California has once again positioned itself at the forefront of climate action with the introduction of two landmark laws, Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261). These mandates, which apply to thousands of public and private companies across the U.S. that do business in the state, signal a new era of corporate climate transparency. For businesses of all sizes, understanding these regulations is not just about compliance; it’s about proactively managing risk, building a resilient brand, and positioning your company for a sustainable future.
This blog post will demystify SB 253 and SB 261, outlining the key requirements, deadlines, and potential implications for your business. We’ll also explore how a robust ESG reporting software, like IRIS CARBON®, can not only help you meet these new obligations but also turn a compliance challenge into a strategic advantage.
What Are California’s New Climate Disclosure Mandates?
Signed into law in 2023 and refined by SB 219 in 2024, these two bills create a comprehensive framework for climate reporting. While both have similar goals of increasing transparency, they target different aspects of a company’s climate impact and risk.
SB 253: The Climate Corporate Data Accountability Act
This law requires certain businesses to annually report their greenhouse gas (GHG) emissions. The key details are:
- Who is impacted? US.-based public and private companies with total annual revenues exceeding $1 billion that “do business” in California.
- What to report? Companies must disclose their Scope 1, 2, and 3 GHG emissions.
ESG Scope 
ESG Key Deadline - Penalties: The California Air Resources Board (CARB) is authorized to impose penalties of up to $500,000 per year for non-compliance. However, the law provides a “safe harbor” for Scope 3 emissions, meaning companies will not face penalties for misstatements made with a reasonable basis and in good faith.
SB 261: The Climate-Related Financial Risk Act
This law focuses on how climate change poses a financial risk to a company. It’s a forward-looking mandate designed to inform investors and stakeholders about a business’s resilience. The key details are:
| Who is impacted? | U.S.-based public and private companies with total annual revenues exceeding $500 million that “do business” in California. |
| What to report? | Covered entities must biennially disclose a report on their identified climate-related financial risks and the measures they are taking to mitigate those risks. This report must be consistent with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) framework or an equivalent. |
| Key Deadlines | The first reports are due by January 1, 2026. |
| Penalties | Penalties for non-compliance are capped at $50,000 per year, with a focus on companies that fail to publish a report or publish an insufficient one. |
Why This Matters: From Compliance to Competitive Advantage
While these mandates may seem like a burden, forward-thinking businesses will view them as an opportunity. By preparing now, you can:
- Proactively manage risk: Identifying and reporting on climate-related financial risks can reveal vulnerabilities in your supply chain, operations, and market position, allowing you to build a more resilient business.
- Attract investors: The investment community increasingly uses ESG data to evaluate a company’s long-term viability. Meeting these mandates with high-quality, auditable data can enhance your brand reputation and attract capital.
- Drive efficiency: The process of collecting and analyzing emissions data can reveal opportunities for operational efficiencies, such as reducing energy consumption or streamlining your supply chain.
- Stay ahead of the curve: California’s laws often set the standard for national and even global regulations. By complying now, you’ll be well-prepared for any future mandates from the SEC or other jurisdictions.
Your Solution: The Power of ESG Reporting Software
The complexity of these new mandates; from calculating a vast array of Scope 3 emissions to aligning with the TCFD framework is a challenge. Manual processes using spreadsheets are prone to error, lack a verifiable audit trail, and simply cannot keep up with the scale and rigor required. This is where a dedicated ESG reporting software becomes not just a helpful tool, but a necessity.
A modern ESG reporting platform provides an all-in-one solution for:
- Data collection: Automating the gathering of both qualitative and quantitative data from across your organization and supply chain.
- Compliance & framework alignment: Providing pre-built templates and guidance for standards like GHG Protocol, TCFD, CSRD, and, most importantly, the new California laws.
- Data integrity & auditability: Ensuring a robust audit trail, version control, and data validation to provide the “assurance-ready” information CARB and other regulators demand.
- Collaboration: Centralizing the reporting process to allow for seamless cross-functional collaboration and accountability.
- Insight & strategy: Turning raw data into actionable insights, helping you identify areas for emissions reduction and strategic improvements.
Why IRIS CARBON® Stands Out
While the market offers several ESG reporting platforms, including Workiva, Credible, and Watershed, IRIS CARBON® is uniquely positioned to deliver a superior solution for these new mandates. Here’s how we compare:
- Comprehensive Mandate Coverage: While other platforms may specialize in a single area like carbon accounting (Watershed) or financial reporting (Workiva), IRIS CARBON®’s platform is built as a single source of truth for all your disclosure needs. This includes not just ESG, but also SEC, ESEF, and other financial reporting. This unified approach eliminates data silos and ensures consistency across all your disclosures, making it the perfect solution for the integrated nature of SB 253 and SB 261.
- Unmatched Data Auditability: The new California laws, particularly SB 253, place a heavy emphasis on third-party assurance. IRIS CARBON®’s platform is engineered for this requirement, providing an unparalleled robust audit trail for every data point. Unlike other solutions that may have more limited tracking capabilities, IRIS CARBON® ensures that your data is not just present, but verifiable and defensible, giving you and your auditors peace of mind.
- Smarter Automation: Automation is key to managing Scope 3 emissions, and while other platforms offer automated data collection, IRIS CARBON®’s approach is designed for precision and flexibility. We understand that your supply chain is unique, and our system can be configured to capture the most accurate data possible, turning complex value chain data into simple, actionable insights.
- Global and Local Expertise: As a leader in disclosure management, IRIS CARBON®’s team has deep expertise in regulatory reporting across the globe. This means we don’t just provide a tool; we provide a partner who understands the nuances of frameworks like TCFD, the GHG Protocol, and now, the specific requirements of CARB. This level of expert support is often an add-on with other platforms, but it is a core part of the IRIS CARBON® experience.
The Time to Act is Now
California’s SB 253 and SB 261 are not just new rules; they are a clear indication of where the market is heading. The days of treating climate data as a secondary concern are over. Businesses that fail to prepare risk not only significant penalties but also a loss of investor confidence and a decline in brand reputation.
By embracing the power of an advanced ESG reporting platform, you can transform this compliance challenge into a strategic opportunity. With its comprehensive features, unparalleled auditability, and deep expertise, IRIS CARBON® offers a smarter, more efficient, and more reliable way to navigate California’s new climate mandates.
Don’t wait for the deadlines to hit. Start preparing for a more transparent, resilient, and sustainable future for your business today.
