California Moves to Mandate Scope 3 Emissions Reporting for Billion-Dollar Firms

California is advancing one of the most ambitious corporate climate disclosure frameworks in the U.S., as regulators outline how to implement Scope 3 emissions reporting under SB 253. The proposed rules will apply to companies generating over $1 billion in annual revenue and operating in or selling into the state-signaling far-reaching implications for global businesses.

Starting in 2026, companies will be required to disclose Scope 1 and Scope 2 emissions. By 2027, this expands to Scope 3-covering indirect emissions across supply chains, product use, and end-of-life impacts-often the largest and most complex share of a company’s carbon footprint.

The California Air Resources Board (CARB) has proposed three rollout models. A “broad applicability” approach would require full Scope 3 reporting across all categories from the outset. A “sectoral phase-in” would prioritize emissions-intensive industries like transport and manufacturing. Meanwhile, a “category phase-in” would begin with commonly tracked emissions such as business travel and purchased goods, offering a more gradual transition.

Recognizing the difficulty of measuring Scope 3 emissions, CARB is allowing flexible methodologies, including spend-based, activity-based, and supplier-specific data approaches, or a hybrid of these.

Compliance costs are expected to range between $135,000 and $152,000 annually per company in the initial years, driven by investments in data systems and supplier engagement. Beyond cost, the regulation introduces strategic and reputational risks, pushing companies to rethink supply chains and product design.

As California moves forward, its framework is likely to set a global benchmark-accelerating the shift toward full value chain transparency and redefining corporate climate accountability.

SB 253's Scope 3 mandate for $1bn+ firms is one of the most consequential sub-national climate-disclosure rules globally, and it applies well beyond California-headquartered companies. Our ESG-strategy and sustainability-due-diligence teams help US clients build Scope 3 data infrastructure that satisfies California, SEC-adjacent and ISSB S2 requirements simultaneously.