Climate Emissions Reporting: What California Dairy Businesses Need to Know
California’s dairy industry faces unique compliance challenges and opportunities due to the state’s recent climate disclosure laws.
The new regulations, SB-253, SB-261, and SB-219, require companies doing business in the state to publicly report greenhouse gas (GHG) emissions and climate-related financial risks, starting in 2026.
These laws set out revenue-based thresholds, link disclosures to recognized frameworks such as the GHG Protocol, Task Force on Climate-related Financial Disclosures (TCFD), or International Sustainability Standards Board (ISSB), and introduce phased assurance requirements and enforcement expectations.
Early planning and internal alignment will be essential for organizations affected by these laws.
Dairy Industry Implications
California’s dairy industry—the largest in the United States—is particularly affected by these new climate disclosure laws. Dairy operations encompass both agricultural production and food processing, meaning that entities in this sector often face complex, cross-sectoral reporting.
Many dairy producers, cooperatives, and processors exceed the revenue thresholds established by SB-253 and SB-261. They must now prepare to quantify, verify, and disclose emissions and climate-related risks across their entire value chain. The dairy industry’s significant methane and nitrous oxide emissions, primarily from manure management and enteric fermentation, make it a focal point under California’s climate policy objectives.
Understanding GHG Emissions Scopes
Climate disclosure requirements classify GHG emissions into three categories, commonly referred to as scopes, based on where emissions occur across an organization’s operations and value chain.
This framework is established by the Greenhouse Gas Protocol and is the basis for reporting under California’s climate disclosure laws.
Scope 1: Direct Emissions
Emissions from sources owned or controlled by the organization, such as methane from livestock and manure management, on-site fuel combustion, and company-owned vehicles.
Scope 2: Indirect Energy Emissions
Emissions associated with the generation of purchased electricity, steam, heating, or cooling used by the organization, including power consumed for milking, refrigeration, and processing facilities.
Scope 3: Value Chain Emissions
All other indirect emissions occurring upstream and downstream in the value chain, such as feed production, transportation, packaging, third-party processing, distribution, and product use.
Examples of Impacted Dairy Operations
- Milk production farms. Large-scale dairies must account for methane from manure lagoons and digestive processes (Scope 1), as well as energy use from milking and refrigeration (Scope 2).
- Processors and cooperatives. Daily processors and cooperative structures may face dual obligations—GHG reporting under SB-253 and financial risk disclosure under SB-261.
- Vertically integrated businesses. Organizations managing feed production, herd operations, and branded consumer dairy products must align reporting across multiple stages of the value chain.
Key Law Impacts on Dairy
Business Considerations for Dairy Operators
- Data and measurement systems. Implement tools to track methane and nitrous oxide emissions, electricity, and fuel use across production sites.
- Risk management. Evaluate risks tied to water scarcity, heat stress, feed availability, and future methane reduction mandates.
- Strategic planning. Quantify the financial benefits of methane digesters, lagoon covers, and low-emission feed strategies. Explore opportunities for carbon credits or sustainability-linked financing.
- Governance. Ensure climate-related risk oversight is embedded in board and cooperative governance structures.
- Transparency and assurance. Prepare for limited assurance in 2026, with reasonable assurance by 2030, under SB-253.
Dairy Industry Spotlight
California’s dairy sector—responsible for nearly one-fifth of the state’s methane emissions—faces both compliance challenges and strategic opportunities under the new laws. Early action to quantify emissions, align governance structures, and integrate a climate risk assessment into long-term planning will be critical for maintaining regulatory compliance, market creditability, and competitive positioning.
To learn more about these laws and actions your business can take, contact your firm professional.