Pilot guidance for California Climate Disclosure Laws

The climate regulatory landscape is evolving rapidly. While many regions have pulled back on environmental ambition, California is countering this trend with two pioneering laws, namely, Senate Bills 253 and 261, collectively known as the California Climate Disclosure Laws. Unlike conventional compliance measures, these laws are designed to elevate standards. They challenge organisations to lead and set best practices that shape ambitious new market norms for decarbonisation.

In response, The Chancery Lane Project (TCLP) launched a pilot initiative to support organisations navigating these new requirements. We developed guidance, still very much in beta, designed to help companies understand their obligations under the laws. As well as allow organisations to measure their climate impacts transparently and integrate the evolving standards into their reporting processes. This pilot aims to start and maintain important conversations and empower organisations to not only comply but to lead in climate disclosure and decarbonisation efforts.

Understanding the California Climate Disclosure Laws

What are SB 253 and SB 261?

• SB 253 (Climate Corporate Data Accountability Act) and SB 261 (Climate-Related Financial Risk Act) are Senate Bills enacted by the California State Legislature. Together, they require large public and private companies operating in California to publicly disclose their direct and indirect greenhouse gas emissions as well as climate-related financial risks.
• SB 253 mandates transparent reporting on Scope 1, 2 and 3 emissions (covering everything from direct operations to supply chains).
• SB 261 focuses on assessing and disclosing climate-related financial risks and strategies for mitigation.

Who oversees these laws?

The California Air Resources Board (CARB) is the state agency responsible for developing and updating the regulatory programmes and guidance that implement these laws.

Why does this matter?

California’s approach is regarded as a new “gold standard” in corporate climate transparency and risk reporting, with potential ripple effects for global markets.

This is especially significant when set against the backdrop of regulatory delays and dilution elsewhere. This includes the narrowing of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), uncertainty around the EU Deforestation Regulation (EUDR) and the recent retreat by the US Securities and Exchange Commission (SEC) from enforcement of national climate disclosure rules.

Why we took this on

In a year when the EU diluted its Corporate Sustainability Due Diligence Directive, postponed aspects of the EU Deforestation Regulation and the US Securities and Exchange Commission retreated from national climate disclosure rules, California’s robust, future-focused framework stands out. It creates an opportunity for legal practice to move beyond tick-box exercises, to use contracts as levers for real climate action and market transformation.

Rather than focusing on minimum legal requirements, we see contracts as a way for organisations to signal climate leadership, embedding ambitious, innovative standards into commercial practice. They help define where the market is heading, not just where regulation currently sits.

Our approach: a step-by-step process

Our goal was to help organisations move beyond compliance and establish ambitious market norms in their climate disclosure and reporting practices. To achieve this, we set out to develop clear, practical guidance, model contract clauses, and supportive tools that enable businesses to use their commercial agreements as levers for best practice adoption in response to California’s evolving disclosure and reporting requirements.

The collaborative process produced Document 6, which you can find annexed to this thought piece, which is a living guidance note that helps organisations translate California’s climate disclosure obligations into contract-ready language and market-facing tools.

Behind our California working document is an intentionally agile, sometimes messy, collaborative process. Here’s how we shaped it:

1. Defining the need: Recognising the gap for contract-focused climate disclosure guidance tailored to California’s new laws, we convened a working group of legal, sustainability and commercial experts to work up that guidance and test approaches suitable for real-world application.
2. Drafting with AI support: We generated five parallel working versions of draft guidance using a large language model (LLM), blending the requirements of California’s SB 253 and SB 261 with TCLP’s existing climate clause library and broader legal principles. Each draft explored different tones and structural approaches to test clarity, ambition and contract-readiness.
3. Crowdsourced review and iteration: These early-stage versions were shared with stakeholders for open feedback, helping us capture usability challenges, missed nuances and technical language refinements. This group went beyond our original working group. It included in-house legal counsel, law firm partners, sustainability professionals and contract drafters working at the frontlines of disclosure obligations.
4. Expert validation: The most promising draft (version 5) underwent critical review by a select group of senior counsel at companies likely to be directly impacted by SB 253 and SB 261.
5. Integrating diverse feedback: we used both AI-assisted synthesis and manual editorial review to build Document 6 that incorporated technical accuracy, practical utility and responses to real-world scenarios. This is the version we are sharing with you all alongside this article.
6. Ongoing agility: With CARB continuing to develop implementation standards, this document remains a living draft, open to adjustment, iteration and improvement. It is designed to travel with the law and to grow as ambition grows. TCLP’s unique mission is to help organisations move beyond compliance by embedding bold climate stewardship goals into their contracts, driving transformative climate action and leadership.
   

Evolving standards and the limits of current contract clauses

As we collaborate to advance contract-ready guidance for California’s climate disclosure laws, it is essential to openly recognise the significant challenges and ongoing uncertainties. The California Air Resources Board (CARB) is actively developing detailed regulations that will clarify both procedural and substantive expectations for SB 253 and SB 261. Until this regulatory picture is complete, any contractual template or clause is, by necessity, preliminary and provisional.

Recent feedback from expert reviewers underscores that brevity or broad alignment language may fall short of the robust clarity needed for credible, durable market adoption. For example, consider this sample clause from our early drafting:

In addition to any statutory obligations under CCDAA and CRFRA, [the Supplier] shall measure and report Scope 3 emissions data annually to [the Company], aligned with the Greenhouse Gas Protocol.

At present, this clause leaves open several significant questions:

• Which Scope 3 categories are required?
• Are suppliers expected to report all 15 categories under the Greenhouse Gas Protocol, or a limited subset?
• In what format and level of granularity must data be supplied?
• How will compliance or “breach” be measured before further regulatory detail is published?

Until CARB releases final implementation standards and category-specific requirements, including clarification of what constitutes a “reasonable” Scope 3 reporting effort, draft contract language must acknowledge this uncertainty, both to counterparties and to internal contracting parties. Attempting to lock in too much detailed compliance language too soon risks misalignment with future regulation or inadvertently creating obligations that are, on the 1 hand, either impossible or impractical to meet, or on the other insufficiently ambitious

For these reasons, all template clauses in this guidance are intended as adaptable frameworks, not final forms. Their immediate value is to help signal intention, establish communication with suppliers, and build readiness for more specific obligations as they emerge. 

Our approach is intentionally iterative: we seek and welcome feedback and real-world examples so that these contract tools can keep pace with regulatory change, market evolution, and shifting best practice. Recognising what we do not yet know and acknowledging where legal and commercial standards are still forming will support better first impressions and contribute to more robust, trustworthy market norms.

Your role: help set the market standard

This draft is not the last word. It’s a collaborative anchor, a platform to co-create the ambitious contractual tools our climate and markets urgently require. Will you help us develop this document into a powerful tool that can shape new market norms and go beyond compliance to set best practices in the California market?

1. Download and review Document 6 (link included below).
2. Share your feedback: Where do you see limitations? What would facilitate more ambitious action? How are you using this document to inspire and inform the way your business prepares for the California Disclosure Laws?
3. Send insights and suggestions: on practical success, ambitious contract models or market tension points directly to Ruby Carver at [email protected].

Your comments are essential for refining practical guidance, ensuring California Climate Disclosure Law contract templates truly drive best-practice decarbonisation and helping establish market-leading standards for ambitious climate-aligned contracting.

Get involved. Join the movement to develop best-in-class, climate-aligned contracts that lead global standards, not just meet them.