How XBRL Can Transform Climate Reporting for California Businesses
California is taking its climate accountability to the next level with two key programs: the California Corporate Greenhouse Gas Reporting Program (SB 253) and the Climate-Related Financial Risk Disclosure Program (SB 261). These initiatives aim to increase the transparency of how companies disclose their greenhouse gas emissions and manage the financial risks associated with climate change.
Starting in 2026 and 2027, large companies operating in California will be required to disclose this critical information. Although the law specifies what businesses must report, it does not address one important question: how they should report it.
That’s where XBRL (eXtensible Business Reporting Language) enters the conversation as a potential game-changer.
A Closer Look at SB 253 and SB 261
SB 253: This law requires companies with annual revenues over $1 billion to report their greenhouse gas emissions, covering Scopes 1, 2, and eventually Scope 3. Scope 3 emissions, which include indirect emissions from supply chains and product use, are often the hardest to track but are critical for understanding a company’s true environmental impact.
SB 261: Companies with annual revenues of $500 million or more must prepare detailed reports on climate-related financial risks and how they plan to manage those risks.
These regulations mark a significant step toward better climate transparency. However, businesses and stakeholders may find it difficult to compare and understand the data without a common reporting format.
Why XBRL Matters for Climate Disclosures
- Better Transparency and Easier Data Access
XBRL turns static reports into structured, machine-readable data, making it easier for stakeholders like regulators, investors, and analysts to extract insights. Rather than reading long reports, decision-makers can rapidly obtain the information they need, allowing them to make informed decisions.
- Faster and More Precise Reporting
Manual reporting can be slow and error-prone. XBRL enables businesses to speed up the process, reduce errors, and assure data consistency across all reports.
- Easier Comparisons Between Companies
Climate data from different companies might be difficult to compare due to variances in reporting formats. XBRL tackles this issue by presenting data in a standardized manner, which makes it much easier for stakeholders to see trends and compare organizations.
- Staying in Line with Global Standards
Organizations such as the International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD) advocate for more consistent, machine-readable reporting. California’s use of XBRL may help align with these worldwide standards.
Why the Shift Toward Machine-Readable Climate Data Matters
California’s climate disclosure programs come at a time when federal efforts, such as the U.S. Securities and Exchange Commission’s (SEC) climate rule, are on hold. By taking the lead, California has a chance to set an example for other states — and possibly even the entire country.
Although XBRL is not yet mandated in California for climate reporting, it can significantly simplify and standardize disclosures. Access to organized, machine-readable information can help businesses and stakeholders make better decisions about climate hazards and policies.
How DataTracks Can Help
The new climate disclosure standards are difficult to understand, but DataTracks makes the process easier. DataTracks, a respected provider of XBRL-based regulatory reporting and compliance solutions, offers tools to assist businesses:
- Prepare and validate accurate reports in line with evolving climate regulations.
- Streamline reporting processes with automated data tagging and error checks.
- Gain valuable insights from structured data that can guide decision-making.
With years of regulatory reporting expertise, DataTracks is prepared to assist companies in meeting California’s new climate disclosure regulations with confidence.
Final Thoughts
The new climate reporting regulations in California are a significant step toward increasing accountability and transparency. As firms prepare to meet these obligations, using structured formats such as XBRL will be critical to making the reporting process more efficient, accurate, and meaningful.
By partnering with experts like DataTracks, businesses can navigate these changes smoothly, ensuring compliance while gaining a competitive edge with clear, actionable data. With the right tools and approach, climate reporting doesn’t have to be a burden — it can be an opportunity to lead in sustainability and innovation. Contact an expert at +1 (646) 904-8324 or enquiry@datatracks.com.