California

New Sustainability Reporting Laws Reshape Corporate Accountability

California is leading the United States in implementing stringent Environmental, Social, and Governance (ESG) regulations, significantly impacting businesses operating within the state. At EcoActive, we are committed to assisting organizations in navigating these complex requirements, ensuring compliance, and promoting sustainable practices.​

Overview of California’s ESG Regulations

In recent years, California has enacted pivotal legislation mandating comprehensive climate-related disclosures from businesses:​

Climate Corporate Data Accountability Act (SB 253)

Effective from 2026, SB 253 requires companies with annual revenues exceeding $1 billion and operating in California to annually disclose their greenhouse gas (GHG) emissions across all scopes:

• Scope 1: Direct emissions from owned or controlled sources.
• Scope 2: Indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company.​
• Scope 3: All other indirect emissions that occur in the company’s value chain, including both upstream and downstream activities

These disclosures must undergo third-party assurance to ensure accuracy and transparency. ​

Greenhouse Gases: Climate-Related Financial Risk (SB 261)

Starting in 2026, SB 261 mandates that companies with revenues over $500 million doing business in California biennially prepare and submit reports detailing:​

• Climate-related financial risks in alignment with the Task Force on Climate-related Financial Disclosures (TCFD) framework.​
• Measures adopted to mitigate and adapt to these identified risks.​

These reports must be submitted to the California Air Resources Board (CARB) and made publicly accessible. ​

Compliance Timeline

Understanding the phased implementation is crucial for timely compliance:​

• 2026:
  
  • Begin annual disclosure of Scope 1 and Scope 2 emissions with limited assurance.​
  • Submit the inaugural climate-related financial risk report.

• 2027:
  
  • Commence reporting of Scope 3 emissions, with limited assurance required.​
    
    
• 2030 and Beyond:
  
  • Scope 1 and Scope 2 emissions disclosures will require reasonable assurance.
    
  • Scope 3 emissions disclosures will continue with limited assurance. ​

Implications for Businesses

These regulations necessitate that companies:​

Implement robust systems for tracking and reporting GHG emissions across all scopes.​

• Align their reporting frameworks with TCFD recommendations.
  
• Engage accredited third-party auditors for assurance of disclosed data.​
  
  
• Develop and disclose strategies for mitigating identified climate-related financial risks.​

Non-compliance can result in significant penalties, including fines up to $500,000. ​

How EcoActive Can Assist

At EcoActive, we offer comprehensive ESG consulting services tailored to help your organization:​

• Assess Readiness: Evaluate current ESG practices against California’s regulatory requirements.​
• Develop Compliance Strategies: Create customized roadmaps to achieve compliance within stipulated timelines.​
• Implement Reporting Systems: Establish efficient processes for accurate data collection and reporting.​
• Facilitate Third-Party Assurance: Connect with accredited auditors to validate your disclosures.​
• Mitigate Risks: Design and implement measures to address identified climate-related financial risks.​

Partnering with EcoActive ensures that your business not only complies with California’s ESG regulations but also enhances its sustainability profile, fostering long-term resilience and stakeholder trust.​

Stay Informed and Proactive

The ESG regulatory landscape is continually evolving. Staying informed and proactive is essential. Subscribe to our newsletter for the latest updates and insights on ESG compliance and sustainability best practices.​

Contact EcoActive today to embark on your journey toward comprehensive ESG compliance and sustainable success.