- California is implementing sweeping corporate climate disclosure rules, stepping into a federal vacuum.
- Scope 3 reporting could pull farm-level emissions into corporate disclosures, affecting contracts and supply chain relationships.
- Agriculture and business groups warn of high costs, tight timelines and legal uncertainty.
California has moved corporate climate disclosure from political debate into operational rulemaking, and the consequences for food and agriculture could be profound.
The California Air Resources Board has adopted an initial regulation to implement two controversial 2023 laws — SB 253 and SB 261 — that require large companies doing business in the state to disclose greenhouse gas emissions and climate-related financial risks. While the board focused on administrative definitions, fees and a first-year reporting deadline, agricultural stakeholders say the larger issue — the flow of emissions data through food supply chains — is only just now taking shape.
The vote comes at a time when federal climate disclosure efforts have stalled, leaving California as the de facto leader in corporate climate transparency. For agriculture, how this regime unfolds could reshape the measurement, negotiation and economic valuation of emissions across farms, co-ops, processors and distributors.
Sen. Scott Wiener, D-San Francisco (office photo)California steps into a federal vacuum
With the U.S. Securities and Exchange Commission’s proposed climate disclosure rule delayed by litigation and federal climate policy under the Biden administration significantly pared back, California’s laws now stand among the most expansive in the nation.
State Sen. Scott Wiener, D-San Francisco, a coauthor of SB 253, framed the moment in stark terms during a CARB hearing last week.
“This is an incredibly important step for California in terms of corporate transparency and in terms of climate action,” Wiener said, adding that the state must act, “particularly in an era when the federal government under the Trump administration is doing everything in its power to destroy any and all climate action.”
Sen. Ben Allen, D-Santa Monica, who authored SB 261, has similarly described the regulations as a critical first step, saying in a statement to the board that “accurate and comprehensive emission disclosure is not optional — it is essential.”
Because California is the world’s fifth-largest economy, companies are expected to integrate California’s rules into broader global compliance structures rather than segment their disclosures by state — effectively turning California’s standards into a de facto national norm.
Inflection point: Scope 3 and the farm gate
The initial regulation adopted by CARB limits the first reporting year to Scope 1 and Scope 2 emissions — direct emissions from a company’s own operations and purchased energy — and sets the first-year deadline in August. CARB confirmed it will exercise enforcement discretion for those initial submissions so long as companies make a good faith effort and retain required data. More than 120 companies in diverse sectors have already voluntarily submitted climate risk reports despite SB 261 enforcement being stayed by a federal court order.
Interested in more news on farm programs, trade and rural issues? Sign up for a four-week free trial to Agri-Pulse. You’ll receive our content - absolutely free - during the trial period.
But an entirely different tier of impact will hit when companies begin reporting their Scope 3 emissions, which account for greenhouse gases embedded across the entire value chain — from farm production to transport to end-use of products.
For food and agriculture companies, Scope 3 reporting means gathering data on emissions from:
- Livestock methane and manure management
- Fertilizer application
- Feed crop production
- Transport and refrigeration energy use
- Upstream and downstream packaging and distribution
Processors, retailers and brands will need reliable data from growers, ranchers and input suppliers — most of whom lack standardized emissions tracking systems. Once collected, those emissions data could become part of publicly accessible corporate disclosures.
CARB has released a preliminary list of more than 4,000 entities that could fall within the reporting requirements.
Dozens of food, meat and dairy conglomerates from across the country have made the list, including global agri-food giants like Tyson Foods, Dairy Farmers of America, Del Monte Foods and Nestlé, along with California leaders like Blue Diamond Growers and Grimmway Farms, which are subject only to SB 261 disclosures. Also on the list are beverage companies like Modesto-based E. & J. Gallo Winery and fertilizer producers like Bio Ag Solutions.
Agriculture warns of cost and capacity constraints
Agricultural and business groups have raised alarms about how costs will cascade through their sectors.
In written comments to the board, the Dairy Institute of California warned that “substantial direct and indirect compliance costs will be shouldered by covered entities and associated entities alike,” and that the initial regulatory impact analysis submitted by CARB “does not fully quantify the large-scale economic impact” of compliance.
The institute stressed that costs will go beyond processors to include smaller entities preparing emissions information for covered companies, including hiring consultants, building data systems and securing third-party assurance services — a limited and increasingly expensive resource.
“We are deeply concerned with the risk this regulation poses for overestimating GHG emissions for agriculture,” Doreen Dyt, industry relations specialist at California Dairies Inc., told the board.
The California Chamber of Commerce echoed the concerns, asserting that the rules could impose “hundreds of millions of dollars annually” in compliance costs and create an “artificial bottleneck” as thousands of companies compete for assurance capacity ahead of the 2026 deadline. CalChamber is leading a coalition that includes several agricultural organizations.
Its letter urged CARB to complete a standardized regulatory impact assessment before finalizing rules, arguing the economic consequences are too large to be absorbed through a streamlined process.
At the hearing, Jacob DeFant, senior director of environmental policy for the Agricultural Council of California, highlighted similar capacity constraints, noting that the proposed deadline may overload the pool of qualified assurance providers and increase costs and risk of noncompliance for reporting entities.
“The proposed regulation must be workable and reflective of real-world agricultural operations,” said DeFant. “We encourage CARB to conduct a full and transparent impact assessment so policy makers and stakeholders like us may understand the true cost to California's economy, including agriculture.”
Fee structure sparks legal and constitutional friction
CalChamber and the Dairy Institute objected to CARB’s inclusion of litigation defense costs in the proposed fee base, arguing that the relevant health and safety code sections do not authorize recovery of costs associated with defending the rule in court.
CalChamber took that argument further, warning that tying legal defense costs to the fee structure could cross the line into an unauthorized tax under Proposition 26, which requires voter approval for any state levy that functions like a tax rather than a fee for service. The chamber also raised First Amendment concerns, noting that some entities funding CARB’s defense are the very firms challenging the underlying laws.
CalChamber and Western Growers are part of a coalition of business groups that filed federal lawsuits challenging SB 253 and SB 261 on constitutional grounds, including free speech and interstate commerce arguments. A federal appeals court has already issued an injunction stalling SB 261’s climate-risk disclosure requirements while the case proceeds. Plaintiffs are also seeking to halt SB 253, though that portion remains on track for 2026 reporting.
Disclosure or penalty?
Another contested design choice is how to enforce the rules.
Agricultural stakeholders argue CARB has imported a penalty framework from environmental enforcement regimes into a climate disclosure context, where the underlying harm is informational rather than physical.
Under CARB’s proposal, noncompliance could lead to daily, compounding penalties — a mechanism common in pollution control statutes but, critics argue, disproportionate for missed or inaccurate reporting.
CalChamber’s comments highlight this tension, asserting that “applying a per-day, compounding penalty structure to disclosure violations bears no reasonable relationship to the nature of the underlying conduct.”
Unique risks for agricultural cooperatives
Agricultural cooperatives face their own set of structural risks under the disclosure regime.
Cooperatives like California Dairies Inc. argue their unique organizational structure — collectively owned by dozens or hundreds of family farms — could trigger duplicative reporting and emissions double-counting if subsidiaries and related entities each report the same upstream farm data.
“Our business is deeply interconnected with other dairy processors that will be subject to this reporting,” said Dyt.
Co-ops also warn that publicly disclosing certain Scope 3 data could erode competitive advantages they currently leverage through voluntary sustainability marketing, essentially turning proprietary emissions data into a commodity open to all market participants.
That concern dovetails with broader Chamber of Commerce arguments about definitional clarity: CalChamber notes that CARB’s criteria for doing business in California and revenue thresholds could sweep in companies with minimal physical presence in the state, forcing compliance in ways that do not reflect actual operations or emissions relevance.
LCFS conflicts
The debate has also drawn in energy and biofuel producers who see inconsistency between California’s climate-disclosure regime and existing sectoral reporting requirements.
Bioethanol producer POET, a privately held company already reporting lifecycle carbon intensity under the state’s Low Carbon Fuel Standard, argued in a comment letter that duplicating reporting under SB 261 adds compliance burden with little incremental benefit for investors, since its emissions are already transparent through the LCFS pathway registry. POET also contended that requiring privately held firms to provide climate risk disclosures — including potentially confidential business information — exceeds the investor-protection rationale of the statute.
While that argument is more sector specific, it reinforces a broader theme: Companies are being asked to reconcile California’s new framework with a patchwork of existing rules and standards.
What it means for farms
Farms and ranches are not directly covered by SB 253 or SB 261 unless they independently meet the revenue thresholds, but once Scope 3 reporting begins, they are likely to be drawn into compliance indirectly through their customers.
Processors and retailers will need defensible emissions data from suppliers, which could mean new questionnaires and reporting templates; contract clauses tying sustainability metrics to pricing; investments in on-farm measurement technology; and expanded verification and recordkeeping expectations.
Over time, emissions intensity may become a negotiating variable influencing which growers secure preferred contracts or supply chain access, underscoring agriculture’s call for clearer rules and realistic timelines to build workable systems rather than rushed reporting frameworks.
