Employees gather around a desk

Q&A: How to Comply With California’s New Climate Disclosure Rules (SB 261 and SB 253)

December 5, 2023

“It’s no longer about being a good corporate citizen. Climate change is happening — the question is, what are the risks and opportunities for your business?” — Laura Zizzo

In a recent Manifest Climate webinar, we sat down with our internal experts, alongside two guest speakers, to find out whether US companies are ready to comply with California’s groundbreaking new climate disclosure rules (SB 261 and SB 235), and how companies can start to prepare now.

Swift preparation is key. Reporting will be required as of January 1, 2026, based on 2025 data, meaning that companies have just one year to get data and governance systems in place.


Louie Woodall | Product Content Director at Manifest Climate

Kenneth Wu | Executive Director of Corporate Sustainability at Gilead Sciences

Erin Koch | Director of Global ESG, Prologis

Q: How ready are companies for SB 261?

Louie Woodall, Product Content Director at Manifest Climate

A: Since SB 261 is based on the TCFD, I analyzed 27 large publicly traded Californian companies’ public filings to gauge their alignment with the TCFD. On average, these companies are reporting information aligned with 31% of the TCFD’s disclosure criteria, so they have a long way to go. But these are large, household-name companies. Smaller companies are likely to be much further behind.

What’s interesting is the breakdown by TCFD disclosure pillars. I found that these 27 companies only aligned with 23% of governance-related criteria. This is interesting because strong climate governance is the foundation of climate action. It enables strategy, accountability, and the proper flow of risk management up and down the corporate hierarchy. Many companies have not yet formalized certain reporting structures or accountability mechanisms, leaving them exposed from a governance perspective.

These companies scored 33% for strategy alignment and 30% for metrics and targets. On this latter pillar, many companies say they don’t have the data or that it’s hard to clarify the data for the purposes of these disclosures. The highest level of coverage, at 36%, was for risk management. We see a lot of companies claiming to be looking at climate physical risks, and transition and policy risks in their disclosures. But that’s really just one layer of detail. The evidence suggests that companies aren’t taking this much further by diving into the financial impacts, and the ‘business-changing’ implications of some of these risks.

Q: How can companies prepare for SB 261 and SB 253?

Get the right people and start building systems

Kenneth Wu, Executive Director of Corporate Sustainability at Gilead Sciences

A: You absolutely need an executive sponsor, because you’ll need that advocacy to help drive the program forward — both from a governance and operational performance perspective, and to get the resources you’ll need (and it takes a lot of resources to do this well). Most importantly, it won’t happen unless the decisions are made up top.

You’ll need a combination of internal and external support, so seek the expertise you need. And remember that developing your internal systems can’t be done overnight. It’s a journey. Spreadsheets and Word documents, as primitive as they may sound, could be the first step to capturing your data and beginning to draft your climate story. They’re not ideal for the lond term, but they’ll help you put pen to paper.

And finally, leverage industry networks and collaborations. You’re not alone; what you’re looking for probably already exists. You may not have to reinvent the wheel.

It’s all about language and positioning

Erin Koch, Director of Global ESG, Prologis

A: Remember that there are still many people who think that sustainability is something you do just to ‘feel good’ or because you have a progressive agenda, and that it’s not central to the business or help make money.

The way we solve this is to think about the language we use when we’re speaking internal about climate change and sustainability. Ensure you’re speaking about things like risk management and risk transfer, mandatory reporting, the FTC, and so on. Use terms like that with the perspective of needing to learn and improve, and I think you’ll be much better positioned for success rather than coming in with the ‘emotional’ appeal of ‘the world is on fire’.

Done is better than perfect

Louie Woodall, Product Content Director at Manifest Climate

A: Don’t let perfect be the enemy of good. Get started. Even if you have incomplete data, contextualize your stories by finding out what your peers are doing. And get help — reach out internally and externally for solutions and service providers.

Q: How can ESG teams get executive buy-in for disclosure compliance?

Erin Koch, Director of Global ESG, Prologis

A: See this as an opportunity to engage with the senior leadership at your company. This is mandatory reporting, and we have a little bit of a runway, but not a long runway, so we need to get moving.

Part of the C Suite’s role is to look long-term. You have that in your favor, because exercises like scenario analysis are all about planning for the future. If you can find a way to do some future planning with the C Suite, then you’ve got the materials you can use to put together a climate strategy. It doesn’t have to be intimidating. Start wherever it makes sense for you to start depending on where you’re situated within an organization and which relationships you currently have. Think about how you can build deeper relationships, and then go from there.

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