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California SB 253 & SB 261: Climate Compliance

If your business sells products into California, operates facilities in the state, or supplies components to companies that do, you are about to be swept into one of the most aggressive climate disclosure regimes in the world. California's Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261) create legally enforceable carbon reporting mandates that go well beyond anything currently required at the US federal level.

While the direct filing obligations apply only to large companies, the data collection burden cascades down the entire supply chain. If you are an SME supplier to a California-reporting company, you will receive detailed carbon data requests — and your ability to respond will determine whether you keep your contracts.

The Two Laws at a Glance

SB 253: The Climate Corporate Data Accountability Act

SB 253 requires companies with total annual revenues exceeding $1 billion that do business in California to publicly disclose their greenhouse gas (GHG) emissions:

  • Scope 1 emissions (direct emissions from owned or controlled sources): Starting in 2026, reporting on 2025 data.
  • Scope 2 emissions (indirect emissions from purchased electricity, steam, heating, and cooling): Starting in 2026, reporting on 2025 data.
  • Scope 3 emissions (all other indirect emissions across the value chain): Starting in 2027, reporting on 2026 data.

Scope 3 is where SMEs come in. It covers everything from purchased goods and services to upstream transportation, business travel, and the use and end-of-life treatment of sold products. For a large electronics company, Scope 3 includes emissions from every component supplier, every logistics provider, and every packaging manufacturer. Reporting entities cannot calculate Scope 3 without data from you.

SB 261 applies to companies with total annual revenues exceeding $500 million and requires biennial reporting on climate-related financial risks in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework. This includes:

  • Physical risks (extreme weather, sea-level rise, water stress) to operations and supply chains.
  • Transition risks (regulatory changes, carbon pricing, technology shifts, market preferences).
  • Governance structures for climate risk management.

Reporting entities must assess climate risk across their supply chain, which means they will ask suppliers about facility locations, flood risk exposure, energy sources, and regulatory exposure.

The Trickle-Down Has Already Started

Although the first Scope 3 filings under SB 253 are not due until 2027, large companies are already building their data collection pipelines. If you are a Tier 1 or Tier 2 supplier to a California-reporting entity, expect to receive a structured carbon data request within the next 6 to 12 months. Companies that cannot provide the data will be flagged as high-risk suppliers and replaced.

Who Is Affected?

The direct legal obligation applies to:

Law Revenue Threshold First Reporting Deadline
SB 253 (Scope 1 & 2) >$1 billion 2026 (for 2025 data)
SB 253 (Scope 3) >$1 billion 2027 (for 2026 data)
SB 261 (Climate Risk) >$500 million January 1, 2026

But indirect obligations apply to any company that supplies goods or services to a reporting entity, regardless of the supplier's own revenue.

How SB 253 Compares to EU CSRD

If you are already preparing data for the EU's CSRD, California's laws will feel familiar but distinct:

Aspect EU CSRD California SB 253
Scope All large EU companies (>250 employees or €50M turnover) US and foreign companies with >$1B revenue doing business in California
Standard European Sustainability Reporting Standards (ESRS) GHG Protocol
Scope 3 Mandatory Mandatory (from 2027)
Assurance Limited, then reasonable Third-party assurance required
Penalties Varies by Member State Administrative penalties (exact amounts TBD by CARB)

The key overlap for SMEs: both frameworks require the same underlying data (carbon footprint, energy usage, material sourcing). If you build a single data pipeline serving both CSRD and SB 253 requests, you protect your business across both the EU and US markets.

What Data Will Your Buyers Demand?

Enterprise procurement teams will request the following data from SME suppliers:

  • Corporate-level Scope 1 & 2 emissions: Total direct and energy-related emissions for your company.
  • Product-level carbon footprints: The carbon footprint of the specific components or materials you supply, aligned with ISO 14067 or the GHG Protocol Product Standard.
  • Energy mix data: The percentage of your energy derived from renewable vs. fossil sources.
  • Reduction targets and plans: Evidence that you have scientifically informed emissions reduction targets.
  • Climate risk assessments: For SB 261, information about your facility's exposure to physical climate risks and your resilience plans.

How to Prepare Your SME Now

Step 1: Calculate Your Corporate Carbon Footprint

Start with Scope 1 (direct emissions from fuel combustion in boilers, furnaces, and company vehicles) and Scope 2 (emissions from purchased electricity). Use the GHG Protocol Corporate Standard as your methodology. Free tools like the EPA's Simplified GHG Emissions Calculator can help.

Step 2: Build Product-Level Carbon Data

For each product line or material category you supply, calculate a cradle-to-gate Product Carbon Footprint. Even an estimate using industry-average emission factors is better than having no data when a buyer asks.

Step 3: Centralize Your Energy and Material Data

Large buyers will ask you to verify your numbers. Build a central repository of utility bills, material invoices from your own suppliers, and transport records. This audit trail is what separates a defensible carbon figure from a guess.

Step 4: Adopt a Recognized Reporting Standard

Align your methodology with one of the internationally recognized standards — GHG Protocol, ISO 14067, or PAS 2050. This ensures your data is comparable and accepted across different buyer questionnaires.

How Sustalium Simplifies California Climate Compliance

Responding to multiple buyer carbon questionnaires in different formats is unsustainable. Sustalium provides a structured California SB 253 compliance platform that consolidates your climate data into a single, buyer-ready package.

  • Unified Carbon Dashboard: Input your Scope 1, Scope 2, and product-level carbon data once. Sustalium structures it to satisfy both EU CSRD and California SB 253 requirements simultaneously.
  • Product Carbon Footprint Generator: Map your Bill of Materials and energy data. The platform calculates cradle-to-gate PCFs for each SKU, providing the exact data format your enterprise buyers require.
  • Buyer-Ready Climate Reports: Generate a professional, structured Climate Disclosure Report for each product or material category. Share it as a public URL or QR code — giving your buyers instant, verified data without needing to chase you for spreadsheets.
  • Audit Trail & Evidence Hosting: Upload your utility bills, supplier energy data, and transport records directly to Sustalium. The platform securely stores your evidence and links it to your reported figures, satisfying third-party assurance requirements.

Future-Proof Your US Supply Chain Contracts

Don't let a missing carbon report get you delisted from a major California buyer's supply chain.

With Sustalium, there is no waiting and no expensive carbon consultants. Generate your California climate disclosure and product carbon footprint data for just €10 per document.

Start Your Climate Reporting Now →

Frequently Asked Questions

My business has less than $1 billion in revenue. Do I have any direct obligations?

No. The direct filing requirements apply only to companies exceeding the revenue thresholds. However, if your customers exceed those thresholds, they are legally required to report your emissions as part of their Scope 3 inventory and will contractually force you to provide the data.

What is the penalty for non-compliance under SB 253?

The California Air Resources Board (CARB) is authorized to impose administrative penalties for non-compliance. The exact penalty structure is still being finalized, but the law explicitly grants CARB enforcement authority, and failure to file or filing false information carries meaningful financial consequences.

How does SB 253 interact with the SEC's climate disclosure rule?

The SEC's proposed climate disclosure rule and California's SB 253 operate in parallel. While the SEC rule has faced legal challenges and delays, SB 253 is California state law and is not affected by federal regulatory uncertainty. Companies doing business in California must comply regardless of what happens at the SEC level.

Can I use the same carbon data for CSRD and SB 253?

Yes. Both frameworks are built on the same foundational data: GHG Protocol-aligned emissions inventories. Sustalium structures your data to satisfy both EU and California requirements simultaneously, preventing duplicate data collection efforts.

Last updated: June 15, 2026