Over two days in June, sustainability leaders from across Europe and beyond gathered at Reuters’ Sustainability Reporting Europe conference to discuss CSRD and sustainability reporting, debate the future of non-financial disclosure, explore the role of technology in reporting, and chart a path toward more integrated, impactful sustainability practices. Senior Sustainability Analyst Jannika Ilievska Kremer from GSI Environmental was in attendance, and the following are her key takeaways—covering overarching themes, why they matter for companies globally, and their relevance for U.S. firms.

1. Interoperability and Strategic Alignment

Speakers from GRI, IFRS/ISSB, and TNFD stressed that true interoperability must be built on shared principles and closely tied to corporate strategy.

• GRI highlighted the need for digital reporting platforms, warned that we’re reaching the limit of useful disclosure, and urged a relentless focus on impact rather than volume.
• ISSB/CSRD reporting, per IFRS, should center on financial materiality—only those sustainability facts that can sway investor decisions—and authenticity outweighs perfect data.
• TNFD is scaling up nature-related disclosures under a voluntary framework, with over 500 adopters and the first progress report due September 2025; in Asia, firms are already seeing nature risk management as a strategic advantage.

Why this matters to companies: Without interoperability, firms end up juggling multiple, disjointed reporting systems—wasting resources and confusing stakeholders. By aligning frameworks and embedding disclosures into corporate strategy, organizations can streamline data collection, improve decision-making, and strengthen investor confidence.

Why it’s important for U.S. companies: U.S. firms operating globally face a patchwork of disclosure requirements; interoperability reduces complexity and helps ensure consistent, credible reporting across jurisdictions.

2. From Voluntary to Mandatory: Navigating Regulated Reporting

Member of European Parliament Lara Wolters warned that “simplification” proposals for CSRD/CSDDD may undermine accountability, and urged companies to stay the course—investing in ESG capabilities for strategic decision-making rather than treating compliance as a checkbox.

Why this matters to companies: As sustainability reporting shifts from voluntary best practices to mandatory regulations, early investment in robust systems turns a compliance burden into a competitive advantage by embedding ESG into core operations.

Why it’s important for U.S. companies: With state regulators moving toward their own disclosure mandates, U.S. companies will similarly benefit from proactive preparation and systems that handle both voluntary and compulsory reporting. Using GRI voluntary standards and former TCFD now IFRS S2 will prepare companies well.

3. Embedding Sustainability in Finance and Audit

Post-CSRD, finance and audit teams have moved to the center of sustainability reporting:

• Joint training for ESG and financial analysts builds a shared language and eases audit readiness.
• Audit conversations have evolved from data completeness to strategic materiality discussions.

Why this matters to companies: Integrating ESG into finance ensures that sustainability data meets the same rigor as financial figures—boosting credibility with investors and enabling better risk management across the business.

Why it’s important for U.S. companies: U.S. investors and lenders increasingly demand ESG metrics alongside financial statements; having finance-vetted ESG data improves access to capital and reduces audit surprises. Completing a double materiality assessment or climate and opportunities assessment to understand your impact on the world, and the world’s impact on your company, is a good starting point for meeting stakeholder expectations.

4. Coordinating Cross-Functional Reporting

Corporate practitioners (Suntory, INGKA Group, Ahold Delhaize, Textile Exchange) shared that they:

• Started with voluntary frameworks (e.g., GRI) to build momentum.
• Secured senior-level buy-in and took a “no-regrets” reporting approach.
• Embedded ESG reporting in finance to leverage data controls.
• Used dashboards and targeted communication to translate standards into action.

Why this matters to companies: Siloed ESG efforts often fail. Cross-functional coordination ensures that sustainability insights inform strategy, operations, and communications—delivering real business value.

Why it’s important for U.S. companies: American firms with diverse operations need integrated dashboards and governance structures to satisfy both domestic and global stakeholder expectations.  Completing a gap assessment of your ESG and Climate Governance, Strategy, Metrics and Targets, and Risk Management policies and processes is a good place to start.

5. Championing Double Materiality Assessments

Leaders from Henkel, ofi, and UCB underscored that DMA is an intensive process but yields strategic value when integrated thoughtfully across risk, governance, and business planning. Early engagement, cross-functional coordination, and clear documentation are essential to success. These waves 1 reporting entities also emphasized that DMAs

Requires targeted stakeholder interviews over generic surveys.
Demands early auditor involvement and rigorous documentation.
Should be revisited when regulations or business contexts change.

Why this matters to companies: Double materiality links sustainability risks and impacts directly to financial performance and strategy—enabling firms to allocate resources where they matter most and disclose information investors and society care about.

Why it’s important for U.S. companies: As U.S. state regulators move toward “financial materiality” disclosures (see CA Senate Bill 261 or NY Senate Bill 3697), a robust DMA framework helps companies demonstrate both risk management and societal impact, meeting varied stakeholder demands including regulatory compliance needs.

6. Europe’s Omnibus at the Crossroads

During a townhall session, representatives from Halton, Toyota, and CSR Europe examined the EU’s Omnibus recalibration, noting that many companies had overestimated their readiness for the original CSRD rapid regulatory rollout. Panelists called for a more streamlined approach that aligns with existing standards, encourages stakeholder engagement, and rewards early adopters. They emphasized that regulatory clarity and transparency are essential to prevent new requirements from undermining corporate competitiveness. Rather than pausing their efforts, these companies are leveraging the additional time afforded by the Omnibus delay to enhance staff training, close existing gaps, and embed sustainability more deeply into their innovation processes and customer engagement strategies.

Why this matters to companies: Clear, stable regulations enable companies to plan long-term investments in sustainability without facing unexpected compliance hurdles or costs. The Omnibus delay will afford companies more time to prepare.

Why it’s important for U.S. companies: U.S. multinationals need to navigate both EU Omnibus rules and emerging U.S. frameworks—stability in one region can make global compliance more manageable.

7. Harnessing Technology and AI

Microsoft and Cisco executives emphasized that technology must serve to enhance genuine sustainability efforts rather than substitute for them. While AI holds the potential to streamline research, modeling, and reporting, its effective adoption depends on meaningful behavioral change and strong digital literacy. When asked what the companies are doing to be more efficient in their data energy use the company representatives explained that at Microsoft, innovation is focused on data center efficiency—introducing closed-loop cooling systems and developing PFAS-free cooling fluids through AI—while Cisco has committed to circular design, ensuring that 100% of its new products are built with resource recovery and minimal waste in mind.

Why this matters to companies: Effective tech adoption reduces resource intensity, automates data workflows, and frees teams to focus on strategy—maximizing ROI on sustainability investments.

Why it’s important for U.S. companies: With U.S. firms facing rising energy costs and ESG scrutiny on a state and global and by local stakeholders, AI-driven efficiency and circular design offer both cost savings and stronger sustainability credentials.

8. Learning from Finance

The draft Omnibus proposal does not alter the initial requirement for limited assurance on CSRD reports (covering FY 2024 data published in 2025) but removes the Commission’s mandate to introduce a transition to reasonable assurance by October 1, 2028, effectively freezing the assurance standard at the limited level going forward.  Whether limited or reasonable assurance, finance teams have decades of experience maintaining complete audit trails, version controls, and reconciliations for transactions. By mirroring these practices in ESG data collection—documenting methodologies, source data, and adjustments—ESG teams can dramatically reduce the time and cost of external assurance while increasing confidence in reported metrics. Nokia, Group Head of Sustainability Strategy and Disclosures and Standard Chartered, and EBRD (European Bank of Reconstruction Development) shared best practices for audit-ready ESG systems:

Establish strong internal controls and detailed documentation.
Engage assurance providers early to align on methodologies.
Drive digitization and cross-departmental alignment to scale reliable disclosures.

Why this matters to companies: Companies in scope of CSRD should use this time to build readiness. Audit readiness not only ensures compliance, but also builds trust with investors, regulators, and customers—an essential foundation for long-term sustainability.

Why it’s important for U.S. companies: U.S. companies are already navigating mandated assurance under California’s SB 253, which requires limited third-party verification of Scope 1 and 2 GHG emissions, with discussions underway to extend similar requirements to climate-risk disclosures under SB 261. Beyond statute, issuers of green and sustainability-linked bonds routinely secure independent verification to certify use-of-proceeds and performance targets, while major investors and ESG rating agencies increasingly view external assurance as a critical “quality signal.” Looking ahead, similar verification provisions are likely to emerge in other states (such as New York) and international frameworks—prompting U.S. firms to build rigorous controls and auditor partnerships now to stay ahead of evolving assurance expectations.

Conclusion

The Reuters Sustainability Reporting Europe conference underscored that the next phase of sustainability disclosure hinges on interoperability, strategic integration, cross-functional collaboration, and prudent use of technology. For U.S. companies—simultaneously managing domestic requirements and global frameworks—these takeaways offer a roadmap to transform compliance into competitive advantage.

We are approaching the midpoint of 2025, and the global landscape is becoming more uncertain and unstable—geopolitical, environmental, societal, economic, and technological risks are becoming more complex and urgent. Climate-related financial risk management is highlighted in the World Economic Forum’s 2024-2025 Global Risk Perception Survey, which gathers insights from over 900 experts around the world. The report analyses global risks through three timeframes to support decision makers in balancing current crises and longer-term priorities. Environmental risks associated with extreme weather events are considered to have the second-highest material impact—trailing only armed conflict at the present time horizon, and misinformation over the next two years. These environmental impacts are expected to intensify over the next decade (see Fig. 1).

Figure 1. Global risks ranked by severity over the short and long term. Source: World Economic Forum Global Risks Perception Survey 2024-2025.

Extreme weather events already have huge impacts on local, national and global economies. Hurricane Helene, which struck the southeastern United States in late September 2024, had a profound impact on both regional and national economies. It is estimated that the total U.S. economic losses from the hurricane are between $225 billion and $250 billion. While the national GDP impact was relatively modest, the hurricane’s effects were significant in specific sectors and regions. For example, supply chain disruptions led to temporary halts in vehicle production at major facilities, affecting employment and output in those areas. The hurricane’s effects on infrastructure, businesses and reginal economies highlight the need for enhanced resilience and preparedness strategies.

It’s no surprise that investors and regulators worldwide have come to agree on the importance of climate-related financial risk reporting (Fig. 2). The California Senate Bills 253 and 261, amended to 219, reflect this global momentum. CA SB 261 references  the TCFD recommendations, which for clarification were disbanded in 2023 and fully incorporated into the International Sustainability Standards Board (ISSB) IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 – Climate-related Disclosures (thus standardizing what was previously guidance in TCFD). Both IFRS S2 and TCFD require companies to disclose the processes and policies used to identify, assess, and manage climate-related risks (we will be sharing a detailed comparison between TCFD, IFRS S2 and other international mandates in the coming weeks). Investors want companies to disclose under TCFD/IFRS S2 to help them make informed, long-term investment decisions. While many jurisdictions have adopted IFRS S2, some like CA SB 261, reference TCFD as a foundation for climate reporting, either due to ongoing transitions or continued recognition of TCFD’s importance.

Figure 2. Global momentum of climate-related disclosures. According to the most recent IFRS Report, over 30 jurisdictions represent 57% of global GDP, more than 40% of global market capitalization, and more than half of global greenhouse gas emissions, have already finalized decisions on the adoption or other use of ISSB Standards, or are making progress to adopt or otherwise use the standards.

At GSI, we work with companies across various industries that may not have previously considered how to integrate climate-related risks—like physical risks (e.g., extreme weather) and transition risks (e.g., carbon regulations)—into their broader risk management processes. Fortunately, many companies already have established risk management processes in place, making it easier to integrate climate-related risks into these systems rather than developing a completely new process.

Whether a company already has a risk management system in place or is considering implementing one, ISO 31000, the international standard for risk management, and COSO ERM (Enterprise Risk Management) offer well-established, recognizable, and credible processes to build upon. ISO 31000 provides a structured and adaptable methodology for identifying, assessing, and treating risks, including those related to climate change. The COSO ERM Framework provides a strategic and integrated approach to risk management that is well-suited to support climate risk assessment. While not climate-specific, COSO’s emphasis on governance, strategy alignment, and performance makes it a powerful tool for embedding climate risk into broader enterprise planning—especially when conducting scenario analysis. By integrating climate risk and scenario planning with a standardized risk management system, companies can align these processes with their existing strategic planning cycles, helping to inform corporate, business, and functional strategies. To make the case for integration, GSI, we have summarized the synergy between the TCFD Disclosure, ISO 31000, and COSO ERM in Table 1 below.

Table 1. Synergies between existing risk management principlesWe increasingly see and encourage clients to consider implementing or reference existing ISO 31000 or COSO ERM in their climate disclosures. For example, a multinational company might say something like “Our enterprise risk management approach follows ISO 31000 principles, and climate-related risks are integrated into this framework through structured risk identification, evaluation and treatment processes” or “Our risk governance aligns with the COSO ERM to ensure climate risks are integrated into the company’s strategic outlook.” They may highlight how climate risk is embedded into their risk register, or the roles of risk owners and governance committees.

As global risks continue to intensify, integrating climate-related risks into existing risk management systems is more crucial than ever. By aligning climate risk with established frameworks like ISO 31000 and COSO ERM, companies can take meaningful steps to incorporate climate considerations into their broader strategic planning, ensuring resilience and long-term success. If companies are not able to implement ISO or COSO, we are still able to use the frameworks and concepts to make our client’s risk management processes more robust. Ultimately, disclosing climate-related risks helps companies build credibility, demonstrating that their processes are well-structured, globally recognized, and aligned with best practices in sustainability and governance, all while enhancing their ability to manage the most significant risks facing their business today and in the future.

If this information is useful to you or you have questions about climate-related financial risk management or how to start integrating climate into your existing processes, please feel free to reach out. Our team has decades of combined experience and is able to support all aspects of CA SB 219 compliance.

 

CARB climate reporting update: On Thursday May 29, the California Air Resources Board (CARB) hosted a workshop covering the major comments it received during the informal solicitation period which took place from December 16, 2024 to March 21, 2025. The workshop was highly anticipated with over 3,000 people signed up to attend across five continents.

The workshop (where presented information can be found here) was the first significant communication from CARB about the rulemaking status since the enforcement notice that was issued in December 2024. While the presentation provided useful insight into how CARB is thinking about major questions preparers have, it was also clear that much remained to be determined before the quickly approaching 2026 deadline. Below are a few of the major themes that emerged from the workshop.

CARB’s commitment to collaborate with key stakeholders

Throughout the workshop, CARB emphasized that it would rely heavily on comments and key stakeholder input to draft and refine the final rules. As part of the formal rulemaking process, a 45-day comment period will be held once the draft regulatory text is released. The agency is fielding comments and insights at any time through its designated email address, ClimateDisclosure@arb.ca.gov.

Firm Timelines, Growing Questions

CARB reiterated that reporting timelines under SB 253 and SB 261 are fixed. The following deadlines were confirmed:

• Scope 1 and 2 GHG emissions reporting: To be reported in 2026 for 2025 emissions
• Scope 3 GHG emissions reporting: To be reported in 2027 for 2026 emissions
• Climate-related financial risk disclosure (SB 261): To be reported in 2026

However, many commenters expressed concern that specific filing dates have not yet been clarified. Given the complexity of developing complete GHG inventories—particularly for companies reporting Scope 3 emissions—there were calls to ensure that deadlines are not set too early in the calendar year.

In addition, while the law calls for limited assurance on 2025 data, CARB has indicated that audit requirements may be deferred until later in 2026, providing preparers with more time to meet assurance expectations.

Need for Alignment and Definitions

As companies seek to align with multiple frameworks, stakeholders have requested clarification on how California’s climate risk disclosure requirements (SB 261) will align with global standards, such as the International Sustainability Standards Board (ISSB) and the EU’s Corporate Sustainability Reporting Directive (CSRD). Senators Scott Wiener and Henry Stern—authors of the legislation—confirmed that international alignment remains a top priority and noted ongoing evaluation of standards from Australia, Japan, the UK, and New Zealand as well.

While CARB has tried to allay fears from preparers about a potentially tight reporting timeline by saying that “CARB will exercise enforcement discretion for the first reporting cycle, on the condition that entities demonstrate good faith efforts to comply with the requirements of the law”, several stakeholders—including GSI Principal Becky Twohey—pressed CARB for clarity on what constitutes a “good faith disclosure” under SB 261. While the agency acknowledged the importance of this definition, it has not yet provided further guidance.

The disbanding of the Task Force on Climate-related Financial Disclosures (TCFD) also fueled additional questions, as stakeholders emphasized the need for a clear path forward on which standards companies should use when preparing their disclosures. There remain open questions about whether there are disclosures that are optional in TCFD or IFRS that will become mandatory under SB261.

Defining Who’s in Scope

CARB is currently exploring whether to use California’s Revenue and Taxation Code to define what constitutes “doing business in California”—a key determinant of which companies are subject to the new disclosure rules. However, stakeholders raised concerns about this approach. One recurring theme was the risk of unintended consequences, such as companies choosing not to hire remote workers in California to avoid triggering disclosure obligations. Additionally, there was skepticism about the relationship between having “business in California” and producing emissions in the state.

This uncertainty underscores the urgency for clear guidance, especially as CARB prepares to issue an updated draft rule by July 1, 2025, as required under SB 219. Reporting entities are actively watching for these updates, hoping for clarification on scope, timing, and implementation strategy.

GSI’s Position

GSI Environmental fully supports CARB’s efforts to bring standardized, transparent climate disclosure to California. We recognize the magnitude of the challenge ahead and the complexity of harmonizing state mandates with international expectations. While we look forward to reviewing the forthcoming draft rules, we also anticipate that delays or clarifications may be necessary to ensure feasible and effective implementation.

As we move forward, we remain committed to partnering with CARB, our clients, and fellow stakeholders to advance climate resilience, data quality, and regulatory preparedness across all sectors operating in California.

 

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.

Stay tuned as we continue unpacking the pathway to compliance and resilience in a rapidly evolving regulatory environment.

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

SB 219 Compliance California

California has long been at the forefront of national environmental and climate policy, setting ambitious goals for reducing GHG emissions and promoting sustainable initiatives. With the passage of Senate Bills 253 and 261, further amended by Senate Bill 219, the state is implementing one of the most significant climate disclosure frameworks in the United States. These laws, scheduled to be in effect January 1, 2026, require thousands of public and private companies to disclose detailed information about their greenhouse gas (GHG) emissions and climate-related financial risks. For companies that do business in California, understanding the implications of this legislation is critical for compliance, risk management, and long-term planning.

This is the first of a multi-part series of articles that GSI will publish over the next several months. The series will provide an overview of the California climate legislation, highlight key concerns and recommendations raised during the public comment process, and offer guidance on how businesses can prepare for successful implementation. We will also take a global look at how California climate disclosures align with those in other jurisdictions and give our thoughts on the process of Climate Risk Assessments and Climate Scenario Analysis. We will wrap up the series after the California Air Resource Board (CARB) releases the final rule.

We will start this series by discussing what these bills hope to accomplish, and their basic requirements.

Overview of Senate Bills 253 and 261, as Amended by SB 219

Senate Bill 253 (SB 253): Known as the Climate Corporate Data Accountability Act, SB 253 requires companies with annual revenues over $1 billion and doing business in California to publicly disclose their full GHG emissions, including Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased electricity), and Scope 3 (all other indirect emissions in a company’s value chain). Reporting must be conducted in accordance with the Greenhouse Gas Protocol and initially subject to third-party limited assurance. The required assurance level for Scope 1 and Scope 2 emissions disclosures potentially increases to a reasonable assurance level in 2030.

Senate Bill 261 (SB 261): Referred to as the Climate-Related Financial Risk Disclosure Act, this bill mandates that companies with annual revenues over $500 million doing business in California prepare biennial reports detailing their climate-related financial risks and the strategies they employ to mitigate these risks. These disclosures must align with the Task Force on Climate-related Financial Disclosures (TCFD) framework.

Senate Bill 219 (SB 219): SB 219 amends SB 253 and SB 261 to address implementation challenges and better incorporation of stakeholder feedback. Notable amendments include clarifications on compliance timelines, improved alignment with federal and international standards, and greater specificity around agency responsibilities and data reporting formats. Of most interest to reporting companies is that:

• SB 219 extends the deadline for CARB to develop and adopt regulations for GHG emissions reporting from January 1, 2025, to July 1, 2025.
• Scope 3 emissions reporting for CA SB 253 is delayed until 2027 (originally 2026), recognizing the complexity of collecting upstream and downstream data.
• Companies are allowed to use TCFD-aligned or similar reports (e.g., CDP responses) to satisfy SB 261 reporting, streamlining compliance.
• Consolidated reporting at the parent company level. To further ease the reporting process, SB 291 clarifies that GHG emissions disclosures can be consolidated at the parent company level. This means that subsidiaries are not required to file separate reports if their emissions are included in a comprehensive parent company disclosure.
• New timeline for Scope 3 emissions disclosure. Originally, SB 253 mandated that reporting entities disclose their Scope 3 emissions no later than 180 days after their Scope 1 and Scope 2 emissions disclosures. SB 219 revises this and establishes that there will be a specific schedule for Scope 3 emissions reporting.

Evaluating your current readiness

These bills position California as a national leader in climate transparency and put significant obligations on a wide swath of companies operating in or connected to the state. As California’s SB 219 disclosure requirements move closer towards implementation, companies subject to the law are navigating an evolving landscape—often without clear regulatory guidance. At GSI, we’ve been working closely with clients across sectors to prepare robust, defensible disclosures, grounded in best practices and aligned with international standards. We also have extensive experience in CARB rulemaking for various regulations including AB32 (Global Warming Solutions Act of 2006).  From our experience with CARB and sustainability reporting, CA SB 219 reporters generally fall into three categories:

1. First-Time Reporters: These organizations are new to climate-related financial risk reporting. While some have foundational elements in place, they are still maturing their programs. For them, SB 219 presents an opportunity to begin articulating how climate risks may impact their operations and to outline plans for improving governance, scenario analysis, and metrics over time.
2. Experienced but Evolving Reporters: This group has responded to customer or investor demands in the past through voluntary disclosures (often aligned with frameworks like TCFD), but are now using SB 261 as a benchmark to assess the adequacy of their reporting. These organizations are refining their programs and looking for clarity on what qualifies as sufficient explanation under the law’s “comply or explain” model.
3. Globally Regulated Reporters: These are companies already subject to international mandates such as the EU’s CSRD or the UK’s climate reporting requirements and have been reporting sustainability metrics for many years. For them, the focus is on ensuring their disclosures are harmonized across jurisdictions while meeting SB 261’s expectations—especially as the global climate disclosure landscape rapidly converges.

While CARB has yet to release detailed guidance, they’ve indicated a lenient approach in the first year. That said, we are helping clients take a “no regrets” approach—ensuring their disclosures are comprehensive enough to stand up to future scrutiny, should expectations tighten.

What does “comply or explain” mean?

Under California SB 219, if a company chooses not to fully comply with the TCFD-aligned disclosure requirements, the statute allows for a “comply or explain” approach. This means the company must provide an adequate explanation for any omissions. While CARB has yet to release detailed guidance, they’ve indicated a lenient approach in the first year. That said, we recommend companies attempt to prepare a “no regrets” disclosure to a build defensible disclosure that is comprehensive enough to stand up to future scrutiny, should expectations tighten. A “no regrets” disclosure means when a company does not comply they:

(1) Specify the gap

Be transparent if there is an omission and clearly specify which TCFD elements are not being disclosed (e.g., scenario analysis, metrics and targets).

(2) Provide context

The explanation should describe why the organization is not disclosing the requirement (for example, insufficient internal capabilities, lack of data, or progress underway). The explanation should also provide rationale grounded in the company’s business model, sector, risk exposure, and maturity of its climate risk program. A one-size-fits-all excuse is unlikely to be acceptable.

(3) Provide forward-facing planned actions

An explanation should outline plans to address the gap or improve in the future—ideally with a timeline, even if tentative, and internal subject matter experts involved (if known). This shows a commitment to maturing the program and aligns with the intent of SB 261 to encourage progress over time.

(4) Are consistent with global norms

If the company is following another reporting framework (e.g., CSRD, ISSB, CDP), the explanation should reference this alignment to demonstrate that the disclosure is not lacking rigor, just using a different format or standard.

This kind of thoughtful transparency not only satisfies regulators but builds trust with stakeholders who are increasingly scrutinizing the credibility of climate disclosures.

Looking Ahead: What to Expect and How to Prepare

We anticipate the final SB 219 rule will be released by July 1st. CARB has scheduled a public workshop on May 29^th. GSI will be monitoring these discussions closely ensure our clients remain at the forefront of any developments. In the meantime, we will post periodic articles to support reporters as they build or refine their disclosures focusing on:

• Integrating climate-related risk into existing risk management practices
• Understanding the public comments going into the final rule
• Tips for GHG assurance
• The role of climate scenario analysis
• Leveraging existing CDP reporting
• Alignment with other global jurisdictions
• Summaries of the evolving US climate regulatory landscape.

For now, our advice remains consistent: prepare an assurable GHG inventory, disclose progress transparently, and document your rationale thoroughly. This “no regrets” approach means your organization is ready—whether CARB maintains a lenient stance or shifts to a stricter interpretation in future years.

As GSI Environmental’s Principal Scientist and Principal Engineer, we—Becky Twohey and Albert Chung—are excited to support organizations as they prepare for these new requirements and work toward integrating robust climate disclosure practices.

In the next installment, we’ll explore what stakeholders shared in the public comment period leading up to the final rule. Stay tuned for: “What Do Stakeholders Say About CA SB 261 and SB 253? Public Commentary Summarized.” We’ll highlight key themes from public comments submitted to CARB and discuss how this feedback is shaping implementation.

Make sure to follow along as we continue to unpack what these regulations mean for your business, and how you can prepare.

If this information is new to you, or you have questions about how these regulations will affect your business specifically, please feel free to reach out. Our team has decades of combined experience and is able to support all aspects of CA SB 219 compliance.