California to Limit Initial Scope 3 Reporting to Key Categories After Cost, Data Concerns

The California Air Resources Board (CARB), the regulator charged with developing and enforcing the state’s new corporate climate reporting regulations, unveiled its proposed Scope 3 approach for its upcoming emissions reporting regulations for large companies, limiting mandatory initial disclosures to 5 key value chain categories, following feedback from companies expressing concerns about cost and data availability.

The regulator also provided updates on other proposed aspects of the upcoming obligations, including requiring limited assurance on Scope 1 and 2 reporting beginning in 2027, and confirming that insurance companies will be included in the regulation’s emissions reporting requirements from 2027.

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.

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. CARB recently announced plans to push back the deadline for companies’ first mandatory emissions disclosures to November 10, from the current August deadline.

Earlier this year, CARB launched a consultation on several proposed approaches for the 2027 rollout of Scope 3 emissions reporting requirements. Options under consideration at the time included “Broad Applicability,” requiring all companies in the scope of the regulation to report on all 15 GHG Protocol-defined Scope 3 categories starting in 2027; “Sectoral Phase-In,” requiring companies to begin reporting only on Scope 3 emissions from the transportation and industrial sectors, and; “Category Phase-In,” which would also see Scope 3 reporting obligations phased in over time, beginning with a selection of categories that are already the most commonly disclosed.

In its workshop, CARB said that feedback from stakeholders indicated concerns that requiring reporting on all Scope 3 categories from 2027 could pose data availability and cost changes, and that it will propose proceeding with the option to require reporting to begin with 5 key categories.

The Scope 3 categories that the regulator will propose for initial reporting include Purchased Goods and Services, Fuel and Energy Related Activities, Waste Generated During Operations, Business Travel, and Employee Commuting. CARB noted that the selected categories are already frequently reported, and already have “some of the most established data sources and mature quantification methods.” CARB did not provide details on mandatory reporting for the other 10 Scope 3 categories, but proposed that companies be able to report voluntarily on the remaining categories.

The workshop also provided details on SB 253’s assurance requirements, with the regulator proposing that companies be required to obtain limited assurance on Scope 1 and 2 reporting beginning in 2027, with assurance engagements conducted in accordance with one of five accepted standards, including AA1000AS v3, AICPA AT-C Section 210, ISO 14064-3:2019, ISAE 3410 & 3000 for engagements beginning prior to December 15, 2026, and ISSA 5000 for engagements beginning after December 15, 2026.

While the initial regulation exempted insurance companies from 2026 GHG emissions reporting to avoid duplication with parallel reporting required by the California Department of Insurance (CDI), in the workshop CARB said that it had determined that CDI reporting, which doesn’t include Scope 3 or assurance requirements, may not satisfy the requirements of SB 253, and proposed that insurance companies be required to meet the SB 253 requirements beginning in 2027, either in a single report meeting both CDI and SB 253 requirements, or with a supplement to the CDI report.

CARB said that it will conduct a series of “listening sessions” in August and September to gather stakeholder feedback on the proposed SB 253 requirements, and invited written comments on the proposals here.