ESG compliance in the USA: a guide for SMEs

The SEC's climate disclosure rule, finalised in 2024, has faced significant legal challenges and its implementation is currently paused. The political environment under the current administration makes comprehensive federal ESG regulation unlikely in the near term. However, this does not mean US businesses can ignore ESG:

• California's state-level laws apply to any company doing business in California — regardless of where it is incorporated
• Large US companies with EU operations or EU customers are subject to CSRD
• Investor and customer pressure for ESG disclosure continues to grow independently of regulation

SB 253 is arguably the most significant climate disclosure law in the USA. It requires companies with over $1 billion in annual revenue that do business in California to publicly disclose their greenhouse gas emissions:

• Scope 1 and 2 emissions: Required in 2026 (reporting on FY2025 data). The California Air Resources Board (CARB) has proposed a first-year reporting deadline of 10 August 2026.
• Scope 3 emissions: Required from 2027 (reporting on FY2026 data). CARB may require limited assurance by 2030, subject to market readiness.
• Third-party assurance: Limited assurance for Scope 1 and 2 beginning in 2026; reasonable assurance required by 2030.
• Applies to: Any US public or private company doing business in California with >$1B in total global annual revenue — not just California-incorporated companies.

The Scope 3 requirement is the critical one for SME suppliers. Scope 3 Category 1 (purchased goods and services) is typically the largest component of a large company's carbon footprint. Companies subject to SB 253 will need emissions data from their suppliers — which means you.

Implementation status (as of early 2026): CARB published proposed initial regulation materials in December 2025, including the proposed August 10, 2026 Scope 1 and 2 deadline. Final rulemaking may not be complete until late 2026, but CARB has consistently stated that statutory timelines remain firm. Companies should not delay preparation.

SB 261 (the Climate-Related Financial Risk Act) requires companies with over $500 million in annual revenue doing business in California to prepare and publicly disclose a climate-related financial risk report, aligned with TCFD. While the statute set an initial deadline of 1 January 2026, a Ninth Circuit court injunction issued in November 2025 has paused enforcement. CARB has stated it will not enforce the January 2026 deadline while the appeal is pending and will provide an alternate reporting date once the appeal is resolved.

Companies that choose to report voluntarily may submit a public link to CARB's docket. While this does not directly require supply chain data, it creates additional pressure on large companies to understand and disclose their climate risks — including supply chain risks.

AB 1305 requires companies that sell, purchase, or use voluntary carbon offsets in California, or that make claims about carbon neutrality or net-zero in California, to disclose detailed information about those offsets. This applies to any business making green claims in California marketing materials — including SMEs.

• CARB — SB 253 Climate Corporate Data Accountability Act
• CARB — SB 261 Climate-Related Financial Risk
• SB 253 bill text (California Legislature)