Understanding California SB 253: The Climate Corporate Data Accountability Act

By Darin Styles, CPA, CFE

California’s SB 253, signed into law on October 7, 2023, represents a landmark moment in climate legislation. It is the first law in the United States to require both public and private companies to disclose Scope 3 greenhouse gas emissions, setting a new standard for transparency in corporate carbon reporting. The primary goal of this legislation is to provide stakeholders with a clearer picture of the environmental impact of businesses operating in the state.

What is SB 253 and who does it apply to?

SB 253 mandates that companies doing business in California and generating more than $1 billion in annual revenue publicly disclose their greenhouse gas emissions. The law applies to “reporting entities”, defined as any “partnerships, corporation, limited liability company, or other business entity formed under the laws of this state, the laws of any other state of the United States or the District of Columbia, or under an act of the Congress of the United States, including those without a physical presence in California but with significant revenue from the state.

These reporting entities must disclose emissions across three categories: Scope 1, which covers direct emissions from owned or controlled sources; Scope 2, which includes indirect emissions from purchased energy; and Scope 3, which encompass all indirect emissions across a company’s value chain. All disclosures must follow the Greenhouse Gas Protocol and be made publicly accessible.

Effective dates

The timeline for compliance is clear. Companies must report Scope 1 and Scope 2 emissions by June 30, 2026, covering fiscal year 2025. Scope 3 emissions, which are more complex to calculate, will follow in 2027 for fiscal year 2026.

Why this matters

The law requires companies to submit their emissions data through a public digital platform managed by the California Air Resources Board (CARB). To ensure accuracy and reliability, all disclosures must undergo third-party verification. CARB has proposed an annual flat fee of $3,106 to cover program costs, and penalties for noncompliance can reach up to $500,000 per year. For companies, early preparation is not just about avoiding penalties – it is an opportunity to strengthen their reputation and gain a competitive edge as stakeholders increasingly demand credible climate data.

The pressure to comply

Among the most challenging aspects of SB 253 is Scope 3 reporting. Unlike Scope 1 and 2 emissions, which rely on data within a company’s control, Scope 3 emissions require information from a vast network of suppliers and partners. This complexity makes Scope 3 the most resource-intensive category to measure.

Many suppliers do not currently track emissions related to travel, procurement, or product disposal, forcing companies to rely on estimates that may not fully reflect reality. To address this, businesses may need to renegotiate procurement contracts to include emissions reporting requirements, adding pressure to supply chains. While the law includes a safe harbor provision to protect companies from penalties for good-faith Scope 3 estimates, inaccurate disclosures can still lead to reputational harm and legal challenges.

Compliance also comes with significant financial implications. Companies will need to invest in new data tracking systems, sustainability tools, and legal and sustainability consulting services. The requirement for independent third-party verification will further increase costs and could create bottlenecks as demand for qualified auditors rises. For multinational companies, the challenge is even greater, as they must collect emissions data from foreign suppliers who may lack the infrastructure or awareness to comply.

How leading companies are responding

Forward-thinking companies are already taking proactive steps. Apple, for instance, now requires its suppliers to transition to renewable energy and uses scorecards to monitor progress toward its goal of carbon neutrality by 2030. Amazon evaluates the environmental impact of its products from raw material extraction through disposal to identify high-emission stages and guide improvements. Ford has taken a different approach by focusing on emissions reductions in materials such as steel and aluminum, using supplier-specific greenhouse gas modeling tools to drive reductions.

What companies should do now

The path to compliance begins with a thorough assessment of current emissions reporting practices against the Greenhouse Gas Protocol, with a particular focus on Scope 3. Companies should engage their value chain partners early to collect data, align on methodologies, and set expectations for data quality. Building robust internal processes for data collection and assurance readiness is essential, as is securing third-party assurance providers well in advance. Finally, businesses must stay informed by monitoring CARB updates as the implementation framework evolves.

On October 14, 2025, the California Air Resources Board (CARB) is expected to release its notice of proposed rulemaking, officially launching a 45-day public comment period under the California Administrative Procedure Act. This period offers stakeholders an opportunity to provide feedback and shape the final framework.

Following this, CARB’s board is scheduled to convene on December 11–12, 2025, to review public input and consider formal adoption of the proposed rule. Businesses subject to SB 253 should closely monitor these developments to ensure timely compliance planning.

Take the lead on climate disclosure

SB 253 introduces a new era of emissions transparency – one that demands strategic planning, cross-functional coordination, and credible data. With Scope 3 reporting and third-party assurance requirements on the horizon, companies must act decisively to meet expectations and mitigate risk.

Abdo’s ESG specialists are ready to support your journey – from mapping your emissions landscape to engaging suppliers and preparing for CARB’s digital platform. Let’s work together to turn compliance into competitive advantage. Contact us today to begin shaping your climate disclosure strategy.