California climate disclosure, SB 253 and SB 261.

Two laws, two different exercises

SB 253 and SB 261 are frequently discussed together and are often confused. They apply to different populations, require different things, and are built on different data.

SB 253: emissions reporting

Requires reporting of greenhouse gas emissions across Scope 1, Scope 2, and Scope 3, with assurance attached. The core work is building a GHG inventory that can survive verification, which for most organizations means Scope 3 is the hard part. Value chain emissions depend on supplier data, spend-based estimation, and methodology choices that need documenting.

SB 261: climate-related financial risk

Requires a report on climate-related financial risk and the measures adopted to reduce and adapt to that risk, prepared in line with an established framework. This is a narrative and analytical exercise rather than a data-collection one, closer in character to IFRS S2 than to an emissions inventory.

Why this catches companies out

These are state laws with a national reach. The test is doing business in California and meeting a revenue threshold, not being headquartered there, which brings in a large number of companies that have never produced climate disclosure and have no internal function that owns it.

Two consequences follow. First, the data does not exist yet in most cases, and building an assurable inventory takes longer than the compliance calendar suggests. Second, the obligation frequently lands on a finance team that is already fully occupied with financial reporting, which is where additional senior capacity often becomes the practical answer.

What the work involves

• Applicability. Confirming whether and how each law applies, at which entity level, and on what timeline.
• Inventory build. Organizational and operational boundaries, activity data collection, emissions factor selection, and calculation methodology, documented as it is decided.
• Scope 3 strategy. Determining which categories are relevant, choosing between spend-based and activity-based approaches by category, and documenting the basis for estimates.
• Assurance readiness. Building the evidence trail during the process so the verifier is testing a controlled process rather than reconstructing one.
• Risk disclosure. Governance, risk identification, scenario consideration, and the adaptation measures narrative for SB 261.
• Process design. Making the second year a refresh rather than a repeat.

Overlap with other obligations

Companies subject to California requirements are frequently also within scope of CSRD, an ISSB-based regime, or customer-driven disclosure requests. The emissions data underneath all of them is largely the same. Building one governed inventory that feeds every obligation, with mapping to each framework's presentation requirements, avoids running parallel processes that produce inconsistent numbers.

Inconsistency across disclosures is its own risk. Two published figures for the same emissions year, differing because two teams built them separately, is a question nobody wants to answer.