California's Climate & Sustainability Regulations
What you need to know when doing business in California
Download the SB 261 Factsheet
Position your business for climate risk compliance.
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California’s sustainability leadership
California has long stood at the forefront of climate and sustainability progress and legislation. With its large economy – the fourth largest in the world behind the U.S., China, and Germany – it is in a unique position to shape national and global environmental policy.
In recent years, the state has enacted a suite of ambitious laws aimed at increasing corporate accountability and accelerating the transition to a low-carbon economy. Notably, the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261) require thousands of businesses operating in California to disclose their greenhouse gas emissions and climate-related financial risks, respectively.
Alongside these acts, California has also introduced the Voluntary Carbon Market Disclosures Acts (AB 1305) – aimed at strengthening the integrity of voluntary carbon offsetting and climate goal-related claims – as well as more sector-specific sustainability requirements like the Responsible Textile Recovery Act (SB 707) and the Fashion Environmental Accountability Act (AB 405).
Climate disclosure requirements
SB 253: Climate Corporate Data Accountability Act
SB 253 applies to large corporations (>$1 billion in revenue) doing business in California, and requires them to report on Scope 1, 2, and 3 emissions along certain timelines beginning in 2026 (Scope 3 reporting begins in 2027). Furthermore, emissions data must be independently verified by a third party, and assurance levels are set to increase over time.
SB 261: Climate-Related Financial Risk Act
SB 261 requires companies with over $500 million in annual revenue doing business in the state to publicly disclose climate-related financial risks – and what they’re doing to address them – by 1st January 2026. That may seem distant, but the real work of gathering data, mapping risks, and drafting disclosures needs to start now to avoid a last-minute scramble. With potential penalties of up to $50,000 per year for non-compliance and limited consultant capacity toward year-end, acting early is essential.
At Anthesis, we help companies navigate SB 261 requirements with clarity and confidence. Whether or not you have in-house sustainability expertise, our structured offer supports you through physical and transition risk assessments, financial impact analysis, and the development of compliant disclosures aligned with TCFD or IFRS. Our process is practical, efficient, and designed to integrate climate risk into your broader enterprise risk management strategy without unnecessary complexity.
| SB 261 Potential Requirements | How Anthesis Can Help |
|---|---|
| Assess climate-related financial risks. | Physical and transition risk assessments that articulate your company’s scenarios and time horizons. |
| Report and disclose financially material climate risks. | Financial impact pathways depicting how identified climate risks may impact financial position and/or performance. |
| Adopt measures to reduce and adapt to climate-related financial risks. | Integrate climate risks into your company’s enterprise risk management processes through recommendations |
| Report and disclose climate-related risks and measures adopted to reduce and adapt to them, in accordance with TCFD or IFRS. | A climate risk report with disclosures aligned with TCFD. |
Beyond compliance, we see SB 261 as a strategic opportunity. A thoughtful approach to SB 261 can surface valuable mitigation and adaptation strategies that strengthen resilience, protect long-term operations, and meet the expectations of investors and customers alike.
Webinar
Climate risk disclosure as a strategic catalyst: leading through california’s SB 261
This webinar is designed for companies who want to understand the road to compliance, as well as those interested in going beyond compliance—to embed climate risk into their governance structures and business strategy, unlock innovation, and gain a competitive advantage.
SB 219: Greenhouse Gases: Climate Corporate Accountability: Climate-Related Financial Risk
SB 219 was signed into law in September 2024, and made important amendments to both SB 253 and SB 261. Learn more about these amendments here.
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AB 1305: Voluntary Carbon Market Disclosures Act
AB 1305 is intended to strengthen the integrity of voluntary carbon offsetting and climate goal-related claims. The bill affects companies of any size operating within California which:
- Market and/or sell voluntary carbon offsets in California.
- Purchase and/or use carbon offsets to make climate-related emission claims (such as carbon neutrality and/or net zero emissions) within California.
- Make any climate-related emission claims within California.
AB 1305 became effective in January 2024, with first disclosures due by January 2025.
Textile & apparel legislation
SB 707: Responsible Textile Recovery Act
SB 707 introduces the first extended producer responsibility (EPR) framework for textiles in the U.S., requiring producers to manage the recycling and reuse of their products.
The law mandates the formation of Producer Responsibility Organizations (PROs) to handle collection, sorting, and recycling, with full implementation expected by 2030. Companies are encouraged to prepare for compliance by assessing their environmental impact and developing sustainable practices.
AB 405: Fashion Environmental Accountability Act
Still in the process of being introduced, AB 405 is a new bill that will impact the fashion industry, encouraging increased accountability in reducing Green House Gas (GHG) emissions and greater supply chain transparency.
AB 405 would apply to businesses selling fashion goods in California with annual gross receipts exceeding $100 million (referred to as “fashion sellers”). The bill excludes fashion sellers that sell used fashion goods and does not include multi-brand retailers, unless the total annual gross receipts of all of the private labels under the retailer exceed $100 million.
In scope companies will need to establish a quantitative GHG emissions baseline, as well as both short-term and long-term reduction targets. Beginning in 2027, companies will also need to disclose supply chain details. Finally, companies will also need to have insight into their supplier’s chemical and wastewater testing, and include this information – along with the GHG emissions inventory – in an annual Environmental Due Diligence Report.
Anthesis support
Anthesis is equipped to support clients in preparing for and complying with any of the above regulations.
Our Net Zero and Decarbonisation services provide strategic guidance on energy and carbon transitions, and all related reporting needs. We offer California-specific insights and decision-making support to ensure sustainable business growth in both the short and long term.
Meanwhile, Our Supply Chain and Responsible Sourcing team can help you embed sustainability into your procurement and production processes, creating a wealth of benefits from mitigating and managing risks, complying with global and local regulations, enhancing and protecting your reputation, and creating competitive advantages that contribute to long-term business success in both the California and more global landscapes.
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