Guide to the California Climate Accountability Package: SB 219 and AB 2311

California has long been at the vanguard of US environmental policy. In September 2023, the state became the first US state to pass climate disclosure regulations under the California Climate Accountability Package, which requires companies that do business in California regardless of where they are located to report on their emissions, climate risks, and carbon offsets.

The three California Climate Bills under the Accountability Package include SB 253 (Scope 1, 2, and 3 emissions reporting), SB 261 (climate risk reporting), and AB 1305 (carbon offset reporting). They were signed into law in October 2024 by California Governor Gavin Newsom with caveats centered on the costs and adoption timeline.

Cut to 2024, California climate bills SB 253 and 261 are tied up in a lawsuit, and Newsom has asked for a 2-year delay to the rules. To try to save the rules and address many of the complaints from Newsom and the plaintiffs from their lawsuit, the architects of the rules made a series of amendments to rules under a new consolidated bill, SB 219. Additionally, AB 1305 has been amended to become AB 2331.

Continue reading for a comprehensive update on where these bills currently stand, when they are likely to come into effect, and what companies doing business in California need to do to comply.

What is the California Accountability Package?

Climate change is already causing unprecedented weather, including increased wildfires, sea-level rise, and extreme weather events across California. The California Accountability Package contains three rules designed to ensure that US companies operating in California assess and report their climate impacts for communities, citizens, investors, and other stakeholders transparently and consistently:

• SB 253, Climate Corporate Data Accountability Act: A rule requiring companies that do business in California and have more than $1 billion in annual revenue to report on their Scope 1, 2, and 3 emissions annually and get assurances on them.

• SB 261, Greenhouse Gases: Climate-related Financial Risk: A rule requiring companies that do business in California and have more than $500 million in annual revenue to report on their climate risks and opportunities beginning in 2026 and every second year after that.

• AB 1305, Voluntary Carbon Market Disclosures: A rule requiring companies that buy, sell, market, or make emissions reductions with voluntary carbon offsets, to report at least annually detailed information about those offsets.

To address changes in the proposals from California Governor Gavin Newsom, all the bills were amended in 2024. SB 253 and SB 261 merged to SB 219, and AB 1305 became AB 2311:

• SB 219 Greenhouse Gases, Climate Corporate Accountability, & Climate-related Financial Risk: The main change to this amended bill was to give the California Air Resources Board (CARB) an additional six months to make rules for SB 253 (until July 1^, 2025) and to remove the fee that would apply to companies filing to SB 253 and 261. Companies are also now allowed to consolidate reporting at the parent company level, among other minor changes. CARB has also been given more authority on whether they use third parties for the rule-making process and to define when companies report Scope 3 beginning in 2027.

• AB 2311 Voluntary Carbon Market Disclosures: The changes to AB 1305 under 2311 are related to its adoption timeline. It was first delayed for a year (Jan 1st, 2025) and then for an additional six months (July 1st, 2025). There were also some other minor changes.

These updated bills maintain the essence of the original bills, ensuring companies benefiting from the Californian market also share the responsibility for their contribution to the state’s emissions. However, they address some key criticisms the originals faced, making them more likely to maintain their updated timelines and content.

What You Need to Know About CA SB 253

California’s desire to continue its leadership in climate policy, coupled with the recognition of the severe impacts of climate change on its citizens, industries, and economic prosperity, are the two main drivers of the policy. The bill stresses the importance of companies with significant revenue sharing their carbon footprint. It will mandate comprehensive annual GHG emissions data reporting using globally recognized standards to promote informed decision-making and transition towards a net-zero carbon economy.

Requirements of CA SB 253

The state would require the California Air Resources Board to create rules for disclosure and contract a third party to create a digital platform for annual disclosures all by January 1, 2025. The platform was to be funded by an annual fee from reporting entities. Reporting requirements for disclosures included:

• Scope 1 & 2 Reporting
  • Starting in 2026, companies must publicly report their Scope 1 (Direct emissions) and Scope 2 (Indirect emissions) for 2025 data.
• Scope 3 Reporting
  • Beginning in 2027, companies must also report their Scope 3 emissions (Indirect emissions from the entire value chain) based on 2026 data.
• Alignment with Standards
  • Reporting should follow the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
• Third-Party Verification
  • Scope 1 & 2: Limited assurance starting in 2026, reasonable assurance by 2030.
  • Scope 3: Limited assurance beginning in 2030.

CA SB 253 Timeline

Currently, the timeline for SB 253 is phased in over four years beginning in 2026:

Year	Requirement
2026	Report Scope 1 & 2 emissions for the previous year with limited assurance
2027	Begin reporting Scope 3 emissions for the previous year
2030	Reasonable assurance is required for Scope 1 & 2 emissions; limited assurance is required for Scope 3

Potential Penalties for Non-Compliance with CA SB 253

• Maximum Fine: Up to $500,000 per reporting year
• Considerations: The state will consider past compliance and good faith efforts to meet the requirements
• Safe Harbors for Scope 3:
  • No penalties for misstatements of Scope 3 emissions, made on a reasonable basis and in good faith
  • Between 2027 and 2030, penalties for Scope 3 will only be applied for non-filing.

What You Need to Know About CA SB 261

California recognizes the profound economic and environmental impacts of climate change and the urgent need for comprehensive risk disclosures from major organizations. While numerous global initiatives and policies have begun advocating for transparent climate-risk reporting, current standards remain voluntary. This bill aims to set a precedent by introducing mandatory and comprehensive climate risk disclosure for both public and private entities in California, ensuring a sustainable and resilient future for the state.

Requirements of CA SB 261

• Starting in 2026, and every second year thereafter, companies must disclose their climate-related risks, along with mitigation and adaptation measures, on their websites.
• Reporting must align with the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
• Companies need to report across four key areas: governance, metrics and targets, strategy, and risk management.
• If companies cannot meet all reporting requirements, they must disclose as much as possible, explain any gaps, and outline steps to fully comply in the future.
• Companies already reporting under TCFD or ISSB (International Sustainability Standard Board) standards can satisfy the requirements of SB 261.
• The state board was to contract an organization to prepare a public report biennially, reviewing the climate-related financial risks reported by companies and analyzing risks facing California.

Timeline of CA SB 261

Year	Requirement
2026	Start reporting climate-related risks and mitigation measures on websites biennially after that.

Potential Penalties for Non-Compliance with CA SB 261

• Non-Compliance: Penalties will apply to entities that fail to publish or publish insufficient reports
• Maximum Fine: Up to $50,000 per reporting year
• Considerations: The state will consider past compliance and good faith efforts when assessing penalties.

What You Need to Know About CA SB 219

In September 2024, the California Senate passed an amended version of SB 253 and 261, updating them and consolidating them under SB 219. The updates were to address the criticisms in the ongoing litigation of SB 253 and 261, as well as from California Governor Gavin Newsom, who wants to delay the adoption timeline by two years.

SB 219, maintains SB 253 and 261 unchanged, except for a few key areas, which include:

• To maintain the current adoption timeline, the CARB has been given an additional six months (until July 1st, 2025) to make the full disclosure rules for SB 253.
• To reduce costs for businesses, the fees that reporters would have been required to give to report to SB 253 and 261 were removed.
• The new legislation enables companies to streamline their reporting obligations for SB 253 and SB 261 by consolidating them at the parent company level.
• CARB is no longer obligated but can work with an external organization to create a climate risk report and establish a system for public disclosure of the necessary information.
• CARB will also now determine when companies report their Scope 3 every year after 2027. Under the original rule (SB 253), companies would have had 180 days after they reported Scope 1 and 2 to report Scope 3.

What You Need to Know About CA AB 1305

California state recognizes the potential for poor-quality carbon offsets to be used to make inaccurate emissions reduction claims. To ensure public and private companies of all sizes and geographies selling, buying, or using carbon offsets in California must report on information about their efficacy.

Main Requirements of CA AB 1305

Beginning on Jan 1st, 2024 (now delayed to July 1st, 2025), companies that market or sell, purchase or use, or make emission reduction claims using offsets in California will have to begin reporting on certain information regarding their offsets.

For each specific entity seller, purchaser, or claimant, they need to make annually updated disclosures on their website:

• Marketer or Seller: For entities that sell or market voluntary carbon offsets in California, they must report on:
  • Project details, including the protocol used to estimate emissions reductions, location, timeline, type, and durability of the carbon offset project.
  • Information on independent validation, annual emissions reductions, accountability measures, and data for emissions reduction or removal credits verification.
• Purchaser or User: For entities operating and buying or using voluntary carbon offsets in California, they must report on:
  • The seller’s information, offset project type, the protocol used to estimate emissions reductions, and site location.
  • Details on whether there is a third-party verification of company data and emissions reduction claims.
• Claimants: For entities that are operating in California and using voluntary carbon offsets to make emissions reduction claims, they must report on:
  • Must provide documentation supporting the accuracy of “carbon neutral” or “net zero” claims and how progress is measured.
  • Must disclose whether claims are independently verified by a third party.

CA AB 1305 is the only one of the rules that does not require data assurances. However, companies are required to disclose whether their carbon offset project attributes, emissions, or emissions reduction claims have received attestation.

Timeline for AB 1305

Year	Requirement
2024 (Delayed until July 1, 2025)	Start reporting information regarding the efficacy, type, and projects related to their voluntary carbon offsets.

Potential Penalties for Non-Compliance with AB 1305

• Maximum Fine: A daily fine of $2,500 for non-compliance up to $500,000 per reporting year.
• Non-Compliance: Penalties will apply to entities that fail to publish or publish insufficient reports.

What You Need to Know About CA AB 2311

In March 2024, AB 1305 was amended to become AB 2311. The main change was in delaying the disclosure timeline by a year to January 1^, 2025. In August 2024, it was amended again with two primary changes:

1. The bill was delayed by an additional six months. Now, the first reporting deadline is July 1, 2024
2. Renewable energy certificates issued by governmental regulatory bodies are now exempt from the voluntary carbon market rule and are not covered, which now excludes carbon trading under California’s regulated emissions trading scheme.

This updated rule is currently in the legislative process and is expected to pass in 2025.

Companies Directly Impacted by CA SB 253 & 261

SB 253 and SB 261 will affect both public and private US companies “doing business” in California. The state of California defines doing business as any of the following:

• Engaging in any transaction for the purpose of financial gain within California
• Organized or commercially domiciled in California
• If California sales, property, or payroll exceed the following amounts or 25% of the total:

Year	CA Sales	CA Real & Tangible Personal Property	CA Payroll Compensation Exceeds
2022	$690,144	$69,015	$69,015

CA SB 253 and SB263 requirements will also affect the US public and private companies doing business in California based on their revenue for the previous fiscal year:

• SB 253: Any company doing business in California with a turnover of $1 billion or more, expected to be around 5,400 companies.
• SB 261: Any company (apart from insurance companies) doing business in California with a turnover of $500 million or more, expected to be around 10,000 companies.

Companies Indirectly Impacted by CA SB 253 & 261

Many companies will be directly affected by these two bills under SB 219: 5,400 by both bills and an additional 5,000 by SB 261, based on initial estimates. However, key parts of the bills mean that they will impact many more companies indirectly by making up the value chains of those companies that are directly affected.

CA SB 253 and Scope 3

The inclusion of Scope 3 GHG Emissions in SB 253 will mean that reporting entities may request supply chain emissions data related to them. For most companies, Scope 3 emissions are the vast majority of their emissions, accounting for 11.4 times companies Scope 1 & 2. For financial institutions, it would constitute a huge overhaul because Scope 3 incorporates financed emissions, which are 700 times that of Scope 1 & 2 for most financial institutions and would require them to collect data from thousands of companies they have invested in or loaned to.  

SB 261 and Supply Chain Climate Risk Reporting

In SB 261, the key language in the bill is companies will have to report climate-related risks in their supply chain. This will implicate the companies in the supply chains of companies directly affected to share climate data related to assessing climate risks and opportunities.

Overall, these bills will reach far more companies than just those identified as reporting entities. Companies of all sizes and geographies should be prepared to report some climate information to the companies they supply to.

Companies Directly Impacted by AB 2331 (Previously AB 1305)

AB 2331 differs from SB 253 and 261 in that it can also impact international non-US companies. It also does not have any financial thresholds requiring any public or private entity that falls under three distinct groups to report on information relevant to their position as a buyer, seller, or company making a claim using carbon offsets. The three affected groups are:

1. Entities that sell or market voluntary carbon offsets in California.
2. Entities that buy or use voluntary carbon offsets operate in California and purchase the offsets in California.
3. Entities that use carbon offsets to make emissions reduction claims operate in California and make the claims there.

Taking a proactive approach can help you stay compliant and avoid potential penalties and damage to your brand reputation. Studies have found that the cost of a damaged brand reputation is far more than that of fines for non-compliance.

Ready to stay ahead of compliance challenges? Good.Lab offers an end-to-end solution that simplifies the entire process, ensuring you’re fully equipped to meet regulatory requirements. From streamlined reporting to building effective ESG strategies, we’ll guide you every step of the way. Let’s take the complexity out of compliance and set you up for long-term success.