22 Feb New carbon laws in California will drive climate action with corporates
California has confirmed the passing of two new laws requiring businesses to disclose their carbon emissions and climate-associated financial risks. The Climate Corporate Data Accountability Act (Senate Bill 253) means all large corporations operating in California must publicly report their greenhouse gas emissions. The Climate-Related Financial Risk Act (Senate Bill 261) instructs that businesses disclose the impacts they experience, as a consequence of climate change.
Senate Bill 253 requires public and private companies with revenues exceeding $1 billion and participating in business in California to disclose their emissions, including scopes 1, 2 and 3 emissions, starting in 2026. Senate Bill 261 requires large US corporations with annual revenues over $500 million operating in California to disclose climate-related financial risks and management strategies to the public.
California has a significant influence on the United States. The state contains one of the largest economies and has historically driven national and global change. Businesses are already taking action to satisfy the demands of new regulations. A recent study suggests that many corporate leaders are preparing for climate disclosure rules, and over half consider climate change a risk to their business. California’s new laws solidify the move from voluntary climate reporting to mandatory climate reporting, strengthening the need for corporate climate actions. Business leaders focusing on climate reporting will be in a better position to meet these new regional requirements.
California’s climate disclosure plans represent a new phase for corporate sustainability. As a result, thousands of companies will have to disclose their emission profiles, resulting in considerable carbon reductions. The regulations have applied further pressure on big businesses, the highest greenhouse gas emitters, to focus on decarbonisation.
Customers and regulators can determine businesses falling behind and support them to take climate action. In an evolving landscape, a business’s climate data will influence its access to capital. Climate-focused companies will likely benefit from the new policies in California. If an organisation has been measuring and tackling emissions and climate risks, the new framework will enable them to highlight this progress.
While the bills only apply to those participating in business in California, they represent a drive for accelerated transparency in carbon accounting. The state’s laws represent a new stage of climate disclosure laws like the EU Corporate Sustainability Reporting Directive (CSRD). These new measures come when investors demand more consistent and reliable information to enable them to combine climate-related financial information into their investment plans. An increased amount of companies have committed to achieving net zero emissions. More transparency enables investors to determine if businesses are greenwashing or making genuine progress on their climate commitments.
Accurate carbon accounting will also enable businesses to secure more understanding of emission profiles and identify any areas of concern, such as high-emitting suppliers. Effective climate data can help deliver trust, secure investment, and create a competitive edge. The new laws in California represent a defining moment for climate action and will likely have a ripple effect beyond the state borders.
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