The California Air Resources Board (CARB), the regulator charged with developing and enforcing the state’s new corporate climate reporting regulations, unveiled a series of proposed options for the implementation of upcoming obligations for large companies to report on Scope 3, or value chain, greenhouse gas (GHG) emissions.
The new proposals were presented as part of a public workshop to communicate and solicit feedback on the California Corporate Greenhouse Gas Reporting Program, created through California’s new climate reporting regulation SB 253.
SB 253 requires companies with revenues greater than $1 billion that do business in California to report annually on their direct Scope 1 and 2 emissions, and Scope 3 value chain emissions, including those associated with supply chains, business travel, employee commuting, procurement, waste, and water usage.
The new workshop follows the final adoption by CARB late last month of the new regulation, and the establishment by the regulator of August 10, 2026 as the first-year disclosure deadline for reporting of corporate GHG emissions. In its first year, the regulation will require companies to report on Scope 1 and 2 emissions, including direct operational emissions indirect emissions from purchased energy, while reporting on Scope 3, or indirect value chain emissions, will begin in 2027.
Reporting requirements around Scope 3 emissions are one of the most challenging aspects of GHG disclosure regimes. These emissions very often account for the vast majority of many companies’ carbon footprints, but are typically the hardest to track and calculate, occurring outside of the direct control of companies, in areas such as supply chains, or in their customers’ use of their products.
In its workshop, CARB outlined three proposals for the upcoming rollout of Scope 3 emissions reporting requirements. The first, “Broad Applicability,” would require all companies in the scope of the regulation to report on all Scope 3 categories starting in 2027, with companies able to not report on Scope 3 categories that are deemed de minimis, with appropriate explanation.
The second option, “Sectoral Phase-In,” would require companies to begin reporting only on Scope 3 emissions from the transportation and industrial sectors, which together account for around 60% of California’s emissions, in order to prioritize sectors responsible for the largest share of statewide emissions that are subject to the greatest transition risk.
The third option, “Category Phase-In,” would also see Scope 3 reporting obligations phased in over time, but instead of having the phase-in implemented by sector, it would require companies to begin with reporting on categories that are already the most commonly disclosed, including business travel, purchased goods and services, fuel and energy-related activities, employee commuting, and waste generated during operations.
CARB also presented several GHG accounting methodologies for companies reporting Scope 3 emissions under the new regulation, including “spend-based,” based on monetary values of goods and services purchased; “activity-based”, based on physical measures of activity, such as the physical quantity purchased; and “supplier-specific,” based on primary emissions or activity of suppliers. The regulator proposed giving companies flexibility to report using any of the methodologies, or a hybrid approach combining the methodologies.
The workshop also an overview of CARB’s Standardized Regulatory Impact Assessment (SRIA) outlining the estimated cost to companies to comply with the new GHG reporting regulation. Noting that first-year costs are expected to be higher than ongoing costs, CARB provided an estimated cost averaged over the first three years, and also provided a range to account for the various proposed Scope 3 phase in options. The estimated average annual cost per entity ranged from approximately $135,000 under the “Category Phase-in” scenario to $152,000 under the “Broad Applicability” scenario.
CARB is soliciting feedback on the proposals from the workshop until April 13. Click here to access the workshop presentation slides.
