As we approach 2025, companies are entering a pivotal period to establish robust data governance practices in preparation for California’s Climate Disclosure Rule, SB 219. This regulation impacts approximately 10,000 businesses, mandating comprehensive climate risk and greenhouse gas (GHG) emissions reporting. By 2026, U.S. companies operating in California with revenues exceeding $500 million will be required to disclose their fiscal year 2025 climate data, making proactive preparation essential.
2025 marks a pivotal year for companies to establish solid data governance practices in anticipation of California’s Climate Disclosure Rule, SB 219. Signed into law by Governor Gavin Newsom as part of the Climate Accountability Package, SB 219 replaces previous bills SB 253 (covering Scope 1, 2, and 3 GHG emissions reporting) and SB 261 (climate risk reporting). By 2026, reporting on fiscal year 2025 climate risks and greenhouse gas emissions will become mandatory for U.S. companies operating in California with over $500 million in revenue. To avoid financial penalties or reputational damage from non-compliance, companies should begin preparing now. Our compliance guide covers critical steps to ensure your company meets these requirements when they take effect in 2026.
Key Takeaways
- California’s climate reporting regulation is now unified under SB 219.
- 2025 is a critical year to prepare data governance practices for streamlined emissions reporting and verification under SB 219.
- SB 219 will impact over 10,000 U.S. companies doing business in California—and even more within their supply chains.
- SB 219 mandates annual reporting and assurance for Scope 1, 2, and 3 emissions, along with biennial climate risk reporting.
What is California Senate Bill 219?
In September 2024, California’s Senate passed SB 219, an updated and edited version of SB 253 and SB 261. While SB 219 is the same as the two previous bills it replaced, it was changed in some key areas. Namely, it gave the California Air and Resources Board (CARB) certain powers, including making the rules for emissions reporting by July 1st, 2025, and eliminated the need for companies to pay to file a report. Despite these changes, at its core, SB 219 still achieves the same goals as the previous bills and still requires U.S. companies doing business in California to report on climate risks and verified GHG emissions.
What is required under CA SB 219?
CA SB 219 sets a US precedent by introducing mandatory and comprehensive climate risk and GHG emissions disclosure for public and private US entities doing business in California.
Why act now on CA SB 219?
Waiting until 2026 may seem feasible, but with good data collection and governance systems in place in 2025, your company will be able to meet reporting and assurance requirements and avoid potential penalties. Taking action in 2025 provides time to integrate necessary data management and strengthen supplier partnerships for data sharing, setting you up for smoother compliance when SB 219 takes effect in 2026.
Timeline for CA SB 219 Adoption
SB 219 gave CARB until July 1st, 2025, to create the emissions disclosure rules. This timeline makes 2025 the most critical year for preparing for compliance. Companies will know most of what to prepare for but will have at least six months to understand the in-depth intricacies of the rules as set by CARB.
GHG Emissions Reporting Under CA SB 219
GHG emissions reporting under SB 219, is the same as it was under SB 253, requiring calculations for Scope 1, 2, and 3 reporting in line with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.
Any company doing business in California with greater than $1 billion in revenue (estimated to be 5,400 companies) will have to report emissions annually, as follows:
- 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.
CARB will define when companies will report Scope 3 in 2027. Previously, it was 180 days after Scope 1 and 2 under SB 253. This will likely give reporters additional time to report on their more complex Scope 3 emissions.
Companies will also be required to have their emissions verified by a third party based on the following timeline:
- Limited Assurance: Scope 1 and 2 starting in 2026, and Scope 3 in 2030
- Reasonable Assurance: Scope 1 and 2 by 2030
The penalties for non-compliance with the emissions reporting side of SB 219 could result in a fine of up to $500,000 per reporting year. The penalties will consider the reporter’s previous compliance efforts and if the reporting was made in good faith. There will also be safe harbors for Scope 3:
- No penalties will be imposed for inaccuracies in Scope 3 emissions reporting, provided that the statements were made on a reasonable basis and in good faith.
- Between 2027 and 2030, penalties related to Scope 3 emissions will only apply to cases of non-submission.
Climate Risk Reporting Under SB 219
In 2026, and every second year thereafter, companies that do business in California and have over $500 million in revenue (estimated to be 10,000 companies) must disclose their climate-related risks and opportunities in alignment with the Task Force on Climate-related Financial Disclosures (TCFD).
The TCFD requires companies to report across four key thematic areas: governance, metrics and targets, strategy, and risk management. Companies already reporting under TCFD or ISSB standards can satisfy the requirements of SB 219.
Penalties for companies that fail to publish climate risk reports or insufficient reports are fined up to $50,000 per reporting year. Previous compliance efforts and good faith will be considered when assessing penalties.
What You Need to Do in 2025 to Comply with CA SB 219
With compliance to meet California’s climate disclosure regulations less than one year away, the best time to start to prepare is now. Here are five practical steps to take in 2025 to make sure you are prepared:
1. Establish ESG Data Governance Practices
Effective ESG data governance ensures that climate data are accurate, auditable, and comprehensive. By starting a robust data governance strategy in 2025, companies can simplify the data collection, reporting, and verification processes for SB 219. Here is what a strong data governance practice entails:
- Clearly defined roles: Assign specific roles to ensure relevant data is collected from each team and stored in the centralized data hub. One person will be required to engage different functions to collect data, and a cross-functional team should be developed and regularly meet to go over reporting and data collection processes.
- Centralized data management: Store all your emissions data and any accompanying documentation and metadata in a single, accessible location. This central hub of climate data makes it easier for auditors to report and assess.
- Data quality for verification and audit readiness: Set up processes to routinely validate data quality. This can involve creating a standardized collection process and data templates to ensure consistency. This should be done internally and by an external third party for an interim audit to ensure that limited assurance requirements will be met.
- Supplier data integration: Begin engaging with suppliers to align data collection with SB 219 Scope 3 reporting requirements.
Make sure your data meets strong governance practices. Good.Lab’s carbon calculator helps your team compile data in a central place to ensure good data management and audit readiness.
2. Measure Scope 1 and 2 Emissions
In the first year of compliance, you only have to report your Scope 1 and 2 emissions, so this should be your first area of focus. In carbon accounting, these are typically the easiest emissions to collect and calculate.
- Scope 1: Relates to the direct emissions from your owned facilities and vehicles.
- Scope 2: Come from the indirect energy, heat, steam, etc., you purchase.
The reporting company should already hold the data to calculate these emissions. In 2025, ensure your data collection methods are accurate and centralized to allow for seamless tracking of Scope 1 and 2 emissions. Or, you can use Good.Lab’s GHG calculator to simplify the calculation process.
3. Align with TCFD Reporting
The climate risk part of SB 219 is based entirely on the TCFD reporting standards. Familiarizing yourself with the TCFD and its four reporting themes—governance, strategy, risk management, and metrics and targets—will help you understand the reporting requirements.
Climate risk reporting under SB 219 is built on a report or explain basis, where companies must report in line with TCFD to the best of their ability and explain any gaps and how they plan to fill them. Conduct a gap assessment in 2025, using Good.Lab’s Climate Risk Readiness, to determine gaps in current reporting and what gaps can be filled before the first year’s report and create a plan to fill in the remaining reporting gaps before the next reporting cycle in 2028.
4. Engage with Suppliers
Key parts of SB 219 mean that reporters will have to obtain data from the companies in their supply chains. The inclusion of Scope 3 GHG Emissions and the requirement of reporting climate-related risks in the value chain means reporters will have to request supply chain emissions and climate risk data from suppliers.
Although Scope 3 emissions are not required until 2027, engaging with your suppliers early will be essential. Early engagement will ensure that suppliers can provide the relevant data when the time comes. Suppliers should start collecting their Scope 1 and 2 emissions as this is what their customers will seek. If you need help putting in this early groundwork Good.Lab can help you segment and assess your suppliers.
5. Prepare for Limited Assurance
From the first year onward, companies are required to get limited assurance on their Scope 1 and 2 emissions. This involves ensuring good data governance and management and storing all the data and metadata related to your emissions in a place your auditor can easily access. You should also have a pre-audit before the compliance deadline to ensure everything is lined up, and you can fill in any data gaps way before the deadline. Good.Lab’s software-based carbon data management system will simplify data validation for limited assurance in 2026 by giving you a central platform for data storage and downloadable data reports.
Although companies are required to get limited assurance for Scope 3 and the more rigorous reasonable assurance for Scope 1 and 2, this is not until 2030. Getting experienced with limited assurance for Scope 1 and 2 until then will help you comply with these more complex assurance requirements in the future. 2025 is the perfect time to build data governance practices around emissions data to ensure audit readiness.
CA SB 219 and Other Global Sustainability Reporting Regulations
The global climate disclosure regulatory landscape is increasingly aligning with frameworks California’s SB 219, the SEC’s Climate Disclosure Rule, the International Sustainability Standards Board (ISSB) Standards, and the EU’s Corporate Sustainability Reporting Directive (CSRD), showing significant overlap. All emphasize Scope 1 and 2 emissions reporting and climate risk reporting guided by TCFD, and all but the ISSB mandate third-party assurance requirements. While there are differences in scope and applicability, the convergence around key standards like the GHG Protocol and TCFD reflects a unified movement towards consistent and interoperable sustainability reporting.
Other US States Modeling Climate Reporting Rules after CA SB 219
Other US states have followed California’s lead and created their climate reporting regulations proposals. New York, Illinois, and Washington all have state-level climate risk or emissions reporting proposals based on California’s SB 219.
- New York: SB S897A, the Climate Corporate Accountability Act, will require companies with over $1 billion in annual revenues to report and get assurance on their Scope 1, 2, and 3 emissions starting two years after the bill becomes law. And SB 5437 will require annual climate risk reporting.
- Illinois: HB4268, the Climate Corporate Accountability Act, mandates annual disclosure and verification of Scope 1, 2, and 3 greenhouse gas emissions for companies with annual revenues over $1 billion, beginning January 1, 2025.
- Washington: SB 6092, the Climate Corporate Data Accountability Act, will require large businesses to report and get assurance on Scope 1, 2, and 3 emissions in 2026 and Scope 3 emissions starting the following year.
If all these proposals make it through state legislatures, the following timeline shows how they will be implemented:
Given the overlap with SB 219 and climate and sustainability reporting regulations across the US and globally. Companies will be able to integrate the data and assurance they prepare in 2025 for California compliance and reuse it for other compliance needs in different states and jurisdictions and vice versa. Thus, reducing duplicative compliance and reporting efforts.
Time is of the essence to comply with this complex reporting regulation. Following our simple preparation tips and assessing your climate risk regulation readiness in 2025 will ensure you stay compliant and avoid potential penalties and damage to your brand reputation.
Ready to future-proof your CA SB 219 compliance? Look no further than Good.Lab. Our experts are prepared to establish the data governance processes you need in 2025 to streamline your 2026 reporting and assurance efforts. With SB 219 impacting over 10,000 U.S. companies and their supply chains, now is the time to act. Need a comprehensive review of your current and future compliance requirements? Reach out to our experts today.
