For large companies, climate disclosure rules will soon be required to operate in California. Preparing for California climate disclosure laws will add costs, but also unlock opportunities for agri-food companies.
About California’s Climate Disclosure Laws
The California Air Resources Board (CARB) is now responsible for implementing regulations related to emissions reporting and tracking climate-related financial risks:
- Climate Corporate Data Accountability Act (Senate Bill 253). SB 253 requires companies doing business in California with total annual revenues over $1 billion to publicly disclose their greenhouse gas emissions. Starting in 2026, companies must report Scope 1 and 2 emissions, and, by 2027, Scope 3 emissions. GHG emissions disclosures must follow the Greenhouse Gas Protocol and be verified by third-party reporting entities. This law aims to increase transparency and accountability for corporate climate impact through public disclosures, and violators may face penalties up to $500,000 annually.
- Climate-Related Financial Risk Act (Senate Bill 261).SB 261 mandates companies with over $500 million in total annual revenue doing business in California to report their climate-related financial risks every two years. Reports must follow the Task Force on Climate-Related Financial Disclosures (TCFD) or similar frameworks and outline both physical and transitional risks to operations, supply chains, and financial health. Disclosure risk reports must be publicly available, and companies that fail to comply can face fines up to $50,000. The goal is to improve investor and public awareness and reasonable assurance of how companies are preparing for climate impacts.
Sustainability Concerns Change How Companies are Doing Business
Priorities around sustainability are shifting in the United States. Climate-focused action items, particularly climate laws regarding emissions reporting, are broadening to place particular emphasis on supply chain resilience, operational productivity, and risk mitigation. At the same time, the current federal administration has deprioritized many climate change-related policies and withdrawn from the Paris Agreement. This scenario presents both challenges and opportunities for food and agribusiness companies.
For large businesses, climate disclosure requirements will soon be necessary to operate in California. The state’s influence on resources and consumer goods warrants attention from all U.S. companies, regardless of whether they currently conduct business in the state or not. Other states have proposed similar legislation, and the European Union has already acted on climate reporting requirements.
To maintain market access in these regions, businesses will need to allocate additional resources for emissions data collection and sustainability reporting. Small to midsize companies can expect a longer timeline before reporting programs are legally required. Although, they may see an increase in requests for climate data from their buyers, stakeholders, or customers because of the legislation.
Implications of California’s Climate Disclosure Laws
Preparing for impending climate disclosure legislation at home and abroad will add costs, especially for those who are in the early stages of their carbon-accounting journeys. However, inaction could ultimately prove costlier, and an expanded understanding of climate-related impacts and pressures within complex agri-food supply chains will unlock opportunities for increasing efficiency, preserving market access, and strengthening resilience to manage future risks.
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