California’s climate disclosure laws (SB-253, SB-261, and AB-1305) have reshaped the regulatory landscape for corporate sustainability, and the ripple effect is already being felt far beyond the Golden State. As the federal U.S. Securities and Exchange Commission (SEC) climate disclosure rules stall in court, at least four other states (Illinois, New York, Colorado, New Jersey) have proposed their own climate reporting legislation modeled directly after California’s framework. This state-led momentum reflects growing public and investor pressure for transparency, signaling that climate disclosure is becoming a baseline expectation for responsible corporate governance regardless of federal action. When including California, these five states collectively represent 30% of 2024 gross domestic product (GDP) in the United States, according to data from the U.S. Bureau of Economic Analysis (BEA). In early 2025, the State of California reported that California’s economy ranked fourth internationally by 2024 GDP, falling behind the US, China, and Germany.

For companies that have avoided California’s laws due to limited operations in the state, this expanding regulatory footprint means they may soon be in scope regardless, and any ambitiously growing business near the $500 million or $1 billion revenue thresholds should begin preparing now. While California’s implementation has faced some minor delays due to administration setup, other states now have a clear roadmap to follow – making future regulatory rollouts faster, more consistent, and less likely to be challenged.

The ripple effect: States following California’s lead

Across these states, the $1 billion revenue threshold is emerging as a consistent benchmark for greenhouse gas (GHG) emissions reporting, indicating a growing consensus on which companies should be held accountable. New York stands out as the only state to introduce climate risk assessment reporting requirements like California’s SB-261, further aligning with global trends in financial risk transparency.

While assurance requirements and Scope 3 timelines vary, the overall direction is toward comprehensive, verified reporting – a shift that will require companies to invest in robust data systems and third-party validation. As of October 2025, all bills are currently pending and carried over to the 2026 legislative session, except for Colorado, which failed an initial vote in February 2025 and was postponed indefinitely. In Illinois, the current draft bill mandates that rules be finalized by July 2026, indicating a clear timeline for implementation.

If all proposed laws were enacted with penalties like California’s, a company operating across these states and failing to comply could face over $2 million annually in fines for GHG emissions reporting, and $100,000 biannually for climate risk assessment disclosures – a significant financial risk that underscores the need for early action. 

The table below summarizes the states actively pursuing climate reporting laws in 2025.

Why businesses should act now

Even if your company isn’t currently in scope for California’s climate disclosure laws, the national trend is unmistakable: climate reporting is becoming a standard business expectation, not just a regulatory requirement. Companies that wait to act risk falling behind in compliance, investor trust, operational readiness, and competitive positioning.

Preparing for climate disclosure is not a quick task. A climate risk assessment can take up to four months, while a Scope 1 and 2 GHG emissions inventory with limited assurance may require six months or more to complete. These timelines reflect the complexity of data collection, validation, and assurance, and demonstrate that last-minute compliance can be both costly and risky. For multinational businesses, the urgency is even greater. The convergence of global standards – including the EU’s Corporate Sustainability Reporting Directive (CSRD), the UK’s TCFD-aligned rules, Australia’s Sustainability Reporting Standard aligned with the International Sustainability Standards Board (ISSB), and Canada’s proposed climate disclosures – means that climate transparency is quickly becoming embedded in financial and operational reporting worldwide.

The benefits of proactive management of regulatory risks include:

• Avoiding future penalties by preparing early
• Building investor confidence through transparency
• Strengthening operational resilience against climate risks
• Streamlining overlapping state mandates that may emerge

How CohnReznick can help

Navigating climate disclosure regulations requires more than just awareness. It demands a strategic, well-resourced response. CohnReznick’s Sustainability Advisory practice is here to support companies at every stage of their compliance journey.

Our California Compliance Readiness Assessment is a quick, five-minute tool designed to help companies:

• Determine if they’re in scope for California’s climate laws
• Identify gaps in current reporting capabilities
• Receive tailored recommendations for next steps

Our support doesn’t stop there. We offer:

• GHG emissions inventory development for Scope 1, 2, and 3
• Climate risk assessment and scenario analysis aligned with SB-261 and global frameworks like TCFD and IFRS
• Assurance readiness and third-party verification support
• Cross-state compliance strategy to prepare for overlapping mandates
• Stakeholder engagement and reporting advisory to align disclosures with investors and public expectations

Whether your company is already in scope or approaching the thresholds, our team can help you build a roadmap that turns compliance into a competitive advantage.

Readiness is key

California may have led the way, but the momentum is building elsewhere too. Climate disclosure laws are expanding across the U.S., and the regulatory landscape is evolving quickly. Whether your company is in scope today or nearing the thresholds, the time to act is now.

Use our Readiness Assessment to start the conversation internally, identify gaps, and build a proactive strategy. With the right tools and guidance, your business can move from reactive compliance to strategic leadership.