Some of the world’s largest public and private companies that do business in California are now required to track and publicly report on their greenhouse gas emissions (GHG), following a new bill signed into law this month by California Governor Gavin Newsom.
Governor Newsom signed the Climate Corporate Data Accountability Act (SB 253), requiring more than 5,300 public and private U.S. companies operating in California to report direct and indirect emissions. This includes emissions disclosure requirements from their buildings, supply chains, employee travel and even how employees and customers use any products.
While some public companies already engage in some of this reporting, this new law also impacts private companies. Businesses across California are in for a wake-up call and are going to have to reevaluate their data tracking capabilities, and fast, to ensure accurate and timely reporting by as early as 2026 to avoid any administrative penalties.
In this blog, we discuss:
- What is the Climate Corporate Data Accountability Act (SB 253)?
- The Challenges Facing California Companies
- When Do Companies Need to Be Ready?
- How Digitized Specification Management Can Help
What is the Climate Corporate Data Accountability Act (SB 253)?
The Climate Corporate Data Accountability Act (SB 253) applies to reporting entities – partnerships, corporations, business entities, etc. – formed in California or operating under the laws of California with total annual revenues from the prior fiscal year that exceeds $1B. Companies that check these boxes will be required to report on their Scope 1, Scope 2 and Scope 3 GHG emissions to the state of California every year.
SB 253 defines these Scopes as follows:
- Scope 1 Emissions: All direct GHG emissions that stem from sources that a reporting entity owns or directly controls, regardless of location, including, but not limited to, fuel combustion activities.
- Scope 2 Emissions: Indirect GHG emissions from consumed electricity, steam, heating, or cooling purchased or acquired by a reporting entity, regardless of location.
- Scope 3 Emissions: Indirect upstream and downstream GHG emissions, other than scope 2 emissions, from sources that the reporting entity does not own or directly control and may include, but are not limited to, purchased goods and services, business travel, employee commutes, and processing and use of sold products.
SB 253 also states that GHG emissions data will be published on a digital platform featuring individual reporting entity disclosures as well as allowing consumers, investors, and other stakeholders to view aggregated data in a variety of ways, including over multiple years. An independent, third-party assurance provider is also required to be provided in the assurance engagement.
The Challenges Facing California Companies
Many businesses today don’t have the expertise to accurately report on their combined GHG emissions. Suppliers and partners often own much of the data needed for accurate tracking and emissions reporting, while the rest are scattered across static systems like spreadsheets, email and shared drives.
Over the last few years, California has cracked down on companies when it comes to various reporting measures, so it can be complicated and resource-intensive for these companies to scale for multiple regulations and legislations with manual processes.
An overall lack of real-time, proactive data sharing exists today, and California companies will soon find that the legacy systems (including enterprise resource planning (ERP) and product lifecycle management (PLM) software) will not get the job done when it comes to accurately reporting on GHG emissions in accordance with these new compliances.
When Do Companies Need to Be Ready?
Companies will be required to report their Scope 1 and Scope 2 emissions beginning in 2026 and Scope 3 emissions by 2027. The size of the company will not be taken into consideration, so no phase-in approaches will be implemented, and in 2027, scope 3 emissions will need to be disclosed no later than 180 days after a company discloses Scopes 1 and 2 emissions for the previous fiscal year.
How Digitized Specification Management Can Help
Public and private companies must get their data in order now or risk falling behind when reporting rules begin in just over two short years from now. This starts with creating a single, central source of truth with digitized specification data that any team, supplier, or partner can access real-time.
New legislation, regulations, and disclosure requirements are constantly evolving, but that doesn’t mean companies have to start from scratch every single time. Using the right technology, like a digitized specification management platform, will allow companies to utilize existing reports and update them based on any new regulations or needs.
At Specright, we can guide companies on where to start with services like Spec Assist, where we help track down data from a company’s suppliers, and Spec Squad, where we digitize a company’s data and replace legacy systems like ERPs, PLMs, or even the popular Excel sheet, versions 1, 2 and 3. Companies can also leverage Specright’s integrations to help with streamlining reporting on GHG emissions. For example, Specright helps with Scope 3 emissions collection opportunities for companies that are tracking Scope 1 and Scope 2 emissions with Salesforce’s Net Zero Cloud already. Specright also maintains a bill or materials that companies can use to evaluate their Scope 3 product carbon footprints.
While this law impacts California, additional regulations will be coming across the globe. By using a Specification Management platform, companies can create data transparency and visibility across their entire supply chain while also being prepared for whatever legislation or regulations come next.