What is SB253?
The California State Legislature has passed Senate Bill 253 – The Climate Corporate Data Accountability Act, and on Saturday, October 7th Governor Gavin Newson signed the bill into law.
SB253 will mandate that both private and public companies that “do business in California” submit their operational and supply chain GHG emissions data to an emissions reporting organization which would make disclosures publicly available through a new digital platform. Beginning in 2026, affected businesses will be required to report prior-year Scope 1 direct and Scope 2 indirect emissions data, with Scope 3 value chain emissions data to be reported in 2027. All will be required to be reported in conformance with the Greenhouse Gas Protocol.
While the regulation does require companies to report their Scope 3 GHG emissions, it has clearly stated that business will not be subject to administrative penalty for misstatement with regard to Scope 3 emissions disclosures made with a “reasonable basis and disclosed in good faith”. This will help take away some of the concern of businesses reporting on emissions over which they feel they have limited access to and even more limited control over the quality of the data.
Like the SEC’s draft climate-related disclosure rule and the EU’s Corporate Sustainability Reporting Directive, SB253, mandates that Companies receive third-party assurance of their emissions data via a phased approach, with limited assurance of Scope 1 & 2 data required beginning 2026 (xx year data) and reasonable assurance by 2030. Scope 3 GHG emission data assurance will be required to undergo limited assurance starting in 2030.
Why is this so important?
With the passage of SB253, California has in essence passed the nation’s first emissions disclosure legislation of its kind which preempts the SEC’s long-delayed climate disclosure rule. It will align companies doing business in California with reporting requirements similar to those of the EU’s Corporate Sustainability Reporting Directive (CSRD). California has a history of environmental stewardship and has long held an outsized influence on environmental regulations and standards in the US, and SB253 will no doubt be a continuation of this trend.
Who will this affect?
SB253 is estimated to affect over 5,300 businesses, while the SEC’s proposed climate risk disclosure is expected to affect 3,611 businesses. As defined by the bill, any public or private US business entity with revenues of more than a billion dollars that “does business in California” will be affected.
Under existing law, “doing business” in California is defined as “engaging in any transaction for the purpose of financial gain within California, being organized or commercially domiciled in California, or having California sales, property or payroll exceed specified amounts: as of 2020 being $610,395, $61,040, and $61,040, respectively”.
Therefore, businesses with headquarters outside of California, and subsidiaries of non-US-based companies that meet the revenue threshold will be affected by the legislation if they “do business” in California.
How can we help?
SB253 requires that independent assurance providers possess “significant experience in measuring, analyzing, reporting, or attesting to the emission of greenhouse gasses and sufficient competence and capabilities necessary to perform engagements in accordance with professional standards and applicable legal and regulatory requirements” and to issue appropriate, independent reports.
ERM CVS has been working with world-leading companies providing independent assurance on GHG emissions and other sustainability-related metrics since 1996. Our decades-long greenhouse gas subject matter expertise helps businesses across every industry by adding credibility to, and confidence in, emissions data and sustainability performance by providing both limited and reasonable assurance services in accordance with internationally recognized assurance standards such as ISAE 3000, ISAE 3410, and ISO 14064-3.
Using our content understanding and our knowledge of the current assurance standards, we can support your organization by providing confidential assessments of assurance readiness in advance of SB253’s upcoming reporting deadlines.
Get in touch today if you’d like more information on how ERM CVS can help your organization with its assurance journey.