California’s climate disclosure regulations are set to take effect in 2026, and businesses need to be prepared.

ESG Playbook offers a comprehensive solution to help you comply with SB 219, covering Scopes 1, 2, and 3 GHG emissions and climate risk reporting.

Our platform supports your transition to compliance by helping you measure, manage, and report emissions, assess the maturity of your climate risk and ESG reporting processes, and build a solid plan to produce a climate risk report aligned with the Taskforce on Climate-related Financial Disclosures (TCFD)

10,000+ companies

The total number of companies affected by the laws will be over 10,000, but far more small and medium-sized value chain players are also likely to be impacted.

California’s desire to continue its leadership in climate policy, coupled with the recognition of the severe impacts of climate change on its citizens, industries, and economic prosperity, are the two main drivers of the policy.

The bill stresses the importance of companies with significant revenue sharing their carbon footprint. It will mandate comprehensive annual GHG emissions data reporting using globally recognized standards to promote informed decision-making and transition towards a net-zero carbon economy.

The state would require the California Air Resources Board to create rules for disclosure and contract a third party to create a digital platform for annual disclosures all by January 1, 2025. The platform was to be funded by an annual fee from reporting entities. Reporting requirements for disclosures included:

Scope 1 & 2 Reporting

Starting in 2026, companies must publicly report their Scope 1 (Direct emissions) and Scope 2 (Indirect emissions) for 2025 data.

Scope 3 Reporting

Beginning in 2027, companies must also report their Scope 3 emissions (Indirect emissions from the entire value chain) based on 2026 data.

Alignment with Standards

Reporting should follow the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard

Third-Party Verification

Scope 1 & 2: Limited assurance starting in 2026, reasonable assurance by 2030.

Scope 3: Limited assurance beginning in 2030.

Maximum Fine: Up to $500,000 per reporting year

Considerations: The state will consider past compliance and good faith efforts to meet the requirements

Safe Harbors for Scope 3:

• No penalties for mis-statements of Scope 3 emissions, made on a reasonable basis and in good faith
• Between 2027 and 2030, penalties for Scope 3 will only be applied for non-filing.

California recognizes the profound economic and environmental impacts of climate change and the urgent need for comprehensive risk disclosures from major organizations. While numerous global initiatives and policies have begun advocating for transparent climate-risk reporting, current standards remain voluntary.

This bill aims to set a precedent by introducing mandatory and comprehensive climate risk disclosure for both public and private entities in California, ensuring a sustainable and resilient future for the state.

• Starting in 2026, and every second year thereafter, companies must disclose their climate-related risks, along with mitigation and adaptation measures, on their websites.
• Reporting must align with the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
• Companies need to report across four key areas: governance, metrics and targets, strategy, and risk management.
• If companies cannot meet all reporting requirements, they must disclose as much as possible, explain any gaps, and outline steps to fully comply in the future.
• Companies already reporting under TCFD or ISSB (International Sustainability Standard Board) standards can satisfy the requirements of SB 261.
• The state board was to contract an organization to prepare a public report biennially, reviewing the climate-related financial risks reported by companies and analyzing risks facing California.

Non-Compliance: Penalties will apply to entities that fail to publish or publish insufficient reports

Maximum Fine: Up to $50,000 per reporting year

Considerations: The state will consider past compliance and good faith efforts when assessing penalties.