The California Air Resources Board (CARB), tasked with implementing and enforcing regulations requiring large companies to disclose value chain emissions and report climate-related financial risks, announced plans to ease initial reporting requirements under the new rules. CARB stated it would not pursue enforcement actions during the first year of reporting, providing companies additional time to prepare for compliance.

The regulation stems from SB 253, the “Climate Corporate Data Accountability Act,” which introduces extensive climate reporting obligations for most large businesses operating in the U.S. The law applies to companies with over $1 billion in annual revenue that conduct business in California. It mandates annual reporting of emissions across all scopes: direct emissions (Scope 1), emissions from electricity use (Scope 2), and indirect emissions (Scope 3), including those tied to supply chains, business travel, employee commuting, procurement, waste, and water use.

Under the law, companies are required to begin reporting Scope 1 and 2 emissions in 2026, covering the previous fiscal year, and Scope 3 emissions in 2027. However, before signing the bill, California Governor Gavin Newsom expressed concerns about the implementation timeline, suggesting it may be impractical. Newsom proposed delaying the reporting deadlines to 2028, but this change was not included in the final legislation.

In a recent enforcement notice, CARB acknowledged the challenges companies may face in implementing new data collection systems for compliance. To address this, CARB will use its enforcement discretion, allowing companies to report Scope 1 and 2 emissions in the first year using readily available data, provided they demonstrate good faith efforts to comply with the law. CARB also confirmed it would not take enforcement action against companies for incomplete reporting in the first year, as long as they make genuine efforts to retain relevant data from their prior fiscal year.

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