A split-screen aerial photograph of two contrasting cityscapes — on the left, the sun-drenched California coastline with modern glass office towers in San Franc

ESG Compliance · June 2025 · Strategy Brief

One World, Two Rulebooks

The global ESG consensus has fractured — California is expanding mandatory climate disclosures while Europe is pulling back, leaving multinationals caught in the gap.

The Divergence at a Glance

California SB 253: Scope 1 & 2 reporting begins 2026
EFRAG Simplified ESRS: Mandatory disclosure volume reduced
Multinationals: Two diverging rulebooks, one compliance burden

California's SB 253 mandates that large companies doing business in the state publicly disclose their greenhouse gas emissions across three scopes: Scope 1 (direct emissions), Scope 2 (purchased energy), and Scope 3 (value-chain emissions). The California Air Resources Board (CARB) is overseeing implementation.

The timeline is already in motion. Scope 1 and Scope 2 reporting obligations begin as early as 2026, with Scope 3 disclosures phased in on a later schedule — giving companies a narrowing window to prepare their emissions inventories, data infrastructure, and assurance processes.

For many organizations, the readiness gap is real. Scope 3 data in particular demands visibility deep into supply chains that most companies have never systematically measured. Firms doing business in California — regardless of where they are headquartered — fall within SB 253's reach.

EFRAG's Draft Simplified ESRS mark a deliberate turn away from the expansionist logic that defined ESG regulation for the past decade. The goal is fewer mandatory disclosures — driven by mounting concerns over complexity, implementation costs, and disclosure fatigue across European business.

European regulators are not abandoning sustainability reporting as a strategic priority. The shift is directional: narrowing the disclosure perimeter to information genuinely relevant to decision-making, removing overlapping requirements, and reducing overall compliance burden.

Where California's SB 253 adds new obligations and phased expansion of scope, Europe's draft simplified ESRS trims and consolidates — pulling in the opposite direction simultaneously.

EFRAG's Three Simplification Objectives

1. Reduce volume: Cut the number of mandatory disclosure requirements
2. Remove overlaps: Eliminate duplicative and redundant reporting obligations
3. Focus on relevance: Concentrate on information most useful to decision-making

California and Europe are now pulling in opposite directions simultaneously — one regime expanding mandatory scope, the other cutting complexity. Under SB 253, California obligations begin as early as 2026 (Scope 1, 2, and eventually 3), while EFRAG's Draft Simplified ESRS actively reduces mandatory European disclosures. For multinationals, a single reporting framework can no longer satisfy both regulators — two distinct compliance postures must run in parallel, with added governance, duplicated data pipelines, and assurance processes calibrated to two different standards.

Three Moves That Separate Leaders from Laggards

01 — Audit: Assess current emissions data systems for SB 253 readiness before 2026 obligations begin.
02 — Map: Compare existing ESRS disclosures against EFRAG's simplified draft to surface gaps before they become penalties.
03 — Build: Develop modular reporting infrastructure that flexes across jurisdictions rather than locking into any single framework.

Many organizations are still building reporting programs around yesterday's frameworks. The leaders of tomorrow will be those who can anticipate where regulation is headed next, and adapt before compliance becomes a business risk.
— Greenmentor

Where California's SB 253 adds new obligations and phased expansion of scope, Europe's draft simplified ESRS trims and consolidates — pulling in the opposite direction simultaneously.