California released fresh guidance for its 'Corporate Greenhouse Gas Reporting' (SB 253) and 'Climate Related Financial Risk Disclosure' Programs (SB 261)
Updated: 7 days ago
Pretext : In 2023, recognizing an urgent need to address the physical and transition risks associated with climate change, California passed the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). Here’s a quick timeline of key milestones to help you track California’s climate disclosure laws:
Important Notes:
a. For SB 253 Scope 1 and 2 reporting, June 30, 2026 was proposed as initial reporting deadline for fiscal 2025 emissions but now this has been delayed to Nov 10, 2026.
b) First climate related risk reports under SB 261 were required to be published by companies on their website by January 1, 2026. Later, CARB confirmed that Scope 3 emissions reporting will only begin in 2027, covering a company's 2026 fiscal year data.
c) Scope 1 and 2 data disclosures or scenario analyses (despite TCFD requiring such) are not required for initial SB 261 reports.
d) CARB has established a public docket for companies to post the link to their SB 261 reports.
e) SB 253 reports can be filed online via the CARB 2026 Report Intake Platform or emailed directly to climatedisclosure@arb.ca.gov
f) Both laws have authorized CARB to charge an annual fee for the implementation and administration of the respective reporting programs. The estimated annual fee to be paid by each in-scope entity is $3,106 for SB 253 and $1,403 for SB 261.
These 2 statutes when rolled out earlier, specifically target U.S. based companies that conduct business operations within the state of California and have reported total annual revenues (not just revenue within the USA) exceeding the significant threshold of $500 million. Hence, companies falling under the compliance criteria of this regulation are typically large corporations. The intent behind focusing on such high-revenue companies is to ensure that those with the greatest environmental impact and resource consumption are held accountable for their business practices and are encouraged to adopt more sustainable business models.
What does “doing business in California” mean under these statutes?
California Air Resources Board (CARB) has proposed aligning with California Revenue & Taxation Code §23101. A company is considered to be doing business in California if it meets any of the following:
Over $735,019 in California sales or 25% of global sales
Over $73,502 in California property or 25% of global property
Over $73,502 in California payroll or 25% of global payroll
Actively engages in transactions for financial gain in the state
CARB may refine these thresholds and provide sector-specific exemptions.
2025 story around these 2 regulations :
CARB at that time stated that companies may use data from FY2023–2024 or FY2024–2025 in their initial SB 261 disclosures, depending on availability, as good faith reporting. After a point, these companies will be subject to a biennial reporting requirement that commences on January 1, 2026. The reports will require detailed disclosures around governance, strategy, risk management and metrics based on climate related risks and opportunities. Companies will need to evaluate how climate change could impact their operations and financial performance, thus integrating these considerations into their overall business strategies. CARB stated that each SB 261 report should:
State which framework is being used (e.g., TCFD, IFRS SDS or another acceptable framework)
Discuss which recommendations and disclosures have been compiled and which have not, and
Provide a short summary of the reasons why any recommendations/disclosures have not been included, as well as a discussion of any plans for future disclosures.
Here is the link to the original SB 261 disclosure checklist, released in Sep, 2025.
But here's where it gets interesting:
⚠️As per the original statute, there exists a provision that allows subsidiaries to potentially obscure their individual performance and disclosures by relying on the reports submitted by their parent companies. This means that while the parent company may provide a comprehensive overview of its operations, the nuances and specific impacts of the subsidiary’s activities may not be adequately represented. This could lead to a lack of transparency regarding the environmental and social governance practices of subsidiaries, which could undermine the overall intent of the reporting requirements.
⚠️Furthermore, its essential to note that insurers are explicitly exempt from these reporting requirements. This exemption raises questions about the accountability of the insurance sector, which plays a crucial role in risk management and financial stability, especially in the context of climate-related risks. The absence of reporting obligations for insurers could result in a significant gap in understanding how these entities are addressing climate risks and their implications for policyholders and the broader market.
⚠️Companies were not required to disclose Scope 1, 2, and 3 emissions, which represent direct and indirect greenhouse gas emissions associated with their operations and supply chains. This lack of requirement means that many companies might not fully account for their overall carbon footprint, potentially leading to an incomplete picture of their environmental impact. Additionally, the statute does not mandate that scenario analyses be quantitative since a qualitative approach is sufficient. This could allow companies to provide less rigorous assessments of their climate-related risks.
⚠️While the regulation does accept major global reporting frameworks as valid for compliance, it is important to recognize that material loopholes still remain. As a result, stakeholders, including investors and the public, may find it challenging to obtain a clear and accurate understanding of a company’s true commitment to sustainability and responsible business practices.
On Sep 24th, 2025 : CARB published its "Preliminary List of Reporting/Covered Entities (the “List”)", listing those companies that it believes are subject to the requirements of SB 253 and SB 261. The List, as CARB advises, is based upon California Secretary of State data and other datasets and identifies those companies considered as “doing business” in the state and those meeting the applicable “total annual revenue” thresholds. These will be required to comply with California's new climate reporting laws, mandating disclosures on climate-related risks and opportunities, and for some companies on value chain greenhouse gas emissions as well. In total, the CARB list includes 4,160 U.S. companies, including the majority of S&P 500 constituents. Of the companies included in CARB’s new list, around 60% (2,503) are based outside of California. Most companies listed (2,596) will be required to comply with both SB 253 and SB 261, while 1,564 will be subjected only to SB 261.
CARB's list is not exhaustive, and may not include all companies covered by the new climate-related reporting laws, as it is based on data from March 2022. The List also does not reflect potential exemptions, and “may be missing companies.” For example, limited liability partnerships (“LLPs”) are not included on the List, despite many LLPs likely being subject to the California climate laws. Hence, it is a company’s responsibility to report under the regulations even if not included on the list. The list may also mention those subsidiary companies that won't be required to report based on recently released exemptions, if their parent company issues a report on their behalf.
On November 18, 2025 : In a series of new developments around CARB climate laws, the Ninth Circuit Court of Appeals has granted a stay that temporarily pauses enforcement of SB 261–which requires eligible companies to publish climate risk disclosure reports on their websites by Jan 1, 2026–while it considers a legal challenge from the Chamber of Commerce. This didn't repeal the law but it delayed implementation until the judges can hear the case.
Here is the link to the CARB docket where approx. 50 companies have voluntarily uploaded disclosures of climate-related risks and opportunities as well as comments : Climate-Related Financial Risk Reports (SB 261) Docket
On October 12, 2026 : The California Office of Administrative Law (OAL) approved the California Corporate Greenhouse Gas Reporting and Climate-Related Financial Risk Disclosure Initial Regulation (Initial Regulation), which implements the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261).
The enforcement of SB 253 (requiring emissions disclosures) was to take effect in August 2026. However, to give companies more time and clarify specific requirements, CARB later adjusted the schedule and SB 253 regulation was finally officially approved and took effect on October 12, 2026, locking in the final first-year submission deadline for November 10, 2026.
For SB 261, Jan 1, 2026 statutory deadline is not being enforced. CARB will set a new date once the Ninth Circuit appeal is resolved. SB 261 reports are required to be aligned with TCFD (Task Force on Climate-Related Financial Disclosures) or ISSB (International Sustainability Standards Board) frameworks. Companies must disclose material physical and transition risks, governance structures and mitigation strategies.
Coverage
🔹 SB 253 (GHG emissions): Companies with over USD 1B in global annual revenue doing business in California must report their full GHG emissions footprint (Scopes 1, 2, and 3).
🔹 SB 261 (Climate-Risk): Companies with over USD 500 million in global annual revenue must publish biennial reports on climate-related financial risks and mitigation strategies.
Both public and private companies are covered. Insurance companies are exempt from SB 261.
Penalties for Non-Compliance
• SB 253: up to US$500,000 per year
• SB 261: up to US$50,000 per year
• Scope 3 disclosures : Safe harbor provisions exist where companies make reasonable good-faith efforts.
Link to the new reporting guidance: https://ww2.arb.ca.gov/sites/default/files/2026-09/2026_SB253_Reporting_Guidance.pdf
Link to CARB website : https://ww2.arb.ca.gov/our-work/programs/california-corporate-greenhouse-gas-reporting-and-climate-related-financial-risk
Practical Steps
In the face of uncertainty, performing and documenting a thorough applicability analysis under both laws is a wise approach. Companies affected by SB 253 have several decision points, such as whether to submit greenhouse gas emissions data collectively at the parent level or individually on a regulated entity basis, whether to submit an existing report, use CARB’s template, or file a non-reporting statement. Additionally, companies should prepare their data, controls, and assurance systems for the demands of 2027 reporting and maintain a state of readiness for SB 261 reporting, considering how rapidly the situation could evolve.
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