ESG compliance in the USA: a guide for SMEs
Federal ESG regulation in the USA is currently limited and politically contested. However, California has enacted some of the most ambitious climate disclosure laws in the world — and they affect any company doing business in California, regardless of where it is headquartered.
Educational content only. The information on this page is provided for general awareness and does not constitute legal, financial, or professional advice. Regulatory requirements vary by jurisdiction, company structure, and sector. Always consult a qualified adviser before making compliance decisions.
The federal picture
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
California SB 253: the Climate Corporate Data Accountability Act
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 from 2026 (reporting on 2025 data)
- Scope 3 emissions: Required from 2027 (reporting on 2026 data)
- Third-party assurance: Required for Scope 1 and 2; limited assurance for Scope 3
- Applies to: Any company doing business in California with >$1B global 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.
California SB 261: Climate-Related Financial Risk
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. First reports are due in 2026. 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.
California AB 1305: Voluntary Carbon Markets
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.
Practical priorities for US SMEs
If you make environmental or carbon neutrality claims in California, review them against AB 1305 requirements. Ensure any carbon offsets you reference are properly disclosed.
Identify which of your customers are subject to SB 253 (>$1B revenue, doing business in California). These customers will ask for your emissions data from 2026 onward.
Calculate your Scope 1 and 2 emissions. This is the minimum data your SB 253-subject customers will need.
Prepare Scope 3 data. If you supply to SB 253-subject companies, they will need your full emissions data for their Scope 3 Category 1 reporting.
Manage your USA / California ESG compliance
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