6 min. read
Last updated Oct 6, 2025
Key takeaways for SB 253 compliance
SB 253 requires companies with more than $1 billion in revenue doing business in California to disclose greenhouse gas emissions.
Scope 1 and scope 2 disclosures are due in June 2026. Scope 3 disclosures begin in 2027.
The California Air Resources Board (CARB) enforces the law, with penalties up to $500,000 annually for noncompliance.
Early action builds credibility, reduces risk, and creates value through efficiency, capital access, and customer trust.
Why SB 253 raises the stakes for leaders
SB 253 is a landmark law that raises expectations for corporate emissions disclosure. The stakes are high. Disclosures will be subject to audit, enforcement, and public scrutiny. California is a first mover in the US, and SB 253 sets expectations that other regulators are likely to follow.
Compliance is mandatory, but the way companies respond will determine whether it is only a cost or also an opportunity. By investing early, improving data quality, and treating disclosure as strategic, executives may be able to reduce risk, cut costs, and strengthen competitive advantage.
SB 253 compliance roadmap through 2027
SB 253 sets binding disclosure deadlines and penalties, with all reports subject to independent assurance and annual filing with the California Air Resources Board (CARB). Executives are advised to prepare in phases:
Now: Define reporting boundaries, gather accessible data for material activities, and invest in robust data systems.
Ongoing: Develop data governance practices, convene internal stakeholders, and improve reporting methodologies
By June 30, 2026: Report scope 1 and scope 2 emissions with limited assurance.
By 2027: Report scope 3 emissions, prioritizing the most material categories.
By 2030: Provide limited assurance for scope 3 reporting.
Note: These compliance dates are set by CARB but could shift.
A phased approach gives companies time to strengthen data quality, establish robust governance practices, and build systems that create long-term business value while supporting compliance.
How SB 253 aligns with the Greenhouse Gas Protocol
SB 253 is structured around the Greenhouse Gas (GHG) Protocol, the global standard for emissions reporting. The GHG Protocol classifies emissions activities into three scopes. Understanding the nuances of each scope is critical, as they each present distinct challenges and opportunities for companies.
By aligning with the GHG Protocol, SB 253 ensures consistency, transparency, and comparability. Companies that prepare for SB 253 are also better positioned to meet the EU’s Corporate Sustainability Reporting Directive (CSRD) and ISSB standards.
Scope 1 emissions: Managing direct operations
Scope 1 includes emissions from sources a company owns or directly controls, such as fuel use in facilities, fleets, or on-site manufacturing. These are easier to identify than scope 2 or scope 3, but accurate measurement is not automatic. Data must be gathered across sites, verified against emission factors, and prepared for assurance.
Scope 1 can be significant in heavy industries. Errors or gaps here can create compliance and reputational risks.
Scope 2 emissions: Navigating complex electricity data
Scope 2 covers emissions from purchased electricity, heat, or steam. Electricity is often a large share of corporate emissions, and reporting it is increasingly complex. The GHG Protocol allows both location-based and market-based methods, and new rules are under development.
Advanced electricity accounting methodologies are raising the bar, especially for high-energy sectors like data centers and AI.
Scope 3 emissions: Tackling value chain complexity
Scope 3 covers all other indirect emissions across a company’s value chain. These typically represent the majority of a company’s footprint but are the hardest to measure. The GHG Protocol defines 15 categories, ranging from purchased goods and services to investments. Keep in mind that a new scope 3 standard is being developed, and companies should prepare to stay up to date with the changes ahead.
Effective scope 3 reporting requires supplier engagement, clear goal setting, and data improvement over time. Companies must balance ambition with pragmatism, focusing first on the categories with the greatest impacts.
Case study: evo and supplier engagement
evo partnered with Carbon Direct to track its operational and supply chain emissions. By prioritizing high-impact suppliers and providing tools for better reporting, evo improved data quality and built stronger relationships.
Assurance and enforcement requirements
All SB 253 disclosures must be independently assured. Scope 1 and scope 2 require limited assurance beginning in 2026, moving to reasonable assurance in later years. Scope 3 requires limited assurance beginning in 2030. CARB enforces compliance and can levy penalties of up to $500,000 per year.
For executives, assurance means emissions data must withstand audit-level scrutiny. Companies that invest early in robust systems avoid costly remediation later.
Technology readiness for audit-proof data
Most companies still rely on fragmented spreadsheets for carbon accounting, which is unlikely to stand up to SB 253 assurance requirements. Executives need systems that integrate financial and sustainability data, automate collection, and create auditable records.
The Carbon Direct Platform helps organizations modernize data infrastructure, ensuring that emissions reporting is both reliable and ready for independent review.
Global alignment with other regulations
SB 253 aligns with global disclosure frameworks such as the EU’s CSRD and the ISSB standards. Companies that act early can reduce duplication, improve efficiency, and demonstrate leadership across markets.
By preparing now for SB 253 and reporting consistently, executives may be able to meet multiple regulatory demands while building credibility with global investors.
Sector challenges: Tech, heavy industry, and finance
The challenges of SB 253 vary by sector:
Technology and AI: Rising energy use makes scope 2 reporting critical, with hourly power matching becoming a key differentiator.
Heavy industry: Scope 1 emissions are often large, requiring facility-level rigor and assurance readiness.
Consumer goods: Supply chain complexity drives scope 3 challenges, making supplier engagement essential.
Financial sector: Financed emissions and portfolio alignment require advanced methodologies and transparent disclosure.
Carbon Direct tailors strategies for each sector, helping executives focus on what matters most. For instance, the Russell Family Foundation worked with Carbon Direct to calculate its full footprint, including financed emissions, and reduce its portfolio exposure to carbon-intensive assets. This positioned the foundation to meet its net-zero 2030 target while supporting mission-aligned investments.
Beyond SB 253 compliance: Creating business value
SB 253 sets a regulatory floor, but companies that treat disclosure as a strategic lever for value can gain a competitive edge. Credible emissions data reveals cost-saving opportunities, builds trust with investors, and strengthens positioning in climate-conscious markets.
Carbon Direct’s Value Creation Playbook highlights the financial upside: companies with stronger climate performance enjoy a lower cost of capital (6.8% compared to 7.9% for peers), and 70% of investors believe companies with credible climate strategies deliver higher returns.
Disclosure is not just about risk. It can help win contracts from customers that demand transparency, attract capital from lenders and insurers that reward climate leadership, and prepare organizations for future regulations. Companies that get this right will secure a lasting advantage.
Ready to turn SB 253 compliance into a source of value?
Contact Carbon Direct to learn how we can help your organization cut costs, build investor trust, and unlock growth through credible climate disclosure.
FAQs on SB 253 for executives
Who must comply with SB 253?
Companies with more than $1 billion in annual revenue doing business in California.
When are disclosures due?
Scope 1 and scope 2 emissions by June 30, 2026. Scope 3 emissions beginning in 2027.
How should executives get started now?
Approach SB 253 in phases, starting with building governance, defining reporting boundaries, and investing in robust data systems. Carbon Direct helps companies navigate the complexities of SB 253 to transform disclosure into business value. Contact us to learn more.
What are the penalties for noncompliance?
Up to $500,000 per year, enforced by the California Air Resources Board.
Do disclosures require assurance?
Yes. Scope 1 and scope 2 require limited assurance beginning in 2026, moving to reasonable assurance later. Scope 3 requires limited assurance beginning in 2030.
