Understanding California Climate Regulations SB 253 & SB 261: Implications for Agri-Food Companies

California has long been a leader in environmental regulation, and the passing of the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) in late 2023 continue this tradition.

Introduction

Crucial to California's goal of achieving carbon neutrality by 2045, regulations SB 253 and SB 261 mandate extensive climate-related disclosures from large businesses operating in the state. As a result, thousands of organizations are expected to provide assurance-ready carbon emissions data — including detailed reporting on Scope 3 emissions throughout their value chains.

As the world's fifth-largest economy, California has a track record of reshaping business practices beyond its borders. In this blog post, we unpack the details of California’s latest climate regulations and what they mean for the agri-food sector.

What are California's SB253 & SB261 climate regulations? 

California’s SB 253 Climate Corporate Data Accountability Act mandates that large businesses publicly disclose their greenhouse gas (GHG) emissions. Beginning in 2026, large public and private organizations operating in California must report their direct GHG emissions (Scope 1 and 2). By 2027, they must also include indirect emissions (Scope 3), which often constitute the majority of a company’s carbon footprint.

This policy applies to all large companies doing business in California with annual gross revenues exceeding $1 billion USD. While the law doesn't precisely define what "doing business" in California means, it is expected to affect U.S.-based partnerships, corporations, limited liability companies, and other entities with operations in the state. Based on existing standards, the threshold for "doing business" could be quite low, potentially impacting over 5,000 companies.

To comply, businesses must submit their emissions data to a digital reporting platform, ensuring all information is clear and easily understood by stakeholders. SB 253 also requires third-party assurance of these reports. Companies that fail to comply could face civil penalties.

Meanwhile, California’s SB 261 Climate-related Financial Risk Act requires large public and private companies to disclose the financial risks they face due to climate change. Starting in 2026, companies will have to submit a climate-related financial risk report biannually, in accordance with the Task Force on Climate-related Financial Disclosures (TCFD). Reporting companies will need to detail the physical and transition risks they face as a result of climate change, as well as the measures they’re taking to mitigate and adapt to those risks. 

SB 261 affects a broader range of organizations than SB 253, as it applies to any corporate or business entity operating in California with annual revenues over $500 million USD. 

What should agri-food companies expect?

The enactment of California’s SB 253 and SB 261 marks a significant shift from voluntary to mandatory climate reporting, setting new standards for corporate climate accountability that will extend far beyond the state. And because of the influence of California's agri-food industry in national and global markets, these laws are expected to set a precedent for agri-food companies worldwide.

Beyond disclosure, California's SB 253 and SB 261 also present a distinct opportunity for agri-food companies to unlock positive business impacts such as: 

1. Strengthening resilience
   Climate risks are critical for agri-food companies, with extreme climate events impacting productivity across crops, meats, and fisheries. Accurate climate disclosures such as those required by California’s latest climate laws will equip business leaders and investors with vital information for informed decision-making to safeguard and improve financial stability.
   
   
2. Positioning for global compliance
   By establishing strong climate reporting capabilities with audit-ready carbon accounting to comply with California’s rigorous standards, agri-food companies are also positioning themselves to meet comparable emerging global regulations, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD).
   
   
3. Securing investment and earning trust
   Agri-food companies that measure and mitigate emissions can leverage California’s reporting framework to showcase reduction initiatives and earn investor trust. Aligning with frameworks like TCFD also grants access to green finance, crucial for sustaining and expanding operations in global markets increasingly focused on decarbonization and sustainability.
   
   
4. Uncovering opportunities for value creation
   The accurate carbon accounting mandated by California’s climate laws can help agri-food companies identify and address high-emission areas, uncovering opportunities for cost savings, operational efficiencies, and innovation. Prioritising decarbonisation can also enhance competitiveness by attracting customers committed to reducing their carbon footprints.
   
   

How Terrascope can help your company meet California's climate laws

As the regulatory landscape shifts from voluntary to mandatory climate reporting, emissions data will undergo the same scrutiny as financial data. Agri-food companies must be confident in their data and able to demonstrate its accuracy. Measuring and reporting Scope 1, 2, and 3 emissions can be challenging, but utilizing software like Terrascope to automate GHG accounting ensures greater accuracy, traceability, and transparency.

Terrascope is an enterprise-grade, end-to-end decarbonization software platform designed to help corporations reduce emissions across their operations and supply chains. By providing credible, auditable emissions data compliant with the GHG Protocol, Terrascope delivers the carbon-related analytics needed for accurate and timely disclosures.

Terrascope specialises in Scope 3 and land-based emissions, supporting both company and product carbon footprinting, reporting, and decarbonization goals. For the agri-food industry, our focus on Scope 3 emissions includes:

• Mapping emission sources across the value chain
• Moving beyond spend-based data to guide best practice data for robust calculations
• Using location-based or custom emission factors that align with your supply chain, instead of generic global factors

Terrascope also has proprietary capabilities to track data confidence, visualize emission factors in detail, and simulate changes from reduction initiatives. 

As California leads the way in climate regulation, it’s imperative for agri-food companies to stay ahead of the curve. Contact us today to learn how Terrascope can support your journey towards effective decarbonization.