The California Air Resources Board (CARB) has issued an Enforcement Notice providing clarity and flexibility regarding the initial reporting requirements under the Climate Corporate Data Accountability Act (Senate Bill 253). This Act mandates U.S.-organized entities with annual revenues exceeding $1 billion and operating in California to disclose scope 1, 2, and 3 greenhouse gas (GHG) emissions annually. With the first reports for fiscal 2025 due in 2026, CARB’s approach acknowledges the challenges companies face in adapting to the new requirements, offering a practical path forward for early compliance.
A Phased Approach to GHG Reporting
Under the Act, companies must disclose scope 1 and 2 emissions (direct and indirect emissions from energy usage) starting in 2026, followed by scope 3 emissions (indirect emissions throughout the supply chain) in 2027. This phased approach reflects the complexity of gathering and verifying data across different emission categories, especially scope 3, which involves a wide range of activities outside the company’s direct control.
CARB’s recent Enforcement Notice introduces key measures to ease the transition:
- Use of Existing Data for Initial Reports: For the first reporting cycle, companies may report scope 1 and 2 emissions using data already collected or accessible by December 2024. This provision allows companies time to establish robust data collection processes without the immediate risk of penalties for incomplete data.
- Enforcement Discretion: CARB will not penalize companies for incomplete reporting in the first cycle, provided they demonstrate good faith efforts to retain relevant data and work toward full compliance.
These provisions reflect CARB’s acknowledgement of the challenges inherent in adapting to complex regulatory frameworks and its commitment to fostering a cooperative approach to environmental accountability.
Supporting Companies Through the Transition
The Act initially required CARB to adopt implementing regulations by January 1, 2025. However, SB 219 extended this deadline to July 1, 2025, leaving a compressed timeline between regulation finalization and the first reporting deadline. CARB’s Enforcement Notice effectively provides additional breathing room, enabling companies to focus on developing accurate, compliant reporting processes.
The good faith standard outlined in the notice is particularly significant. Companies that demonstrate genuine efforts to understand and meet the requirements can avoid enforcement actions, even if their first reports are incomplete. This approach incentivizes proactive compliance and encourages companies to prioritize data accuracy and transparency.
Implications for Scope 3 Emissions
While scope 1 and 2 emissions reporting is relatively straightforward, scope 3 emissions present unique challenges. These emissions encompass a company’s entire value chain, including activities such as transportation, waste generation, and supply chain manufacturing. Gathering accurate scope 3 data requires collaboration with suppliers, partners, and other stakeholders, as well as investments in tracking systems and tools.
The delayed implementation of scope 3 reporting until 2027 gives companies additional time to address these complexities. However, the expectation remains that businesses must actively work toward building systems capable of capturing the necessary data.
VURDHAAN’s Role in Supporting Compliance
As a sustainability consultancy deeply involved in climate accountability, VURDHAAN partners with organizations to navigate emerging regulations such as California’s Climate Corporate Data Accountability Act. By guiding GHG emissions tracking, supply chain engagement, and data management, VURDHAAN ensures that companies can align with reporting requirements while enhancing their overall sustainability strategy.
Our expertise includes helping organizations prepare for scope 3 reporting, leveraging tools and frameworks like the Greenhouse Gas Protocol to build transparent, efficient processes that support both regulatory compliance and long-term ESG goals.
Aligning With Broader Climate Goals
California’s Climate Corporate Data Accountability Act is part of a growing global trend toward increased transparency in corporate GHG emissions. Similar initiatives, such as the EU Corporate Sustainability Reporting Directive (CSRD), reflect a shift in how businesses are held accountable for their environmental impact.
By aligning with these standards, companies can strengthen their sustainability credentials, meet investor and consumer expectations, and contribute to broader climate goals. CARB’s flexible enforcement approach demonstrates a recognition of the need for partnership between regulators and businesses in achieving these shared objectives.
Key Takeaways for Businesses
To successfully navigate California’s new GHG disclosure requirements, companies should focus on the following priorities:
- Early Preparation: Begin assessing current GHG emissions tracking capabilities and identify gaps, particularly for scope 3 emissions.
- Data Management Systems: Invest in tools and systems that streamline emissions data collection, analysis, and reporting.
- Stakeholder Collaboration: Engage with suppliers and partners to align on scope 3 data requirements and ensure consistency across the value chain.
- Good Faith Efforts: Demonstrate a commitment to compliance by documenting steps taken to address the Act’s requirements and collaborating with CARB during the transition period.
- Long-Term Strategy: Integrate GHG reporting into broader sustainability and ESG initiatives to maximize business value and align with global decarbonization goals.
A Positive Step Toward Accountability
California’s Climate Corporate Data Accountability Act represents a significant milestone in corporate environmental accountability. By introducing phased reporting and offering flexibility during the initial implementation period, CARB has created an opportunity for businesses to transition smoothly to the new requirements.
This approach not only supports compliance but also encourages companies to adopt a proactive stance on sustainability, leveraging GHG disclosures as a foundation for long-term environmental and financial success. As businesses align their operations with these evolving expectations, they will play a critical role in advancing global climate action and fostering a more sustainable future.