshops and stakeholder engagement to inform the final rulemaking process. Their goal is to ensure consistent, transparent, and actionable climate disclosures from companies operating in California.
During the regulatory comment period, stakeholders submitted a wide range of feedback, reflecting diverse perspectives from industry, advocacy groups, and the public. GSI Environmental’s sustainability team has summarized and outlined seven major themes of the public comments submitted to CARB.
1. Clarifying Definitions and Scope
Many commenters expressed support for adopting standardized and existing definitions to reduce ambiguity. For example, there was broad endorsement of using California Revenue & Tax Code §23101 to define “doing business in California,” a critical threshold for determining which companies are subject to the disclosure requirements. Currently, CA SB 219 applies to companies that meet the revenue thresholds established in SB 253 (applies to companies with total annual revenues exceeding $1 billion) and SB 261 (applies to companies with total annual revenues exceeding $500 million). Under the California Revenue & Tax Code §23101, a company is considered to be “doing business” in California if it meets any of the following criteria:
- Commercial Domicile: The company is organized or commercially domiciled in California
- Sales Threshold: The company’s sales in California exceed a certain amount annually
- Property Threshold: The company’s real and tangible personal property in California exceeds a specified amount, also adjusted annually
- Payroll Threshold: The company’s compensation paid in California exceeds a certain threshold, adjusted annually
Additionally, stakeholders sought explicit clarification on exemptions. Suggestions included specifying whether entities such as government agencies or out-of-state firms with minimal California market presence are subject to the rules. This clarity is essential for consistent application and enforcement.
2. Avoiding Duplication and Minimizing Compliance Burdens
Businesses and industry groups urged regulators to avoid duplicative reporting requirements, emphasizing the need to leverage existing disclosures already made to the U.S. Securities and Exchange Commission (SEC) or under international standards like the Taskforce on Climate-Related Financial Disclosures (TCFD), or International Sustainability Standards Board (ISSB).
Particular concern was raised around the cost-effectiveness of reporting Scope 3 emissions, which require collecting data from across a company’s value chain. CWhile Scope 3 remains the most difficult to decarbonize for the majority of companies, it has been instrumental in driving improvement on the supply-side of the equation by signaling the scrutiny and appetite on the demand-side for green solutions. With the SEC initially dropping Scope 3 reporting requirements, only to eventually drop the climate rule altogether, all eyes are now on CARB to set the bar.
3. Alignment with Existing Global Standards
Similarly, a clear theme across the comments was the importance of aligning California’s disclosure rules with widely recognized international standards such as:
- The Greenhouse Gas Protocol (for emissions accounting)
- The Task Force on Climate-related Financial Disclosures (TCFD)
- The International Sustainability Standards Board (ISSB)
Commenters emphasized that alignment would minimize the compliance burden for multinational companies and ensure that California’s framework is interoperable with emerging global regimes, such as those in Canada, Australia, Europe, Taiwan, Japan, Brazil, etc.
4. Phased and Practical Implementation
Many businesses and assurance providers requested a phased approach, particularly for complex reporting requirements like Scope 3 emissions. Commenters highlighted that third-party assurance markets are not yet fully equipped to handle large-scale Scope 3 verification and called for realistic timelines that recognize current data limitations and resource constraints.
Phased implementation would allow companies to build internal capabilities and data infrastructure over time.
5. Third-Party Reporting and Data Standardization
There was strong support for leveraging third-party platforms such as the CDP (formerly the Carbon Disclosure Project) and The Climate Registry to streamline reporting and reduce duplication.
In addition, stakeholders advocated for the use of machine-readable, standardized formats such as XBRL (eXtensible Business Reporting Language) to facilitate data access, analysis, and public transparency (same as is required by EU in the Corporate Sustainability Reporting Directive).
6. Flexibility Versus Consistency in Reporting
Not surprisingly, opinions diverged on the need for flexibility versus consistency. Environmental advocates stressed the importance of standardized reporting to allow for comparison across companies and sectors. Meanwhile, technology firms and other stakeholders pushed for a more flexible approach that could accommodate evolving methodologies, data tools, and industry-specific nuances.
Finding the right balance between rigor and adaptability remains a key challenge for regulators.
7. Environmental Justice and Public Transparency
Public commenters and environmental justice organizations emphasized the societal value of transparency and the equitable distribution of climate mitigation benefits. They urged CARB to ensure that climate disclosures are publicly accessible and framed in a way that empowers affected communities.
There were also calls to integrate environmental justice considerations into risk disclosures to highlight how climate impacts disproportionately affect low-income and marginalized communities.
California’s climate disclosure legislation—SB 253, SB 261, and the clarifying amendments in SB 219—sets a new precedent for corporate transparency and accountability in the United States. As companies begin preparing for implementation, understanding the regulatory landscape and stakeholder perspectives is an essential first step.
In the next article, we will turn our attention to how companies can leverage their existing risk management practices to both comply and create value: “III. Integrating Climate into Existing Risk Management.” We’ll explore how both COSO Enterprise Risk Management (ERM) and ISO 31000 offer well-established, recognizable and credible processes to build on, and the synergies between existing risk management principles and climate-related financial risk reporting.
Disclaimer: This blog is for informational purposes only and does not constitute legal or compliance advice. Companies should consult with legal counsel and relevant experts to determine specific obligations and develop a tailored compliance strategy.
Sources for all articles:
California State Legislature. Senate Bill No. 253: Climate Corporate Data Accountability Act. 2023. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB253. Accessed 31 Mar. 2025.
California State Legislature. Senate Bill No. 261: Climate-Related Financial Risk Disclosure Act. 2023. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB261. Accessed 31 Mar. 2025.
California State Legislature. Senate Bill No. 219: Climate Accountability Implementation Act. 2024. https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240SB219. Accessed 31 Mar. 2025.
California Air Resources Board. Approved Comments: Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Disclosure (SB 261). California Environmental Protection Agency, https://ww2.arb.ca.gov/approved-comments?entity_id=41096. Accessed 31 Mar. 2025.
United States Securities and Exchange Commission. Press Release: SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors. United States Securities and Exchange Commission, https://www.sec.gov/newsroom/press-releases/2024-31. Accessed 21 May. 2025
