Guest post by: Kristina Wyatt, and Executive Vice President and General Counsel at The Conservation Fund

When the California Air Resources Board votes on how Scope 3 reporting will roll out in 2027, it will do more than set compliance deadlines. It will define the seriousness of California’s climate ambitions. What is at stake is not simply a technical question on implementation, but whether the state intends to ground climate disclosure in comparability and align with global disclosure standards or invite fragmentation, inconsistent disclosures, and diminished comparability for users of the disclosures.

CARB is considering three options for implementing Scope 3 reporting under SB253. The first is ‘broad applicability,’ requiring all companies to report on all relevant Scope 3 categories from 2027, with the ability to exclude categories deemed de minimis with explanation. The second proposes a ‘sectoral phase-in,’ with transportation and industrial companies reporting first and additional sectors added subsequently. The third option, ‘category phase-in,’ would start with five commonly reported categories (business travel, purchased goods & services, fuel & energy, employee commuting, and waste), before expanding over time.

These distinct options would lead to very different outcomes. A broadly applicable approach would allow for a common start line and shared expectation across the market. The sectoral and category phase-ins, on the other hand, would create staggered obligations, less fulsome disclosure, and reduced comparability across companies and sectors.

One concern expressed around the first option – broad applicability – is that companies will not be prepared to disclose the full range of their Scope 3 emissions in 2027. This concern should be mitigated, at least in part, by CARB’s statements on its expectations for reporting in the first year. CARB is looking for good faith efforts, not perfection. With each year, methodologies will evolve and data will be based less on estimates and more on reported emissions based on data from companies’ value chain partners. The first year allows companies to learn, identify gaps, engage suppliers, and ultimately improve over time.

Sectoral phase-ins or phased-ins by category, in contrast, could diminish the utility of the reported information for investors and other users of the information. This matters because although companies will already be reporting Scope 1 and Scope 2 emissions under SB253 in August, those categories only capture a small share of overall climate impact for most firms. Scope 3 emissions typically represent the majority – around 90% – of a company’s climate footprint and much of its exposure to climate risk. Supply‑chain disruptions, resource constraints, and climate‑related shocks tend to arise upstream or downstream, not within a company’s own operations. Disclosures that postpone or limit Scope 3 coverage therefore risk missing material sources of emissions and risk, limiting the value of such disclosures to investors and other users of the information.

From a business perspective, comprehensive Scope 3 reporting is a practical risk‑management tool. Companies need a clear view of their value chain exposure to make well-informed decisions about sourcing, investment, and long‑term planning.

SB253 passed the state assembly in 2023, giving companies more than four years of lead time before Scope 3 reporting begins. Global frameworks like the Greenhouse Gas Protocol are well established for measuring and disclosing emissions. In addition, the ISSB standards aim to create a global baseline for sustainability reporting, improving consistency and comparability of information for investors and other users, while reducing burden and risk for preparers. Many large companies in scope will also be captured by the EU’s Corporate Sustainability Reporting Directive requiring value chain emissions reporting. There’s no need to delay further, start complying now and progress over time.

Scope 3 reporting is inevitable. Whether through California regulation, international requirements, or investor pressure, companies will be expected to understand and disclose their value chain emissions. The real question is whether CARB enables a coordinated learning curve now or stretches that process out over years through fragmentation and delay.

California has long positioned itself as a climate policy leader. The decision before CARB is an opportunity to reaffirm that leadership. Choosing broad applicability would not demand perfection in 2027. It would demand seriousness, clarity, and a commitment to improvement over time.

About the author:

Kristina Wyatt is a member of Persefoni AI’s Sustainability Advisory Board and Executive Vice President and General Counsel at The Conservation Fund. She was also former senior climate and ESG counsel at the US SEC.