Actions to take now in preparation for the California climate laws
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The California Climate Corporate Data Accountability Act requires companies doing business in California to disclose Scope 1, 2 and 3 emissions as well as climate-related financial risks beginning in 2026. The law was known as bills SB 253 and SB 261 which were combined and amended to be SB 219.
SB 253 requires both public and private companies with over $1 billion in annual revenues doing business in California to disclose their greenhouse gas (GHG) emissions. Most notably, it requires reporting entities to disclose their Scope 3 emissions, the indirect emissions throughout a company’s value chain, in addition to their Scope 1 and Scope 2 emissions.
SB 261 requires companies with more than $500 million in annual revenue doing business in California to report all identified climate-related financial risks, as well as measures they have adopted to mitigate and adapt to these risks. In-scope businesses are required to disclose their climate-related financial risks biannually. Organizations must assess their risks and publicly report on them in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
Under SB 253, businesses with more than $1B in revenue doing business in California, must track and report their emissions. Companies that are not preparing for this need to begin now, as entities in-scope of SB 253 will need to report their Scope 3 emissions beginning in 2027. While businesses operating in California get ready for the upcoming emissions disclosure requirements, they should also be preparing TCFD-aligned reports on their climate-related financial risks for SB 261.
Gathering relevant emissions data for is a critical first step to conducting a complete inventory for your company’s Scope 1, 2 and 3 emissions in accordance with the Greenhouse Gas Protocol. Emissions data must be audit-ready; SB 253 requires limited third-party assurance for companies’ Scope 1 and 2 emissions reporting for January 2026 disclosure. While Scope 3 won’t be required until 2027, it is wise to begin that compliance process well in advance by ensuring that the proper systems are in place for data collection and calculations.
Similar to the data collection process prior to emissions calculations, companies should compile a list of relevant physical and transition risks and opportunities prior to conducting a climate risk assessment. Inputs such as the geographic location and value of assets (e.g., offices, warehouses etc.), financial information from your company’s most recent statements (e.g., revenue, CapEx, cost of raw materials etc.), and a complete mapping of your supply chain are critical to conducting an accurate climate risk assessment. While this may seem daunting, some requisite data can be pulled from the results of the emissions inventory, saving time and cost.
Sphera’s sustainability experts carry out detailed studies for your Scope 1 and Scope 2 emissions sources, as well as your relevant Scope 3 categories to provide data-driven insights to improve your value chain emissions. Similarly, our expert consultants and refined Climate Risk Tool allow for customization and easily transferrable asset and financial data. We can support you in:
A corporate carbon footprint (CCF) is an assessment of the amount of GHG emissions that occur from a company’s activities and its upstream and downstream value chain. From data collection to calculation to disclosure, Sphera’s unique combination of software and data solutions – supported by our comprehensive consulting services – guides companies across sectors through the process.
CFF calculation is an ongoing process. SpheraCloud Corporate Sustainability software, combined with our methodological and sector expertise, can help your company accelerate and scale your carbon accounting efforts while ensuring compliance with SB 253. We can help you:
SB 261 requires companies to publicly report their climate-related financial risks, including potential physical risks (e.g., tropical storms and extreme heat) and transition risks (e.g., shifts in climate policy or new technologies). Accurately identifying the current and anticipated financial impacts of climate change on your company means conducting climate scenario analysis. Scenario analysis is a method for developing input to strategic plans to enhance plan flexibility or resilience to a range of future states. These should include a low-carbon scenario, such as a 2°C or lower warming trajectory.
Sphera consultants work with your team to perform a risk analysis. These results can then be configured in SpheraCloud Corporate Sustainability dashboards for communication with stakeholders across your organization.
Leveraging our Climate Risk Tool and the latest scientific climate scenarios, Sphera consultants will work with your team to perform a qualitative or quantitative climate risk assessment for material physical and transition climate-related risks.
In addition to identifying and assessing the financial impact of relevant climate-related risks and opportunities on your organization across time horizons, SB 261 stipulates that disclosing entities must also describe the measures and strategies that they have adopted – and plan to adopt in future years – to mitigate these risks. It is crucial for companies to integrate governance, processes and systems for mitigating any climate risks into larger enterprise-risk management.
After identifying and assessing the financial impact of physical and transition risks to your company through scenario analysis, Sphera will leverage our expertise in transition planning and climate mitigation to draft a comprehensive adaptation and resilience framework specific to your company. This will include actionable, cost-efficient recommendations of risk mitigation and adaptation measures that you can take both now and in future years to shore up resilience and integrate it into your company’s broader sustainability and risk management strategies.
Companies must publicly report on their risks in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
Sphera consultants can help you understand the requirements of the California climate laws, and prepare your reporting in line with the TCFD framework.
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