California's Scope 3 Law: Advertising Compliance Guide 2026

California just made climate disclosure mandatory for large companies. If your organization generates more than $1 billion in annual revenue and conducts business in California, you now face legally binding requirements to disclose all Scope 3 emissions.

That includes digital advertising.

The law took effect January 1, 2026. First compliance reports are due within 180 days for most companies. The clock is already running.

Who Must Comply: The $1B Revenue Threshold

California’s climate disclosure law (formally SB 253 and SB 261, passed in 2023 and implemented 2026) applies to companies meeting two criteria:

Annual revenue exceeding $1 billion (consolidated global revenue, not just California operations)
“Doing business” in California (broadly defined—if you have customers, employees, or operations in California, you likely qualify)

This captures approximately 5,300 companies globally, including most Fortune 500 firms, major European corporations, and large private companies.

Key nuance: the $1 billion threshold is based on total company revenue, but all entities doing business in California must report. A parent company with $5 billion in revenue must report for all subsidiaries and business units, even those under $1 billion individually.

The law doesn’t exempt non-US companies. If you’re headquartered in London, Frankfurt, or Tokyo but sell products or services in California, you’re subject to disclosure requirements.

What Must Be Disclosed: All Scope 3, Including Advertising

California’s law requires comprehensive Scope 3 emissions disclosure across all 15 categories defined by the GHG Protocol. Scope 3 represents indirect emissions in your value chain—everything that’s not direct operations (Scope 1) or purchased energy (Scope 2).

Digital advertising falls under Scope 3 Category 1: Purchased Goods and Services. When you buy advertising inventory, you’re purchasing a service that generates emissions through:

Data center energy consumption (ad serving, bidding, tracking)
Data transmission networks (delivering ads to users’ devices)
Content delivery networks (serving creative assets)
Device energy consumption (rendering and displaying ads)

For most consumer-facing companies, advertising represents 0.5-3% of total Scope 3 emissions. That’s small compared to supply chain manufacturing or product transportation, but it’s material enough to require accurate measurement and disclosure.

The law mandates reporting:

Total Scope 3 emissions in tonnes CO2e
Methodology used for calculation
Boundaries and assumptions
Changes from previous reporting periods
Third-party verification status

Crucially, the law requires assurance. Your disclosure must be verified by an independent third party with climate accounting expertise. This isn’t self-reported data filed and forgotten. It’s audited information subject to verification standards.

Differences from CSRD: EU vs California

Companies already complying with Europe’s Corporate Sustainability Reporting Directive (CSRD) will recognize similarities with California’s law, but key differences exist.

Coverage scope:

CSRD applies to large EU companies (500+ employees) and listed companies meeting size thresholds
California law applies to companies with $1B+ revenue doing business in California (regardless of where headquartered)
Many companies will need to comply with both

Disclosure timing:

CSRD follows annual financial reporting cycles (typically 4-6 months after fiscal year end)
California law requires disclosure within 180 days of reporting period for Scope 3

Materiality assessment:

CSRD allows “materiality” judgments—companies can exclude immaterial emissions categories
California law requires reporting of all Scope 3 categories, regardless of materiality assessment (though small sources can use estimation methodologies)

Assurance levels:

CSRD requires limited assurance initially, moving to reasonable assurance by 2028
California law requires reasonable assurance from the start for companies over $1B revenue

Penalties:

CSRD enforcement varies by EU member state; penalties can reach millions of euros
California law includes administrative penalties up to $500,000 per violation per year, plus potential securities fraud exposure if misrepresentations are material

The practical implication: companies operating in both California and the EU need harmonized climate disclosure processes that meet the stricter requirements of both regimes.

Timeline: First Reports Due 2026

The compliance calendar is unforgiving:

January 1, 2026: Law takes effect. Companies must begin tracking emissions for the 2026 reporting period using compliant methodologies.

June 30, 2026: First Scope 3 disclosure deadline for companies with calendar year reporting (180 days after December 31, 2025 fiscal year end). This covers 2025 emissions calculated retrospectively.

Throughout 2026: Companies with non-calendar fiscal years must disclose within 180 days of their fiscal year end.

January 1, 2027: Second reporting period begins, now with a full year of tracking infrastructure in place.

Key insight: the June 2026 deadline requires retroactive calculation of 2025 advertising emissions. Companies that didn’t track activity-based emissions data throughout 2025 face a painful reconstruction exercise—pulling impression logs, data transfer records, and supply chain information from ad tech platforms that may or may not have retained granular data.

Smart companies started implementation in Q4 2025. Everyone else is now racing to establish compliant measurement before the deadline.

Penalties: Real Enforcement Mechanism

California’s climate disclosure law includes meaningful enforcement provisions, distinguishing it from earlier voluntary frameworks.

Administrative penalties:

First failure to disclose: warning and opportunity to cure (30-60 days typically)
Continued non-compliance: administrative fines up to $500,000 per reporting period
Knowing misrepresentation: additional penalties and potential criminal liability

Securities law implications: For publicly traded companies, inaccurate climate disclosure can trigger securities fraud liability under state and federal law. If investors rely on false or misleading emissions data, companies face potential class action lawsuits and SEC enforcement.

The California State Air Resources Board (CARB) administers the law and has hired dedicated enforcement staff. Early signals suggest they’re taking compliance seriously—draft regulations released in 2025 included strict verification standards and limited safe harbors for estimation errors.

Reputational risk: Beyond legal penalties, non-compliance carries significant reputational exposure. Climate-conscious investors increasingly scrutinize emissions data. ESG rating agencies incorporate disclosure quality into scores. Customers and employees expect transparency.

A company caught undercounting Scope 3 emissions or using indefensible methodologies faces media scrutiny, investor pressure, and competitive disadvantage as rivals demonstrate better climate performance.

What to Report: Advertising Falls Under Scope 3 Category 1

Scope 3 Category 1 encompasses all purchased goods and services. For advertising, this includes:

Digital advertising emissions:

Programmatic display and video advertising
Social media advertising (Facebook, Instagram, LinkedIn, TikTok, etc.)
Search advertising (Google, Microsoft, etc.)
Connected TV advertising
Digital audio and podcast advertising
Digital out-of-home advertising

Required data points:

Total emissions in tonnes CO2e for the reporting period
Breakdown by major advertising channel (if material)
Methodology description (activity-based vs spend-based)
Data quality assessment (primary data percentage vs estimates)
Supply chain boundaries (which emissions are included/excluded)

Boundary decisions: You must define and disclose what’s included in advertising emissions:

Ad serving and delivery infrastructure: Yes (core emissions)
Data center operations for bidding and decisioning: Yes
Creative production emissions (design, video production): Depends (typically Category 1 if outsourced)
Agency fees and services: Only the emissions associated with those services, not the fees themselves
User device emissions from viewing ads: Debatable (GHG Protocol is unclear; California guidance suggests inclusion for digital advertising)

The key is consistency and transparency. Whatever boundary you choose, document it clearly and apply it consistently across reporting periods.

How to Calculate: Use GMSF v1.2

California law doesn’t mandate a specific calculation methodology, but it requires methodologies “consistent with GHG Protocol standards” and subject to third-party verification.

For digital advertising, this effectively means using GMSF v1.2 (Global Media Sustainability Framework) or an equivalent activity-based methodology.

Why GMSF works for California compliance:

Built on GHG Protocol standards (Scope 3 Category 1 methodology)
Activity-based calculations using operational data (impression logs, data transfers, etc.)
Standardized emissions factors vetted by industry technical working groups
Verification-ready outputs with audit trails to source data
Widely adopted by major platforms and measurement vendors

GMSF calculation process:

Collect activity data from ad tech platforms (impressions served, data transferred, supply chain hops)
Apply standardized emissions factors for each activity type
Sum emissions across all advertising activities
Aggregate to total advertising emissions in tonnes CO2e
Document assumptions, data sources, and calculation methodology

Alternative: spend-based estimation California law allows spend-based estimation for Scope 3 categories where activity data is unavailable. But there’s a catch: verification standards require documented effort to obtain activity data before falling back to spend-based methods.

Given that GMSF v1.2 is operational and major ad tech platforms support it, verifiers will likely challenge spend-based calculations for digital advertising as insufficiently rigorous. The activity data exists—you’re expected to use it.

Common Mistakes to Avoid

Companies new to California climate disclosure are making predictable errors. Here’s what to avoid:

Mistake 1: Assuming advertising is immaterial Some companies initially excluded advertising from Scope 3 disclosure, arguing it’s immaterial. California law requires disclosure of all categories. You can’t skip advertising just because it’s small relative to total emissions.

Mistake 2: Using outdated spend-based factors Spend-based emissions factors for advertising (typically 400-600 kg CO2e per $1,000 spent) are derived from 2019-2021 data and overstate current emissions by 300-500%. Verifiers are flagging these as inaccurate. Use activity-based GMSF calculations instead.

Mistake 3: Ignoring supply chain emissions Some companies only counted direct ad serving emissions (impressions delivered) while excluding bidding, data transfers, and supply chain intermediaries. This understates emissions by 40-60%. Include the full supply chain.

Mistake 4: Missing the data retention window Ad tech platforms typically retain granular logs for 90-180 days. Companies that waited until March 2026 to start collecting 2025 data found critical information already purged. Start data collection immediately, don’t wait for the deadline.

Mistake 5: Inconsistent reporting boundaries One company included social media advertising in their California disclosure but excluded it from CSRD reporting (arguing different materiality thresholds). Verifiers flagged the inconsistency. Maintain consistent boundaries across regulatory regimes unless there’s a legitimate methodological reason for differences.

Mistake 6: Inadequate documentation California law requires methodology documentation. “We used GMSF” isn’t sufficient. You need: which version of GMSF, which emissions factors, what data sources, what assumptions, how you handled data gaps, quality assurance procedures. Document everything.

Compliance Roadmap for 2026

Here’s a practical 90-day implementation plan for companies facing the June 2026 deadline:

Days 1-14: Assessment and Planning

Confirm whether your company meets the $1B revenue threshold and “doing business in California” criteria
Inventory current advertising measurement capabilities
Identify data sources for 2025 activity data (ad servers, DSPs, social platforms)
Engage potential verification providers (book them early—they’re capacity-constrained)
Budget for measurement platform and verification costs

Days 15-45: Data Collection and Calculation

Implement GMSF-compliant measurement platform (or engage vendor like Carbon Intelligence)
Extract 2025 advertising activity data from all platforms
Calculate emissions using activity-based GMSF methodology
Document all assumptions, data sources, and boundaries
Run data quality checks (completeness, accuracy, consistency)

Days 46-75: Verification and Documentation

Submit calculations and documentation to third-party verifier
Respond to verifier questions and provide additional evidence as needed
Refine calculations based on verifier feedback
Prepare disclosure document with required elements
Internal legal review of disclosure language

Days 76-90: Filing and Disclosure

Finalize disclosure document with verified emissions data
File with California Air Resources Board via designated portal
Publish disclosure in sustainability report or dedicated climate disclosure
Internal communication to stakeholders (investors, board, employees)
Media/PR strategy if needed (particularly for companies with significant emissions or strong climate commitments)

Post-filing: Continuous Improvement

Establish ongoing measurement infrastructure for 2026 reporting period
Integrate emissions data into advertising operations and optimization
Track emissions reduction progress against baseline
Monitor regulatory developments (California may expand or modify requirements)

Why Non-US Companies Should Care

If your company is headquartered outside the US but does business in California, you’re subject to this law. “Doing business in California” is broadly interpreted:

Selling products to California consumers (including online sales)
Operating facilities or offices in California
Employing California residents (including remote workers)
Generating revenue from California-based customers
Maintaining supply chain operations touching California

For practical purposes, most large consumer brands and B2B companies with US market presence qualify.

Enforcement against non-US companies: California can enforce against foreign companies doing business in the state through:

Administrative penalties (enforced via California operations or business licenses)
Securities law provisions (if securities trade in California or on US exchanges)
Reputational enforcement (public disclosure of non-compliance)
Business license restrictions (California can condition business licenses on compliance)

Several European companies initially argued California lacked jurisdiction over their emissions reporting. California Attorney General guidance clarified: if you want to do business in California, you comply with California law. It’s a condition of market access.

Strategic response: Non-US companies should harmonize California and CSRD compliance. Both require Scope 3 disclosure with verification. Both apply to advertising emissions. A single measurement infrastructure can serve both regulatory regimes, reducing cost and complexity.

The companies getting this right are treating climate disclosure as a unified global compliance function, not separate US and EU workstreams.

The Broader Trend: Climate Disclosure is Going Mandatory

California’s law isn’t an outlier. It’s part of a global trend toward mandatory climate disclosure:

European Union: CSRD mandatory for large companies starting 2024-2026 (phased by company size)
United Kingdom: Mandatory TCFD disclosure for listed companies and large private firms
Japan: Climate disclosure requirements for listed companies
SEC (US Federal): Proposed climate disclosure rules (currently delayed but expected)
Australia: Mandatory climate reporting under development
Singapore: Climate disclosure roadmap for listed companies

The days of voluntary sustainability reporting are ending. Climate disclosure is becoming a standard corporate compliance obligation, like financial reporting.

For advertising specifically, this means:

Activity-based carbon measurement becomes mandatory, not optional
Spend-based estimates no longer satisfy regulatory requirements
Third-party verification creates accountability for accuracy
Emissions data influences investor decisions and ESG ratings
Companies face competitive pressure to demonstrate emissions reduction

California’s law accelerates this trend in the US market. Even companies not yet subject to mandatory disclosure are implementing GMSF measurement to prepare for likely expansion of requirements.

Getting Compliant: Start Now

If you’re reading this in January 2026 with a June deadline, you’re already behind. Here’s how to catch up:

Immediate actions (this week):

Confirm your company’s California disclosure obligation (revenue threshold + doing business test)
Identify internal owners (typically sustainability team + legal + procurement/marketing)
Inventory 2025 advertising data availability (can you still access activity logs?)
Reach out to GMSF measurement vendors for rapid implementation
Contact verification providers to check availability and timeline

Key decision: build vs buy You can implement GMSF measurement in-house or use a vendor platform. Given the June deadline, most companies should use vendors. Building internal capability takes 6-12 months. Vendors can deliver compliant measurements in 4-8 weeks.

Budget expectations:

GMSF measurement platform: $15,000-75,000 annually (depending on advertising spend and complexity)
Third-party verification: $25,000-100,000 for initial verification
Internal labor: 200-500 hours (project management, data gathering, coordination)

Total first-year cost for mid-sized compliance program: $50,000-150,000. For large enterprises with complex advertising operations: $200,000-500,000.

That’s a material investment, but it’s the cost of regulatory compliance. The penalties for non-compliance exceed implementation costs, and the reputational risk is harder to quantify but potentially far larger.

The Bottom Line

California’s Scope 3 disclosure law is now enforceable. Companies with over $1 billion in revenue doing business in California must report advertising emissions with third-party verification. The first deadlines are already here.

This isn’t aspirational sustainability. It’s legal compliance with enforcement mechanisms and penalties.

The companies that will succeed are those who:

Implement activity-based GMSF measurement immediately
Establish verified baselines for 2025 emissions
Integrate emissions tracking into ongoing advertising operations
Prepare for expansion of requirements (more states, lower thresholds, stricter verification)

The time for considering whether to comply has passed. Now it’s about executing compliance efficiently and using the required data to drive actual emissions reduction.

Get compliant, then get optimized.

For a broader view of the US regulatory landscape and how other states are following California’s lead, see our analysis of US Carbon Regulation: What Trump 2.0 Changes for Advertising →

Need help with California Scope 3 compliance for advertising? Carbon Intelligence provides GMSF-based measurement, documentation, and verification support for companies subject to California climate disclosure requirements. We handle data collection, emissions calculation, and third-party verification coordination. Contact us to discuss your compliance timeline.

About Carbon Intelligence: We provide carbon measurement, optimization, and compliance solutions for digital advertising. Our GMSF v1.2 platform delivers California-compliant and CSRD-compliant emissions data with verification-ready documentation.