For many organizations, managing environmental issues can be reactive. Environmental management often consists of responding to inspections, incidents, or customer requests as...
For many organizations, managing environmental issues can be reactive. Environmental management often consists of responding to inspections, incidents, or customer requests as they arise. ISO 14001 provides a structured, proactive system for managing environmental risks and compliance obligations, and for improving performance and efficiency through integrating environmental management processes across business operations.
The International Organization for Standardization (ISO) is an independent NGO that develops voluntary, widely adopted, interoperable international standards to promote quality, safety, and efficiency across products, services, systems, and processes. ISO has published over 26,000 standards spanning nearly all aspects of technology, management, and manufacturing.
ISO standards are designed to work together. Many management system standards, including ISO 14001, share a common high-level structure, which allows organizations to integrate them into a single, cohesive management system. For example, ISO 14001 aligns structurally with ISO 9001 (Quality Management Systems), ISO 45001 (Occupational Health and Safety), and ISO 50001 (Energy Management). In addition, other standards in the ISO 14000 family support ISO 14001 by providing more detailed guidance on specific topics, such as ISO 14064 for greenhouse gas accounting and ISO 14040 for life cycle assessment.
ISO 14001 also plays an important supporting role in today’s sustainability and climate-related reporting landscape. While ISO 14001 is not a disclosure framework, it helps establish the internal systems, controls, and governance processes that many reporting requirements rely on. ISO 14001 provides a practical management foundation that can support regulatory disclosures, investor reporting, and voluntary sustainability frameworks. In this way, ISO 14001 helps ensure that sustainability and climate disclosures are grounded in repeatable, defensible processes that reflect how the business actually operates.
ISO 14001 was developed to help companies of all sizes implement and manage environmental management systems. The standard provides a structured framework for identifying environmental risks and impacts associated with an organization’s activities, products, and services; understanding and meeting compliance obligations; setting meaningful environmental objectives; and driving continual improvement in environmental performance.
ISO 14001 is not a sustainability certification; it is an environmental management system framework that enables organizations to manage environmental risks and opportunities systematically and to improve operational efficiency over time.
ISO 14001 is applicable across industries and can be scaled to fit organizations at different stages of environmental program maturity.
Organizations adopt ISO 14001 for many different reasons. Implementing an ISO 14001 environmental management system (EMS) can help companies reduce the occurrence of environmental incidents and compliance risks, improve operational consistency across sites, teams, and products, and clarify internal roles and key decision-making processes. The standard also helps companies move from reactive, ad hoc problem-solving to a more proactive approach to environmental risk management. Implementing an environmental management system also signals environmental responsibility to customers, investors, and regulators and, in some cases, helps organizations meet environmental expectations set by customers, partners, or suppliers.
ISO 14001 is well-suited for organizations seeking a structured approach to managing environmental risk, particularly those operating in regulated or operationally intensive or complex environments. For many companies, ISO 14001 serves as a practical starting point for broader sustainability or climate efforts without requiring those programs to be fully built out on day one.
The ISO 14001 framework is built on the Plan-Do-Check-Act (PDCA) cycle, which provides a structured approach to planning, implementation, monitoring, and continuous improvement of an EMS. This structure ensures environmental management is not a one-time exercise, but an active system that evolves as the organization’s environmental management practices mature.
Plan Phase
The “Plan” phase aligns with the requirements set out in Clauses 4 through 6 of ISO 14001 and is designed to establish a comprehensive understanding of the organization and its environmental risk profile. During this phase, the organization must determine the operations, locations, products, and services that will be included in the scope of the EMS. The organization must also identify the environmental aspects and impacts associated with its activities, determine relevant compliance obligations, and establish environmental objectives that reflect its most significant environmental risks, opportunities, and priorities. At this stage, the conversation is not about reporting, but about operations.
Case Study: A manufacturing facility identifies stormwater runoff and hazardous waste handling as key environmental risks based on permitting requirements and past inspection findings. Compliance obligations are documented, and objectives are set to reduce incidents and improve consistency.
Do Phase
The “Do” phase corresponds to the requirements in Clauses 7 and 8 of ISO 14001, which focus on implementing and operating the environmental management system. Once environmental risks and objectives are identified and defined during the planning phase, the organization implements the controls and procedures required to manage these risks and achieve these objectives. This phase typically includes establishing operational controls and work procedures, providing training and awareness for employees and contractors, communicating environmental expectations across the organization, and maintaining processes for emergency preparedness and response. This stage includes documenting what changed and why – something that becomes invaluable later.
Case Study: The manufacturing facility updates operational procedures, standardizes waste-handling practices, and provides targeted training for employees and contractors to address the identified risks.
Check Phase
The “Check” phase is aligned with Clause 9 of ISO 14001. The primary objective of this phase is to monitor and measure the environmental management system and to establish and maintain effective internal audit and management review procedures. During this phase, organizations track environmental performance, evaluate compliance with applicable legal and other requirements, conduct internal audits, and review results with management to confirm that the system is functioning as intended. At this stage, ISO 14001 starts separating signal from noise because you are not just collecting data – you are interrogating it.
Case Study: Environmental performance is monitored at the manufacturing facility through routine inspections, permit reviews, and internal audits. Results are reviewed with management to confirm procedures are being followed and objectives are being met.
Act Phase
The “Act” phase corresponds to Clause 10 of ISO 14001, which focuses on identifying nonconformities, implementing corrective actions, and monitoring results for continual improvement. The final phase in the PDCA cycle focuses on executing improvement measures based on what the organization has learned during the implementation or review cycle. This includes correcting identified issues, addressing their root causes, and updating procedures or environmental objectives as needed. Over time, this process helps organizations strengthen their EMS and better integrate it into everyday business operations. Then the cycle starts again – stronger than before!
Case Study: Based on audit results and performance data, the manufacturing facility corrects issues, addresses root causes, updates procedures or objectives, and integrates the lessons learned into everyday operations.
Organizations that see value in using ISO 14001 for their EMS often share a few traits. Leadership is actively involved beyond simply approving policies, with clear accountability and ownership established across the organization. Documentation is practical and risk-based, and the environmental management system is integrated into day-to-day operations and decision-making rather than treated as a standalone compliance exercise. These organizations also commit to ongoing review and improvement to ensure the system continues to reflect real risks and operational realities.
Organizations that struggle to realize value from ISO 14001, by contrast, often approach the standard as a documentation or certification exercise, focusing on checklists or generic templates rather than aligning the system with how the organization actually operates.
As a sustainability consultant, I have worked with organizations that initially viewed ISO 14001 as “something we do for certification” or “a box check” exercise. Almost without exception, their perspective changed once implementation began. The most significant shift usually happens when leadership realizes ISO 14001:
In today’s complex environment, sustainability expectations are increasingly shaped by fragmented regulations, politicized narratives, and rapid technological change, while governance measures often struggle to keep up with the pace. ISO 14001 provides a practical way to create structure amid that uncertainty by embedding environmental management into existing operations rather than layering on new, standalone processes. ISO 14001 helps organizations prepare for climate and sustainability disclosures without chasing every new rule, supports credible claims with documentation processes, integrates sustainability into risk management and internal controls, and improves operational continuity.
In practice, I’ve seen ISO 14001 help organizations move beyond reactive compliance toward more consistent, resilient environmental management. By requiring clear ownership, documented procedures, and ongoing review, the standard helps ensure that sustainability efforts continue to function even as priorities, leadership, or external expectations evolve. If sustainability is going to last (inside organizations rather than just in reports), it needs systems that can weather uncertainty. ISO 14001 is one of the few tools I’ve seen consistently do that.
Whether your organization is preparing for its first ISO 14001 audit or looking to strengthen an existing environmental management system, GSI can help. We work with organizations to design and implement practical, risk-based EMS frameworks, prepare teams for internal and external audits, and ensure ISO 14001 requirements are meaningfully integrated into existing operations. Our approach focuses on building systems that support compliance, improve consistency, and drive continual improvement over time.
We have a new entrant into the state-level GHG Reporting world, 6 NYCRR Part 253 (Mandatory GHG Reporting) is here! If you...
We have a new entrant into the state-level GHG Reporting world, 6 NYCRR Part 253 (Mandatory GHG Reporting) is here!
If you have large sources of scope 1 emissions in NY, sell fuel/electricity into NY, supply large amounts of agricultural lime and fertilizer in NY, or run waste large operations/export in NY, annual GHG reporting is no longer “nice to have” — it’s a regulated filing.
The data gathered from this regulation will greatly inform how NY’s carbon market could play out with a potential Cap-and-Invest type policy.
The practical takeaway is that 2026 is not a “dry run” year. It will be important to follow your established monitoring plan, initiate QA/QC procedures, iterate and improve processes, and start assembling an evidence package in preparation for verification. Note that certain reporters such as High-Emitting Solid Waste Landfills, Anaerobic Digester and Liquid Storage Operators will need to submit an Emissions Monitoring and Measurement Plan by September 1, 2026.
Across jurisdictions, markets, and institutions, sustainability expectations shifted while the work was already underway. Regulatory timelines stretched, collapsed, or overlapped. Political rhetoric...
Across jurisdictions, markets, and institutions, sustainability expectations shifted while the work was already underway. Regulatory timelines stretched, collapsed, or overlapped. Political rhetoric sharpened even as investor and insurer expectations largely held. Technology advanced faster than most organizations could comfortably absorb. Very little stopped. But it became much harder to pace, prioritize, and describe with certainty.
This article sits inside that tension. It brings together what we saw across client work and the judgment calls behind it, and includes personal reflections from members of our sustainability team on what 2025 felt like from within the work. We also look ahead, because many of the patterns that defined 2025 are likely to shape how sustainability work evolves in 2026.
Rather than treating 2025 as a tidy timeline or a set of definitive answers, we trace the forces that shaped day-to-day decision-making within the organizations we worked with. Here are eight forces our team saw unfold over the past year.
ESG regulatory uncertainty increased in 2025. EU CSRD and CSDDD “simplification,” repeated delays to the EU Deforestation Regulation, the continued stay around the U.S. SEC climate disclosure rule, and uneven movement in California’s climate disclosure laws all reinforced the same lesson: plan anyway, but build flexibility as the compliance map keeps shifting.
Europe: “simplify + delay” without stepping away
In Europe, 2025 felt less like retreat and more like recalibration. The European Parliament approved an Omnibus amending directive in December 2025 that reshapes the scope and timing of sustainability reporting and due diligence requirements. The headline was “burden reduction,” but the lived reality for many companies remained the same: build systems that can hold up.
Meanwhile, the EU Deforestation Regulation was delayed again. The revised compliance dates (late 2026 for larger operators and mid-2027 for smaller ones) were primarily driven by implementation readiness rather than by a change in ambition. Additionally, CBAM quietly kept moving forward: the European Commission continues to frame 2023–2025 as the transitional phase, with the definitive regime starting in 2026. Even when public debate focused elsewhere, product-level emissions data work still crept into procurement, trade, and finance teams.
Taken together, these shifts led to a kind of planning whiplash. Many companies continued to build CSRD-level systems but focused more on getting the basics right and keeping things flexible rather than trying to optimize for any specific regulatory outcome.
United States: disclosure stalled, pressure persisted
In the U.S., the SEC climate rule stayed on hold. In March 2025, the SEC voted to stop defending the rule, and later the Eighth Circuit paused the related litigation, leaving the outcome largely dependent on what the SEC ultimately decides to do next.
In California, momentum was uneven but not gone. During a late-2025 CARB SB 253/SB 261 rulemaking workshop, a lawyer interjected to announce that the Ninth Circuit had issued an injunction, a moment that our team on the call quietly described as feeling somewhat Netflix-like in its timing. CARB remained focused and continued answering questions, signaling that implementation work was still moving forward despite the legal uncertainty.
CARB subsequently posted draft proposed rulemaking documents on December 9, 2025, for the implementation of SB 253 and SB 261, while noting the Ninth Circuit’s temporary injunction on SB 261 enforcement pending appeal. The practical impact was similar to what we had experienced with the CSRD delay. Some organizations paused work, but the majority continued to develop inventory methods, governance structures, and data pipelines because customers, investors, lenders, and internal risk owners continued to request the underlying information.
United Kingdom: credibility and enforcement took center stage
In the UK, attention shifted from expanding disclosure to strengthening its foundations. The FCA set out proposals to bring ESG ratings providers under oversight, focusing on transparency, governance, and conflicts of interest. In parallel, the CMA’s consumer enforcement powers expanded in April 2025 under the Digital Markets, Competition and Consumers Act framework, raising the stakes for misleading environmental claims. That enforcement shift changed behavior. More teams became cautious about public claims, and more effort moved upstream into internal evidence, controls, and review processes.
Across regions, the message of 2025 was consistent, even if the signals were not: regulation did not get lighter. It got harder to read. The organizations that kept moving built flexible systems, documented assumptions, and focused on credibility over certainty.
While timing and enforcement of regulations remained uncertain, the underlying content of sustainability requirements moved in a more consistent direction. More jurisdictions continued to adopt or align with the ISSB standards, and the IFRS Foundation continued to support the framework through ongoing stewardship and refinements.
In practice, that quiet consolidation mattered. Even where formal rules were delayed, stayed, or contested, many companies used ISSB and TCFD-style architecture as a lowest-regret foundation: a structure that could satisfy investors while remaining adaptable across jurisdictions. One caveat persisted. ISSB incorporated TCFD’s disclosure recommendations into IFRS S2, but TCFD continues to be referenced in regulation and practice because laws often cite frameworks long after standards evolve. California’s SB 261 is a clear example: its reporting expectation is built around TCFD (or a successor/equivalent standard), meaning many companies must operate across both legacy and emerging frameworks simultaneously.
COP30 reinforced a shift that has been building for years: the focus moved away from announcing new pledges and toward implementation, finance, and delivery. One clear signal was the renewed emphasis on adaptation finance, with COP30 outcomes calling for efforts to at least triple adaptation finance by 2035 as part of the broader climate finance trajectory. The point was not that COP30 “solved” adaptation finance; it did not, but it did sharpen expectations around delivery and real-world outcomes.
That same shift has been evident in our work supporting California’s SB 261 climate-risk disclosure requirements. Much of our focus has been on building capacity and shared understanding with clients, helping them see how their existing processes, GHG inventories, and climate risk assessments can serve as tools for resilience and adaptation rather than just disclosure requirements. Internally, this has meant identifying risks and modeling climate scenarios at a level that aligns with clients’ climate maturity, from initial risk identification through more detailed scenario analysis to support operational planning, continuity, and long-term adaptation decisions.
In 2025, technology conversations became more focused and more consequential. A few years ago, much of this space felt exploratory. This year, it looked more like infrastructure decisions.
Digital MRV and traceability moved from optional to foundational
Digital measurement, reporting, and verification (MRV) systems, alongside traceability tools, became harder to treat as “nice-to-have.” Expectations for compliance-grade data are rising, and organizations increasingly need systems that can withstand audit-style scrutiny and multi-framework reporting. For us as consultants, this also changed the work: clients increasingly requested assistance with evaluating tools, integrating platforms, and determining what should be in-house versus outsourced. To advise well, we had to educate ourselves quickly across a crowded and uneven software landscape.
Carbon dioxide removal matured fast, but unevenly
Carbon dioxide removal followed a similarly uneven path. Corporate interest has been expanding, and the menu of pathways has become more real: biochar, BECCS (bioenergy paired with carbon capture and storage), other CCS-linked approaches, and enhanced weathering that accelerates natural mineralization. At the same time, debates around MRV, accounting treatment, and claims governance intensified, underscoring that the market is scaling faster than consensus about how to measure and communicate impact.
Internally, this led to deeper learning and research, particularly on biochar as a pathway (including how feedstock, pyrolysis conditions, and end-use affect permanence and co-benefits). We are careful here: this is not a claim about published “GSI biochar research,” but rather about the reality of what we needed to understand to advise credibly.
Energy constraints stopped being a background issue
Overlaying both trends was a broader energy reality check. Electrification ambitions collided with grid constraints and reliability concerns, while data center demand became a material planning variable in many regions. That combination pushed more pragmatic conversations about efficiency, flexibility, and clean firm power, and it pulled sustainability discussions closer to operations, facilities, and energy procurement teams.
Voluntary carbon markets continued to shift away from volume toward credibility. The core question increasingly became: what does this credit represent, and what claim does it support?
Integrity initiatives continued to raise the bar. The Integrity Council’s Core Carbon Principles are explicitly designed to increase transparency and quality differentiation in the voluntary carbon market. In parallel, VCMI’s Claims Code of Practice continued to shape expectations for credible claims linked to real emissions reductions and transparent reporting.
This credibility shift is also evident in how standard-setting bodies are evolving. For example, the GHG Protocol launched public consultations in 2025 on revisions to its Scope 2 Guidance and consequential accounting methods for electricity-sector actions, reflecting the broader push toward tighter accounting rules and clearer claims discipline. In practice, the direction is consistent: participation now requires stronger governance, clearer claims frameworks, and greater tolerance for scrutiny than in prior years.
Looking at 2025 through a services and operating-model lens, one thing became clear. Uncertainty didn’t slow sustainability work down; it changed where time and investment were spent. As regulatory timelines blurred and companies became more careful about public positioning, demand shifted toward strengthening internal systems, governance, and decision-making. The areas that moved fastest were not tied to any single framework, but to building capabilities that enable organizations to operate credibly across a range of scenarios. Below are a few examples of how this played out in the organizations we worked with:
Companies became more conservative in branding and public claims, not necessarily because the work stopped, but because the risk of overstatement rose and because ESG politicization continued to chill external positioning. As greenwashing enforcement tightened, especially in the UK, more companies shifted from communications-first to evidence-first approaches. With ESG politicization, investor pressure became more fragmented across regions, such that global companies had to manage differing expectations across European and U.S. stakeholders.
In practice, this showed up in very real ways. For example, we supported clients’ policies and governance structures to focus on transparency and process rather than specific goals or commitments. Likewise, our work drilled down on tangible impacts and business continuity.
Across sectors, one pattern stood out. ESG shifted from storytelling to operating system design. The companies that made real progress were not those with the most polished narratives, but those investing in the mechanics of how sustainability is actually implemented within the business.
In practice, that meant building controls and data pipelines that could serve multiple frameworks without constant rework, treating transition planning as part of capital planning and enterprise risk management, and investing in supply-chain transparency where regulation and exposure made it unavoidable. Increasingly, these systems followed a familiar plan–do–check–act cycle, with clearer planning, implementation, review, and continuous improvement built in rather than treated as afterthoughts.
This shift also signals something broader. Sustainability as a business concept is maturing and moving steadily toward compliance and standardization. Far from slowing progress, such standardization often creates the stability and clarity needed for meaningful competition, innovation, and long-term value creation. In that sense, 2025 marked the year ESG began to behave less like a narrative and more like a system that must function under real-world pressures.
Looking back on 2025, the most meaningful shift was not driven by a single regulation, standard, or technology. It was a reframing that happened inside organizations themselves. As uncertainty increased and external signals became harder to interpret, attention shifted away from debating headlines and toward understanding how sustainability functions day-to-day.
In 2025, the companies making real progress stopped centering their efforts on what to say publicly and started asking harder, more consequential questions internally. How does this actually operate within the business? Who owns it? How does it hold up under scrutiny? How does it connect to capital, risk, and operations? Those questions reshaped priorities, slowed down some conversations, and deepened others.
That shift mattered. It pushed sustainability work out of slide decks and into systems. It grounded climate risk in financial materiality and business continuity. It reframed reporting as the output of governance and processes, rather than the starting point. And it made space for sustainability to be treated less as a special initiative and more as part of how organizations plan, invest, and adapt.
If 2025 taught us anything, it is that sustainability work is not linear. It advances through pauses, reversals, recalibration, and steady, often quiet progress. The move from voluntary action toward clearer expectations, standardization, and compliance is not a sign of failure or fatigue. It is a sign of maturity.
As we look toward 2026, the question is no longer whether sustainability will continue to matter. The question is how well organizations are prepared to run it as part of the business, even when the rules keep shifting. In that sense, the defining question of 2025 may also be the one that carries forward: not what do we say, but how does this actually work. That shift defined the year.
Check out photos from 2025 Conferences and Personal Reflections from the team below:
Becky Twohey’s Personal Reflection on 2025
Jannika Kremer’s Personal Reflection on 2025
Albert Lu’s Personal Reflection on 2025
Carmen Twitchell’s Personal Reflection on 2025
Lauren Besser’s Personal Reflection on 2025
Albert Chung’s Personal Reflection on 2025
Brady Koetting’s Personal Reflection on 2025
References:
[1] European Parliament, “Simplified sustainability reporting and due diligence rules for businesses” (Dec 16, 2025). European Parliament
[2] European Parliament, “Deforestation law: Parliament adopts changes to postpone and simplify measures” (Dec 17, 2025). European Parliament
[3] European Commission, “Carbon Border Adjustment Mechanism (CBAM): transitional phase 2023–2025; definitive regime from 2026.” Taxation and Customs Union
[4] U.S. SEC Press Release, “SEC Votes to End Defense of Climate Disclosure Rules” (Mar 27, 2025). SEC
[5] Reuters, “US appeals court hits pause on challenges to SEC climate rule” (Sep 12, 2025). Reuters
[6] California Air Resources Board, SB 253/SB 261 program page noting draft proposed rulemaking documents posted Dec 9, 2025. California Air Resources Board
[7] CARB Staff Report (ISOR) referencing Ninth Circuit temporary injunction on SB 261 enforcement (Nov 18, 2025). California Air Resources Board
[8] Financial Conduct Authority, “FCA sets out proposals to make ESG ratings transparent” (Dec 1, 2025). FCA
[9] DLA Piper, “CMA’s new consumer enforcement regime comes into force in April 2025” (Apr 7, 2025). DLA Piper
[10] IFRS Foundation, ISSB overview and ongoing standard support/maintenance. Taxation and Customs Union (Note: if you want, I can swap this for a more specific IFRS “jurisdictional adoption” page in a second pass.)
[11] PwC, SB 261 explanation referencing TCFD alignment and practical disclosure expectations. PwC
[12] PwC, SB 261 and TCFD relationship and “successor framework” concept. PwC
[13] Baker Tilly, SB 261 requiring disclosure in accordance with TCFD or equivalent and noting enforcement paused. Baker Tilly
[14] UNFCCC document calling for efforts to at least triple adaptation finance by 2035 (COP30 decision text). UNFCCC
[15] IISD, “COP 30 outcome: what it means and what’s next” summarizing adaptation finance emphasis and delivery issues. IISD
[16] McKinsey Sustainability, coverage on digital MRV/measurement systems and compliance-grade data trends (sector perspective). IEA (If you prefer only Big Four, I can replace this with a Deloitte/PwC equivalent.)
[17] IPCC AR6 (peer-reviewed assessment basis) for definitions and pathway categories: biochar, BECCS, enhanced weathering (CDR taxonomy). (Web citation not pulled in this pass; if you want it strictly linked, I’ll add the exact IPCC chapter reference with a stable URL.)
[18] VCMI Claims Code of Practice (April 2025, v3.0) for claims discipline and credible use expectations. VCMI
[19] IEA, “AI is set to drive surging electricity demand from data centres” (Apr 10, 2025). IEA
[20] ICVCM, “Core Carbon Principles” (quality threshold and integrity framing). ICVCM
[21] GHG Protocol, announcement of public consultations on Scope 2 Guidance updates (Oct 20, 2025). ghgprotocol.org
The Greenhouse Gas (GHG) Protocol is regarded as the "gold standard" for corporate carbon accounting. However, as energy markets and sustainability reporting...
The Greenhouse Gas (GHG) Protocol is regarded as the “gold standard” for corporate carbon accounting. However, as energy markets and sustainability reporting evolve and climate targets tighten, the rules must adapt. A major overhaul is currently underway, led by four technical working groups established in September 2024. While most of the work is still in the early stages, there have been notable updates regarding proposed Scope 2 changes, specifically around RECs or other contractual instruments used to reduce disclosed emissions.
Here is a summary of what you need to know before the current public consultation closes on January 31, 2026.
Historically, companies could purchase unbundled Renewable Energy Certificates (RECs) or Energy Attribute Certificates (EACs) from any time in a reporting year to “offset” their consumption. The proposed updates move toward hourly matching, requiring RECs to be issued and redeemed for the same hour the energy was actually consumed.
Furthermore, the Market Boundary Requirement is becoming stricter. Under the new rules, companies must purchase energy from generators that could “plausibly deliver” electricity to their specific location via a connected grid, rather than buying “green” attributes from a different region that could not deliver the electricity or an unrelated power market. For the location-based method, a new hierarchy will prioritize the most precise spatial and temporal data that is publicly available.
The combination of both hourly matching and market boundary requirements means that in the future, bundled RECs may be more prevalent in the future. While these contracts are typically much more expensive than unbundled options, they provide confidence that they will be eligible for the new standards’ eligibility.
To ensure the new reporting requirements are feasible for all organizations, the proposed Scope 2 updates include several exemptions and transitional measures, particularly concerning the shift to hourly matching. These proposals consider setting exemption thresholds for smaller organizations or those with annual electricity consumption below a specific, yet-to-be-defined limit. Furthermore, a “legacy clause” is being considered for existing contractual instruments and arrangements to allow for a smoother transition without penalizing prior investments. Other tools to support implementation include the use of “load profiles” which would allow companies to estimate hourly data from annual or monthly records, and a multi-year phased implementation schedule.
The proposed revisions clarify rules for electricity not covered by specific contracts. For Standard Supply Service (SSS), where companies previously lacked an explicit cap, the new guidance requires that entities claim no more than their pro-rata share of these shared resources.
In addition, the definition of “residual mix” is being considered for update. The update would eliminate the practice of defaulting to a standard location-based average when residual mix emission factors are missing. Instead, reporters must use a fossil-only emission factor (e.g., gas, oil, or coal) to ensure non-renewable energy is accurately represented and to prevent the double-counting of green attributes.
While these changes increase the data burden, requiring more granular fossil-based emission factors and hourly load profiles, they are designed to eliminate “greenwashing” and ensure that corporate claims reflect physical reality. Small and medium-sized enterprises (SMEs) and companies with low annual consumption may see certain exemptions to ease this transition, but the direction of travel is clear that greater precision and higher accountability for reporting entities are coming.
Ensure your voice is heard; the GHG Protocol is accepting public comments through the end of January 2026.
If you’ve been following California’s climate disclosure rules, you know the alphabet soup has given way to what’s now being called “the...
If you’ve been following California’s climate disclosure rules, you know the alphabet soup has given way to what’s now being called “the 200s” – Senate Bills 219, 253, and 261. Together, these three pieces of legislation are reshaping corporate climate reporting for thousands of companies “doing business” in California. Despite ongoing legal challenges, a federal court in California rejected business groups’ requests to block the laws, companies’ preparations should move forward based on the California Air Resources Board (CARB) guidance.
Earlier this month, CARB released its minimum disclosure checklist for SB 261. While the checklist is now closed for comments, it offers the clearest view yet into what companies will be expected to put on the record by 2026. Here’s a quick guide to the highlights and some of the grey areas.
To fund administration, CARB has proposed annual fees:
These fees apply per subsidiary and will be adjusted annually, which is an important budget consideration for companies with complex structures.
Who’s “doing business” in California? Determining scope remains one of the most challenging issues. To date, “doing business in CA” means an entity generally must …
Plus at least one of the following must occur in any part of a reporting year:
Subsidiaries of non-U.S. parents that do business in California are still considered in scope. Exemptions include nonprofits, government entities, the California Independent System Operator, and companies whose only California presence is teleworking employees.
CARB plans to publish a list of covered entities based on the California Secretary of State’s records. If you fall into one of these categories, you may be spared – but don’t assume. In addition, CARB has made clear that even if you are not on the list of covered entities published, it is the responsibility of corporations to determine whether they are in scope of the reporting rules.
CARB emphasized that its guidance is meant as an on-ramp: a way for companies to begin reporting in “good faith” and improve over time. Notably, CARB referenced the TCFD-aligned disclosure for the UK public sectors: Application Guidance as a resource for formulating compliance statements. What stands out in this document is the phased approach to implementation and expectations.
Key expectations include:
Whether CARB will provide feedback on these reports is not clear.
CARB reaffirmed CA SB 253’s original reporting and assurance timeline:
The direction is clear: disclose in good faith, start with what you have, and build overtime. California has created the most ambitious climate disclosure program in the U.S., designed to align with global frameworks such as CSRD and IFRS S2. The “200s” may feel overwhelming, but the minimum disclosure checklist shows CARB wants to give companies an on-ramp towards compliance. Plan for continuous improvement since a sound climate disclosure is not a one-time exercise but rather is developed over time with careful planning. Practical near-term steps every company can benefit from include:
Stay tuned for insights on turning compliance into a competitive advantage.
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:
Climate Related Financial Risk Disclosure Draft Checklist. CARB. Posted September 2, 2025. https://ww2.arb.ca.gov/sites/default/files/2025-09/Climate%20Related%20Financial%20Risk%20Report%20Checklist.pdf.
SB 253/261/219 Public Workshop: Regulation Development and Additional Guidance. August 21, 2025. https://ww2.arb.ca.gov/sites/default/files/2025-08/SB%20253%20261%20workshop%20slides%208-21.pdf.
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.