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California has set a new national standard for corporate climate transparency through its Climate Accountability Package, which includes Senate Bill 253 (the Climate Corporate Data Accountability Act) and Senate Bill 261 (the Climate-Related Financial Risk Act).
Together, these laws create the most comprehensive state-level climate disclosure requirements in the United States, requiring thousands of companies to publicly report their greenhouse gas (GHG) emissions and disclose climate-related financial risks.
For organizations that do business in California, understanding both laws — and how they intersect — is critical for compliance, credibility, and long-term sustainability planning.
Overview: The Climate Accountability Package
Signed into law in October 2023 and amended under SB 219 in 2024, California’s Climate Accountability Package strengthens corporate disclosure around both emissions data and climate-related financial risk.
- SB 253 (Climate Corporate Data Accountability Act) focuses on what a company emits — requiring public disclosure of GHG emissions across Scopes 1, 2, and 3.
- SB 261 (Climate-Related Financial Risk Act) focuses on how a company is exposed to climate risk — and what it’s doing to mitigate those risks.
Together, these bills push companies toward more robust, comparable, and decision-useful climate disclosures aligned with global standards like the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board (IFRS S2).
Understanding SB 253: The Climate Corporate Data Accountability Act
Who it applies to
SB 253 applies to companies — both public and private — with annual revenue exceeding $1 billion that “do business” in California. This definition encompasses companies based outside the state that have significant operations, sales, or partnerships within California.
What’s required
Covered entities must publicly disclose their full greenhouse gas inventory, including Scope 1, 2, and 3 emissions — through a reporting platform administered by the California Air Resources Board (CARB).
- Scope 1 and 2 emissions: must be disclosed beginning in 2026, based on fiscal 2024 or 2025 data (CARB has indicated a preference for 2025 data).
- Scope 3 emissions: must be disclosed beginning in 2027.
- Verification: All Scope 1 and 2 data must undergo limited assurance from a qualified third-party verifier; Scope 3 verification will follow in later years as CARB guidance evolves.
- Annual Fee: $3,106 to support CARB’s administration of the program.
Why it matters
Complying with SB 253 enhances transparency and accountability while positioning companies ahead of anticipated federal rules from the U.S. Securities and Exchange Commission (SEC).
More importantly, understanding your emissions profile enables data-driven sustainability planning — helping identify cost-saving opportunities, supply-chain risks, and areas for operational improvement.
Benefits of early alignment
- Builds trust with investors, clients, and regulators.
- Enhances data quality for long-term climate strategies.
- Positions your company to meet global disclosure standards like CDP, CSRD, and IFRS S2.
Understanding SB 261: The Climate-Related Financial Risk Act
Who it applies to
SB 261 applies to companies with annual revenue exceeding $500 million that do business in California — a broader scope than SB 253.
What’s required
Covered entities must publish biennial reports that disclose climate-related financial risks and the measures adopted to reduce or adapt to those risks.
- First report due: January 1, 2026.
- Portal opens: December 1, 2025 (through CARB).
- Framework: Reports must align with TCFD and IFRS S2 principles.
- Annual Fee: $1,403 to CARB.
These disclosures are designed to integrate climate considerations directly into corporate financial decision-making and risk management.
What an SB 261-aligned report includes
SB 261 builds on the four pillars of the TCFD framework:
1. Governance
Describe board oversight and management responsibilities for assessing and managing climate-related risks and opportunities.
2. Strategy
Identify short-, medium-, and long-term climate risks and opportunities — and explain their potential impact on business operations and financial performance.
3. Risk management
Outline processes for identifying, assessing, and managing climate-related risks, including how they’re integrated into broader enterprise risk frameworks.
4. Metrics & targets
Disclose relevant metrics (such as Scope 1, 2, and 3 emissions) and the targets used to manage climate-related risks and opportunities.
Understanding physical and transition risks
Under SB 261, companies must evaluate two key types of climate risk:
- Physical risks, which arise from the direct effects of climate change, such as wildfires, floods, hurricanes, and chronic heat or drought.
- Transition risks, which result from the global shift to a low-carbon economy — including new policies, technological disruption, market shifts, and reputational pressures.
Both categories require robust data and scenario analysis to understand the financial implications of climate change.
Steps to prepare for compliance
Greenplaces’ compliance framework guides companies through a structured process to meet SB 261 — and by extension, SB 253 — requirements efficiently and confidently.
Step 1: Assemble a working group
Bring together leaders from Legal, Finance, Risk & Compliance, Operations, IT, and Sustainability to oversee the process.
Step 2: Define risk rating and establish financial thresholds
Greenplaces distills the technical risk data from several databases and modeling tools into a consistent, easy-to-interpret scale ranging from Very Low to Very High. These risk ratings reflect the likelihood and severity of climate impacts on a location, adjusted for that location’s socioeconomic capacity to withstand those impacts.
Establish internal definitions for high, medium, and low financial impacts — for example:
- High: ≥ $5 million or ≥ 5 percent of annual revenue.
- Medium: $500K–$5 million or 1–5 percent of annual revenue.
- Low: ≤ $500K or ≤ 1 percent of annual revenue.
Step 3: Collect data and documentation
Centralize data on energy usage, emissions, governance structures, resilience plans, supplier engagement, and site locations.
Step 4: Conduct physical risk assessment
Model site-specific exposure to physical climate hazards using climate pathways such as RCP 4.5 (moderate cuts) and RCP 8.5 (business as usual). Evaluate scenarios for 2025, 2030, and 2050.
Step 5: Conduct transition risk assessment
Assess how evolving regulations, technologies, markets, and reputations may affect business performance.
To determine the relevance of transition risks, Greenplaces examines:
- Inputs: reviewing internal docs + public data
- Dialogue: collaborating with your team to identify risks
- Scaling: rating relevance and severity based on impact
Step 6: Identify climate opportunities
SB 261 encourages reporting not just on risk but on opportunity, including resource efficiency, renewable energy sourcing, low-carbon product innovation, and new market access.
Step 7: Draft and review your report
Greenplaces helps clients synthesize findings into a TCFD-aligned report, complete with visual risk matrices and mitigation narratives, ready for submission through CARB.
Step 8: Maintain a “living” assessment
Revisit your disclosures annually to account for business, regulatory, or climate changes.
The value of early action
Aligning with SB 253 and SB 261 early allows organizations to:
- Build investor confidence through transparent, data-driven reporting.
- Strengthen risk management and resilience planning.
- Reduce the burden of future reporting as federal and international requirements converge.
- Position their brand as a leader in sustainability governance.
How Greenplaces can help
Greenplaces partners with companies to simplify compliance and transform disclosure into strategic advantage. Our platform and experts help organizations:
- Collect, verify, and centralize GHG data across business units for SB 253 reporting.
- Model physical and transition risks using advanced climate-scenario tools for SB 261 disclosures.
- Develop TCFD-aligned reports that meet both SB 261 and IFRS S2 standards.
- Facilitate internal workshops that align leadership on risk, governance, and messaging.
- Maintain a living report through annual updates and platform support.
By combining automation with human expertise, Greenplaces ensures your organization stays compliant — and ahead.
