SB 261: Turning climate risk into strategic opportunity

When I was leading sustainability in the retail sector, early spring involved the bustle of planning for next holiday season’s inventory. It was Christmas in April, as our teams forecasted the holiday shopping season’s sales trends, organized promotions, and set prices well over half a year in advance. 

That same sense of early planning for important end-of-year milestones is palpable today, as we creep further into 2025. Daily conversations with clients revolve around preparing their approach to California’s SB 261 legislation to ensure that both their climate risk strategy and biennial disclosure are prepared before the January 1, 2026 deadline. 

Not every company we speak with has their approach fully mapped out with an SB 261 plan in place. In fact, those that haven’t yet started this process are in good company. While the best time to get started addressing your exposure to climate risks was yesterday, the next best time is now. Whether you’re starting from scratch or making an existing TCFD disclosure more robust there is still time in 2025 to get this done — and we recommend you start as soon as possible. 

Below are three ways we suggest approaching SB 261, regardless of where you are on this journey: 

1. The penalty for not disclosing your financial-related climate risk — if you’re a company that does business in California and has sales of at least $500 million annually — is $50,000. Rather than budgeting to pay the penalty, companies can devote a similarly scaled budget to uncovering climate-related risks and disclosing them on their website. Doing so will bring value in multiple ways. 
   
   

2. Over the past five years, the U.S., on average, has experienced a billion-dollar weather disaster every 16 days. These climate events are disruptive to all aspects of business, so understanding where your operations and value chain are exposed to climate risk is simply a smart business move. Many companies can likely already point to climate impacts they’ve experienced: storm-related supply disruptions, lost time due to extreme heat, unexpected closures due to wildfires or smoke, etc. 
   
   

3. The flip side to mitigating climate-related financial risk is seizing climate-related opportunity. Savvy companies will use this planning exercise to identify product, service, and process innovations to help them thrive in a quickly evolving world, like ski resorts that have diversified to offer mountain biking and hiking in warm months. They’ll find ways to make their operations and supply chains more resilient before disasters strike, like adopting regenerative agriculture practices that hold more water in the soil to protect against droughts.
   
   

As in the world of retail, planning for results in Q4 begins today. Companies can get started by creating an inventory of climate-related financial impacts they’ve already experienced in their own operations and value chain. Then, expand that thinking to the potential impacts that could occur, ranked by likelihood over short and long terms. Gather a steering committee to actively contribute to this work, including leaders from finance, risk, operations, procurement, and marketing functions, among others. 

Don’t know where to start? Let us help you. We’ll get you compliant with SB 261 in just 12 weeks. Reach out to get started.