California has become the first US state to enact a climate disclosure regulation, marking a significant shift in the U.S. approach to corporate responsibility. As businesses and investors around the world increasingly focus on environmental, social, and governance (ESG) criteria, California’s acknowledgement of the importance of monitoring sustainability is expected to prompt other states to follow suit.
What is the California Climate act SB 253/ CCDAA?
Signed into law in 2023, the California Climate Act (SB 253)/Climate Corporate Data Accountability Act is a law mandating which companies must report their carbon emissions in greater detail.
Who does it affect?
The requirement to publish climate related financial risk reports, captures a wider set of companies:
- Annual revenue of at least $500M
- US public and private companies conducting business in California
Companies that meet the following 2 criteria must report to this framework:
- US public and private companies with annual revenue in excess of $1B
- Companies conducting business in California
Reporting requirements and timeframes:
- Corporations are required to disclose scopes 1, 2, and 3 emissions:
- Scope 1: direct emissions from owned or controlled sources
- Scope 2: indirect emissions from the generation of purchased electricity, steam, heat and cooling
- Scope 3: all other indirect emissions throughout the value chain, such as those from suppliers and product usage.
2026:
- Companies will need to report on their 2025 direct (Scope 1 and Scope 2) emissions in 2026
2027:
- Companies will need to report on both the above, and, Scope 3 emissions by 2027.
Companies are required to verify their emissions' data with independent third-party audits, ensuring consistency and reliability.
These disclosures will be made public, allowing stakeholders to make informed decisions based on reliable, standardised data.
How this is useful:
- Aims to provide a more transparent and comprehensive view of a company's carbon footprint.
- This will help investors, consumers, and policymakers evaluate how companies are addressing climate change and achieving emissions reduction targets.
- It aims to drive companies toward more sustainable practices by holding them accountable to the public, shareholders, and environmental goals.
How does KEY ESG help
KEY ESG has the California Climate Act SB 253 available as a pre-configured framework:
