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Why Mid-Sized Companies Cannot Afford to Ignore California SB 253 and 261
Senate Bills 253 and SB 261 require large corporations to disclose emissions and climate risks. But the ripple effect will hit mid-sized businesses too.
Jhalak Jain
Introduction
California has set the stage for some of the most ambitious climate disclosure requirements in the world with Senate Bills 253 and 261. Together, these laws require large companies doing business in the state to report their greenhouse gas emissions, climate-related financial risks, and plans to address them.
While on paper, the rules apply only to firms with annual revenues of $500 million or more (SB 261) or $1 billion or more (SB 253), in reality even small and mid-sized companies are likely to feel the heat.
The Impact on Mid-Sized Companies
To answer it briefly, the effects of SB 253 and SB 261 on mid-sized companies will come indirectly through supply chains and client relationships.
How? Let’s break it down:
Under SB 253, larger firms must report not only their own direct emissions but also their Scope 3 emissions, which cover the value chain. These include emissions from suppliers, logistics providers, contractors, and waste management. Since Scope 3 often accounts for more than 70% of a company’s footprint, mid-sized vendors will be expected to provide reliable emissions data. Companies that cannot do so risk being replaced by competitors that can.
Under SB 261, the focus shifts to climate-related financial risks. Large companies must explain how extreme weather, rising temperatures, or stricter energy regulations could affect their operations. But these risks flow down to suppliers as well. Heatwaves can delay logistics, floods can damage warehouses, and rising cooling costs can erode margins. Larger clients will need reassurance that their suppliers can withstand such shocks, because one weak link threatens the entire chain.
Scope 3 Emissions. (Source: Scope 3 Standard)
In short, both laws raise the bar for transparency and resilience across supply networks. Mid-sized companies that prepare early will remain preferred partners, while those who lag risk losing contracts, credibility, and long-term stability.
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Why Ignoring These Laws Could Cost Mid-Sized Businesses
For mid-sized businesses, the risks of ignoring SB 253 and 261 are threefold:
- Lost Contracts: Larger clients may cut ties with suppliers that cannot provide emissions data or demonstrate climate preparedness.
- Higher Costs Later: Scrambling to collect data under pressure is far more expensive than building systems early.
- Reputational Risk: Customers and investors increasingly expect credible climate action. Silence or inaction can weaken competitiveness.
The Opportunity Hidden in Compliance
There is also an upside. Mid-sized companies that get ahead of these requirements can differentiate themselves in a crowded market. By showing transparency on emissions and resilience planning, they can attract new clients, secure financing, and build trust. What seems like a compliance exercise is actually a chance to future-proof operations.
Research shows that every $1 invested in climate adaptation generates between $2 and $19 in returns through avoided losses and efficiency gains. For resource-constrained mid-sized firms, this can make a critical difference.
How Emit Earth Can Help
Our work focuses on helping businesses measure and manage Scope 3 emissions, often the most complex and least understood part of the climate equation. By using real operational data, we help mid-sized companies understand their footprint, identify hotspots, and set realistic reduction targets.
For businesses navigating SB 253 and 261 indirectly, this means being able to respond confidently when larger clients request data. For those aiming to lead, it means turning compliance into a competitive advantage.
The Road Ahead
California’s climate disclosure laws may be state-specific, but their influence is global. Similar regulations are already emerging in Europe under the Corporate Sustainability Reporting Directive (CSRD). Climate transparency is rapidly becoming the norm. Regardless of size, preparing now will help businesses remain competitive, resilient, and relevant in a changing economy.
Sources and Further Reading
- Scope 3 Inventory Guidance: EPA
- California Corporate Greenhouse Gas (GHG) Reporting and Climate Related Financial Risk Disclosure Programs: California Air Resource Board
- SB 253/261/219 Public Workshop:
Regulation Development and Additional Guidance: California Air Resource Board
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