Guest post by: Dan Krekelberg, director, Climate Strategy; Andrea Adams, director, GHG Verification and Tanya Peacock, managing director, California and Hydrogen, at EcoEngineers
How SB 253 Is Reshaping the Way Companies Measure, Report, and Verify Emissions
For years, greenhouse gas (GHG) reporting has been a best practice for companies, driven by voluntary sustainability commitments and in response to investor due diligence. More recently, government agencies have emerged as an additional interested party in this information, mandating the annual reporting and third-party verification of GHG emissions through the adoption of climate disclosure laws. California’s Climate Corporate Data Accountability Act (SB 253) is an example of a jurisdiction that is turning GHG inventories into public-facing compliance documents available for critical review by regulators, auditors, industry peers, environmental advocates, and customers.
SB 253 applies to companies doing business in California with annual revenue exceeding $1 billion, regardless of their headquarters’ location. Covered companies must report Scope 1 and Scope 2 emissions from the prior year by November 10, 2026, with Scope 3 value chain reporting slated to begin in 2027.
Assurance requirements phase in as well: limited assurance for Scope 1 and 2 starts in 2027, moving to reasonable assurance by 2030, while Scope 3 assurance is expected to begin, at a limited level, around the same time. The California Air Resources Board (CARB) can impose administrative penalties of up to $500,000 per reporting year, though a safe harbor protects good-faith errors in Scope 3 reporting through 2030.
The law is part of a broader global trend of governments requiring companies to disclose GHG emissions and climate-related risk, including the EU’s Corporate Sustainability Reporting Directive and the International Sustainability Standards Board’s IFRS S1 and S2 frameworks, now adopted in more than 30 countries. Each of these programs requires the use of the GHG Protocol as the common measurement standard in line with recommendations from policy experts to allow comparability of climate data for investors, by harmonizing programs’ requirements around third-party measurement and verification standards already used by many companies for voluntary reporting. However, differences between programs can arise as regulators adapt disclosure frameworks to local customs and laws, which often raises questions among reporting entities about whether to tailor disclosures and assurance for individual jurisdictions where they are subject to compliance requirements.
From Compliance Checkbox to Business Capability
Companies that treat climate reporting as a box to check are missing the larger opportunity. A credible inventory does more than satisfy a regulator: it can reduce regulatory and reputational risk, strengthen access to customers that require supplier disclosures, build investor and lender confidence, and surface operational efficiencies that lower both costs and emissions. Organizations that invest early in strong reporting systems, including engagement and clear directives to suppliers will be better positioned as disclosure expectations continue to expand.
The Building Blocks of a Defensible Inventory
Under the GHG Protocol, emissions are organized into three scopes. Scope 1 covers direct emissions from sources a company owns or controls, such as combustion in fleets or facilities, fugitive methane and refrigerant leaks, and process emissions from production. Scope 2 covers indirect emissions from purchased electricity, steam, or cooling, and can be calculated on both a location basis and a market basis when energy attribute certificates, such as renewable energy certificates, are involved; best practice under the protocol is to disclose both. Scope 3 covers the value chain, upstream and downstream, spanning 15 possible categories from purchased goods and business travel to the use of sold products. Carbon dioxide from biogenic emissions, from biomass decomposition, should also be included in GHG emissions where relevant, though separate from scoped emissions per GHG protocol. Furthermore, annual GHG inventories are often an evolving practice as companies obtain more granular data on their carbon footprint. However, changes to GHG measurement that result in significant fluctuations in year-to-year GHG emissions can require companies to recalculate baseline inventories for past years under certain disclosure programs.
The Five Principles
Five principles from the GHG Protocol govern how this data should be assembled: relevance, completeness, consistency, transparency, and accuracy.
Relevance is the first filter, ensuring an inventory reflects the boundaries and sources that actually matter to the people relying on it. Completeness means accounting for all relevant sources, without cherry-picking the ones that flatter the results. Consistency allows year-over-year comparisons to mean something, even as methods improve, as long as changes are documented. Transparency, showing the assumptions, methodologies, and data sources behind every number, is what makes third-party verification possible in the first place. Accuracy means reducing bias and uncertainty as far as practicable, so the reported figures stay reliable enough to act on.
Data quality follows a hierarchy. Primary data, drawn directly from energy invoices, utility bills, fuel records, or supplier-specific figures, is the gold standard because it ties directly to a company’s own activity. Secondary data, such as industry-average emission factor databases, fills in where primary data is unavailable. Estimation and proxy data, including spend-based calculations common in Scope 3, are the least precise but often necessary starting point. Most inventories use a blend of all three, and the discipline that matters is documenting why a particular source was used and explaining any change from one reporting year to the next.
What Verification Actually Tests
Assurance exists on a spectrum. At one end, agreed-upon procedures involve no overall opinion from the verifier. Limited assurance, the level most companies will encounter first, involves fewer evidence-gathering procedures and results in an opinion expressed in negative form: nothing came to the verifier’s attention to suggest the information is materially misstated. Reasonable assurance requires more extensive testing to reduce verification risk to an acceptably low level, and the resulting opinion is expressed positively. Absolute assurance, requiring a 100 percent review of everything, is generally considered unattainable.
A typical verification engagement moves through a notice of verification services and conflict-of-interest assessment, risk assessment, planning, data collection and review, draft reporting, finalization, and an independent internal review by someone not otherwise involved in the engagement. In practice, these steps loop back on each other, particularly between data collection, data review, and the log of issues that tracks open questions and findings.
Auditors focus their testing on four areas: boundary definition, to confirm that all relevant sources and facilities are included; data provenance, to trace numbers back to meters, invoices, or internal estimates; internal controls, to evaluate whether calculations are reviewed, approved, and protected from error; and evidence and documentation, from calibration certificates to fuel purchase invoices. Because auditors work from a sample instead of testing every figure, they concentrate effort on the areas most likely to be material, informed by an assessment of inherent risk (how naturally uncertain a number is), control risk (whether internal systems catch errors), detection risk (whether the audit itself might miss something), and sampling risk (the limits of testing only a subset of the data).
Where Scope 3 Gets Difficult
Scope 3 can represent 70 to 90 percent of a company’s carbon footprint, and it remains the most complex category to measure. Primary data is still the goal, but estimation and proxy data are acceptable and common substitutes when it is not available. In instances where disclosure programs explicitly recommend primary data for Scope 3 calculations, this places an increased emphasis on reporting entities sourcing activity and GHG emissions inventory data from suppliers rather than using proxy or spend-based data. The practical challenge is often upstream: suppliers and other business partners need clear, advance notice of exactly what information is required so they are not scrambling to assemble it under time constraints. Regulators are still finalizing how prescriptive Scope 3 reporting will function. In California, for example, draft regulations for SB-253 add clarifying language to GHGP to meet requirements of the state’s administrative laws, and mandate Scope 3 reporting for 5 of the 15 categories specified including:
- Category 1 Purchased Goods and Services
- Category 3 Fuel and Energy Related Activities
- Category 5 Waste Generated During Operations
- Category 6 Business Travel
- Category 7 Employee Commuting
Where to Start
For companies just beginning this process, the real work lies in sequencing governance, inventory development, technology, and assurance planning together. The first question is who the inventory needs to be reported to, and what that audience requires. From there, governance, meaning clear ownership of data collection within the organization, sets the foundation, followed by a realistic timeline and the technology needed to package and transmit the information. Companies that already have some data management procedures and clearly assigned responsibilities in place, even informally, are in a better position than those starting from nothing.
The common thread across reporting, data collection, and verification is that none of it is meant to be a one-time exercise. As disclosure mandates expand and overlap across jurisdictions, the companies best positioned are the ones building a GHG inventory as a durable, auditable system, one designed for scrutiny from the outset rather than reconstructed under deadline.
