The California Air Resources Board (CARB), responsible for implementing and enforcing California’s corporate climate disclosure rules, has introduced several proposed approaches for rolling out Scope 3 (value chain) greenhouse gas (GHG) emissions reporting requirements for large companies.
These proposals were shared during a public workshop aimed at gathering feedback on the California Corporate GHG Reporting Program, established under California SB 253. The regulation mandates companies with over $1 billion in revenue operating in California to annually disclose Scope 1, Scope 2, and Scope 3 emissions, covering areas such as supply chains, business travel, employee commuting, procurement, waste, and water use.
Following the recent adoption of the regulation, CARB has set August 10, 2026, as the first reporting deadline. Initially, companies will report Scope 1 and 2 emissions, with Scope 3 reporting requirements coming into effect in 2027.
Scope 3 emissions are often the most complex to report, as they typically represent the largest share of a company’s carbon footprint but occur outside direct control—such as within supply chains and product usage.
To address this, CARB proposed three implementation approaches:
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Broad Applicability: All in-scope companies report all Scope 3 categories starting in 2027, with limited exemptions for insignificant (de minimis) categories.
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Sectoral Phase-In: Reporting begins with high-impact sectors like transportation and industry, which together contribute about 60% of California’s emissions.
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Category Phase-In: Companies start with commonly reported categories such as business travel, purchased goods and services, fuel- and energy-related activities, employee commuting, and operational waste.
CARB also outlined multiple methodologies for calculating Scope 3 emissions, including:
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Spend-based (based on financial data),
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Activity-based (based on physical quantities), and
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Supplier-specific (based on supplier data),
allowing companies to adopt a flexible or hybrid approach.
Additionally, CARB presented cost estimates through its Standardized Regulatory Impact Assessment (SRIA). Average annual compliance costs per company are projected to range from approximately $135,000 under the Category Phase-In approach to $152,000 under the Broad Applicability approach, with higher costs expected in the initial years.
