Addressing California Carbon Accounting Challenges

After months of anticipation from the corporations mandated to disclose through California’s Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261), as well as the investors and consumers of this information, we have to get comfortable operating strategically in a dynamic landscape. In this ESG Today article I summarize the current status of the laws, following CARB's May public workshop. The takeaway is clear: deadlines are firm, reporting requirements are coming, and companies must prepare now. 🗓️The Clock is Ticking: Despite ongoing development of prescriptive reporting rules expected by year-end, core reporting requirements begin in 2026 for FY2025 data. Companies should already be deep in the stakeholder collaboration, data collection, and analysis required to meet reporting requirements. ✅"Good Faith Effort" Requires Concrete Action: While CARB is not enforcing compliance penalties for SB 253 in 2026, this allowance is only for companies that demonstrate good faith efforts to meet reporting requirements.  This means scope 1 & 2 emissions inventories must obtain limited assurance. 📈Beyond Compliance, It's Strategic Imperative: This isn't just about ticking boxes.  Market demand for climate disclosure is high, with investors increasingly incorporating climate considerations into their risk assessments and capital allocation decisions. Similar business advantages exist for companies to de-risk and decarbonize supply chains.  So what should companies do over the next 6 months ahead of reporting deadlines? Make "No-Regret" Decisions Today: The smartest move is to focus on foundational work that aligns with current requirements and global best practices. This includes: 📊Building audit-ready, GHG Protocol-aligned emissions inventories  🔐Preparing for assurance from day one with transparent documentation  💻Investing in robust data systems that can adapt ⚖️Incorporate climate into core governance, risk and resilience infrastructure The market is already demanding this level of transparency. California isn't backing down, and organizations that lead with proactive preparation will be the ones to thrive in this dynamic landscape. What proactive steps has your organization taken to navigate these non-negotiable deadlines? Let me know in the comments! 👇 https://lnkd.in/ekGhT_kq Workiva #climatedisclosure #climaterisk #GHGemissions

𝗘𝗦𝗚𝗶𝗻𝗧𝗵𝗿𝗲𝗲: 𝗖𝗔 𝗦𝗕 𝟮𝟱𝟯: 𝗔 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗶𝗼𝗻𝘀 𝗥𝗼𝗮𝗱𝗺𝗮𝗽 (https://lnkd.in/gbxNrA9e) Preparing for multiple and differing sustainability regulations is complex and requires thoughtful planning and strategic investment in governance, resources, and infrastructure. Catherine Atkin and the team at Carbon Accountable recently published a Regulations Roadmap “to demonstrate the feasibility of adopting regulations and implementing SB 253 expeditiously, in line with the statutory mandate established in the law, which provides for first reporting by companies in 2026.” The roadmap highlights some key points related to efficiency, indicating that “[SB253] was purposefully structured to minimize the burden on the California Air Resources Board (CARB) to develop regulations and support ongoing implementation of the Act, ensure streamlined reporting by companies, and provide access to readily available GHG emissions data for stakeholders.” 1. 𝙍𝙚𝙥𝙤𝙧𝙩𝙞𝙣𝙜 𝙨𝙩𝙖𝙣𝙙𝙖𝙧𝙙𝙨: The GHG Protocol standards and guidance are included as the accounting and reporting standard to be used by all companies subject to SB 253. The GHG Protocol is the internationally recognized standard for GHG emissions reporting and the cornerstone of all mandatory and voluntary corporate reporting frameworks worldwide. Following the GHG Protocol can help reduce compliance burdens, while promoting global alignment of reporting standards. 2. 𝙍𝙚𝙥𝙤𝙧𝙩𝙞𝙣𝙜 𝙨𝙪𝙗𝙢𝙞𝙨𝙨𝙞𝙤𝙣: SB253 includes a clear focus on minimizing duplication of effort by reporting companies including allowing reporting companies to submit required GHG emissions information in multiple formats. Reporting entities may submit reports prepared for any purpose, including to comply with other national and international mandatory or voluntary disclosure requirements and frameworks, as long as the reports include the company and GHG emissions information. 3. 𝘼𝙨𝙨𝙪𝙧𝙖𝙣𝙘𝙚: Instead of calling for the accreditation of assurance providers, the Act describes required assurance provider qualifications and states clearly that the assurance process should minimize the need for companies who may be reporting in other jurisdictions to engage multiple assurance providers. The time to act is now, below are key no regrets moves for organizations: 1. 𝘎𝘦𝘵 𝘴𝘵𝘢𝘳𝘵𝘦𝘥! Strengthen governance, materiality assessment, data processes & controls. 2. 𝘐𝘯𝘤𝘳𝘦𝘢𝘴𝘦 𝘤𝘰𝘯𝘧𝘪𝘥𝘦𝘯𝘤𝘦! Engage in an assurance readiness assessment to understand preparedness for assurance & regulatory scrutiny, with a priority focus on GHG emissions reporting. 3. 𝘉𝘶𝘪𝘭𝘥 𝘤𝘢𝘱𝘢𝘤𝘪𝘵𝘺! Educate & develop capabilities internally & with the BoD.  #deloitteesgnow

There's a lot of confusion about what companies need to do to comply with California's GHG emissions reporting requirement. Simple overview ↓ 1️⃣ 2026 Calendar Year Report your Scope 1 and 2 emissions for fiscal 2025 Report your TCFD-aligned risks and opportunities (every even numbered year) Get it assured by a third party All reporting will be published publicly Up to $500k in annual fines for non-compliance 2️⃣ 2027 Calendar Year Report your Scope 1, 2, AND 3 emissions for fiscal 2026 Get it assured by a third party All reporting will be published publicly Up to $500k in annual fines for non-compliance ⭐ Updated guidance from CARB expected July 2025 The California Air Resources Board recently had a comment period as input for their final implementation of the CCDAA (Corporate Climate Data Accountability Act), and the comment period is now closed. CARB has a deadline of July 2025 to release their final guidance, which I assume would include the firm reporting deadline. 🏛️ Court challenges There have been several, and all have been batted down. It's worth noting that the 2016 Trump administration also unsuccessfully challenged California's CAFE standards, making small but insignificant changes and have not won the federal v. state argument. The emissions reporting standard, on the other hand, doesn't require companies to meet any emissions standard, but simply measure and report what their emissions are. There is a pending argument against CCDAA predicated on free speech, which is pretty weak. If it were to succeed, all reporting requirements would violate free speech rights; I don't imagine a world where public companies are no longer required to report on financial performance. All in all, the law seems sounds. ❓What should you do? Start preparing for CA CCDAA compliance now. This is largely a data and automation challenge, requiring the right tools and infrastructure to rapidly produce audit-ready results. Second, think about the hidden GTM upside of reporting your emissions. Many F500 companies are asking for product level emissions, and with the right data model you can deliver it to them. All things being equal with your competition, it's an easy tie breaker in an increasingly competitive market, especially with a recession on the horizon. DM me if you have questions about any of this, or if you want to know how Watershed can help.

California Climate Regulations are coming, yet guidance for companies in scope is slow to develop. FSI Consulting has put together a list of actions that companies can take today, that will prepare them for what will likely be a shortened runway for compliance. If you and your company are struggling with CA readiness and where to start, here are 5 no regret actions you can start taking towards compliance: 1- Engage with Key Stakeholders and Determine Overall Approach  Start by assembling a cross-functional team (Sustainability, Finance, Legal, Operations) to manage and support efforts. Work as a team to secure executive and Board-level buy-in while ensuring adequate resources and oversight. Investigate options to keep work in-house or engage with a consultant to calculate GHG emissions and/or prepare a climate risk report.   2- Start Compiling Climate Risk Data  Compile a list of potential physical risks (floods, fires, heat, etc.) to facilities, and research potential transition risks (carbon pricing, regulations, market changes, etc.) based on your organizational boundaries. Think about and identify internal climate risk governance activities and collect relevant metrics and targets for evaluating climate risk mitigation activities. Review peer companies’ climate risk reports in the public domain.   3- Evaluate GHG Emissions Inventory Reporting Readiness  Conduct an internal review of current GHG inventory processes (with future attestation in mind), assess data quality management systems and identify reporting gaps versus requirements.   4- Engage Third-Party Assurance Provider for GHG Emissions Inventory  Select and onboard a qualified verification body and get early feedback on data collection processes and controls.   5- Review Climate Strategy Documentation  Assess current climate commitments and targets, identify gaps in current documentation and create a clear paper trail for compliance purposes.