California is once again at the forefront of climate regulation, with the recent passing of SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act). These landmark laws will have a profound impact on thousands of US companies, many of which operate outside of California. For businesses that meet the revenue thresholds, these mandates transform ESG (Environmental, Social, and Governance) reporting from a voluntary exercise into a non-negotiable compliance requirement.
Navigating these new rules can be complex, but with a structured approach and the right technology, you can turn a compliance challenge into a strategic advantage. Here is a comprehensive checklist to guide your preparations.
Understand the Mandates: SB 253 & SB 261
Before you can comply, you must understand the rules.
- SB 253 (Climate Corporate Data Accountability Act): This law mandates that US companies with revenues over $1 billion annually disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions. The reporting must be made publically available and third-party verified, with disclosures beginning in 2026. This is a game-changer, as it puts a formal reporting burden on a company’s entire value chain.
- SB 261 (Climate-Related Financial Risk Act): This law applies to companies with annual revenues over $500 million and requires them to disclose their climate-related financial risks and the measures they’re taking to mitigate them. This is aligned with frameworks like the Task Force on Climate-Related Financial Disclosures (TCFD).
These two mandates signal a new era of granular, auditable, and mandatory climate disclosures.
Your 5-Step Compliance Checklist
Here’s a practical, step-by-step guide to get your company ready for California’s new requirements.
Step 1: Determine Applicability
First, assess if your company falls under the scope of these laws. Many companies outside of California will be surprised to learn they are subject to these rules if they do business in the state and meet the revenue thresholds. Don’t assume these laws don’t apply to you.
Step 2: Establish a Data Collection Strategy
Manual data collection using spreadsheets is not sustainable. The granularity and volume of data required for Scope 3 emissions alone are immense, involving everything from your supply chain to employee commuting. You need to establish a strategy to:
- Identify all sources of Scope 1, 2, and 3 data.
- Determine how to accurately collect and categorize this data.
- Establish a consistent and repeatable process across your entire organization with quality grades of data governance and controls.
Step 3: Conduct a Gap Analysis
Compare your current ESG reporting capabilities with the new California requirements. This will help you identify gaps in your data collection, internal processes, and technological infrastructure. Key questions:
- Do we have a reliable way to track Scope 3 emissions across our entire value chain?
- Is our data collection auditable and verifiable by a third party?
- Do we have a clear process for assessing climate-related financial risks?
Step 4: Consider Investing in Technology: Why You Need an ESG Reporting Software
The complexity of these mandates makes a robust ESG reporting software essential. Manually collecting, aggregating, and verifying thousands of data points for a single report is not only inefficient but also highly prone to errors that could lead to financial penalties and reputational damage.
A purpose-built ESG platform will provide:
- Automated Data Collection: Seamlessly integrates with your existing systems (finance, HR, supply chain) to pull data in real-time.
- Accurate Carbon Footprinting: Provides precise calculations for Scope 1, 2, and 3 emissions.
- Robust Audit Trails: Tracks every single data point, change, and approval to ensure your data is verifiable for third-party assurance.
- Framework-Aligned Reports: Automatically formats your data to meet the specific requirements of frameworks like SB 253, SB 261, TCFD, and others.
Step 5: Plan for Disclosure & Reporting
Once your data is collected and verified, you need to prepare the final disclosure document. This includes creating the narrative and ensuring the final report meets all regulatory requirements.
IRIS CARBON®: The Superior Platform for California’s Mandates
While there are many ESG platforms on the market, not all are created equal. These laws require more than just a place to store data; they demand a platform built for accuracy, auditability, and regulatory complexity. This is where IRIS CARBON® excels.
Here’s why IRIS CARBON® is the best choice for preparing for California’s new requirements:
- Beyond Data Aggregation: Unlike platforms like Workiva, which can often require significant manual setup and data manipulation, IRIS CARBON® offers true Automated Data Collection & Integration. It seamlessly connects to your source systems, meaning less manual work and a lower risk of error.
- Auditability You Can Trust: The key to compliance is assurance. IRIS CARBON®’s Robust Audit Trail is unmatched. Every data point, every change, and every approval is logged and tracked, providing a transparent and verifiable record for third-party auditors. This level of integrity is often lacking in more basic tools like Credible, which may not provide the comprehensive traceability required for new regulations like SB 253.
- Precise Carbon Footprinting: For Scope 3 emissions the most challenging part of SB 253—IRIS CARBON® provides a clear advantage. Its engine offers highly Accurate Carbon Footprinting, simplifying the complexities of calculating emissions across your entire value chain, a feature often less refined in competitor solutions.
- A Centralized Single Source of Truth: Why juggle different platforms for different mandates? While some solutions may specialize in one area, IRIS CARBON®’s platform serves as a Centralized Single Source of Truth. It handles all your reporting needs from SB 253 and SB 261 to CSRD and SEC filings in one unified system, unlike fragmented tools that may not provide a holistic view.
- A Modular Approach to ESG Reporting: We support organizations at every stage of their ESG journey. Our modular design ensures flexibility—tailored to businesses of any size or complexity—making us the ideal partner for scalable, future-ready ESG solutions
Move from Compliance to Strategic Advantage
California’s new mandates are an opportunity. By using a platform like IRIS CARBON®, you not only ensure compliance with SB 253 and SB 261, but you also gain a strategic tool to analyze your ESG performance, benchmark against your peers, and unlock the true value of transparent and accurate data.
