Article
California’s climate disclosure regulations: An update on SB 253 and SB 261
Dec. 23, 2025 · Authored by Madison Poitras
California continues to lead the nation in corporate climate transparency through two pivotal laws: Senate Bill 253 (SB 253) and Senate Bill 261 (SB 261). These laws require large companies operating in California to disclose greenhouse gas emissions and climate-related financial risks, aligning with increasing demands from regulators, investors and the public for enhanced environmental accountability.
Legislative overview
SB 253: Climate Corporate Data Accountability Act
SB 253 mandates annual public disclosure of Scope 1, Scope 2 and Scope 3 greenhouse gas emissions by U.S.-organized entities with revenues exceeding $1 billion conducting business in California. Reporting must comply with the Greenhouse Gas Protocol, ensuring standardized and credible emissions accounting. The first disclosures, covering fiscal year 2025, are due in 2026. Initial requirements include limited assurance on Scope 1 and 2 emissions for the 2027 reporting period, with assurance expectations increasing over time.
SB 261: Climate-Related Financial Risk Act
SB 261 requires biennial disclosure of climate-related financial risks in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework or an equivalent standard. It applies to U.S.-organized entities with revenues over $500 million conducting business in California. The first disclosures were originally due Jan. 1, 2026, but enforcement has been temporarily paused following a preliminary injunction by the Ninth Circuit Court of Appeals, pending ongoing legal challenges.
Current status of the regulations
CARB’s regulations under SB 253 and SB 261 are not yet finalized. After extending its rulemaking timeline in October 2025, CARB now anticipates final adoption in Q1 2026. CARB has conducted multiple workshops – in May, August and November 2025 – to engage stakeholders and refine regulatory proposals. These sessions have clarified key aspects such as entity scoping, revenue definitions, reporting deadlines and enforcement strategies.
The details of the regulations discussed within this article are accurate as of Dec. 18, 2025, and based on the most current information available, but they remain subject to change until the regulations are finalized.
Legal challenges and enforcement status
The U.S. Chamber of Commerce and other business groups have challenged SB 253 and SB 261, citing constitutional concerns and excessive compliance burdens. The Ninth Circuit Court of Appeals issued a preliminary injunction that applies only to SB 261, temporarily pausing its enforcement. SB 253 is unaffected by this injunction and remains fully in effect.
Oral arguments are scheduled for Jan. 9, 2026, which falls after the statutory Jan. 1, 2026 deadline for SB 261. In response, CARB issued an enforcement advisory on Dec. 1, 2025, confirming that it will not enforce the January 1, 2026, deadline and will set an alternate date for reporting after the appeal is resolved. In the meantime, entities may voluntarily submit reports through CARB’s public docket. CARB plans to exercise enforcement discretion for good-faith first-year submissions, focusing on supporting compliance rather than penalizing initial efforts.
Reporting requirements and deadlines
- Scope 1 and 2 emissions disclosures due by Aug. 10, 2026.
- Scope 3 emissions reporting begins in 2027 for fiscal year 2026 data.
- Reports must be publicly accessible, with submission of report links to a CARB public docket.
SB 253 reporting deadlines and compliance guidance
CARB has set a preliminary deadline of Aug. 10, 2026, for the initial year of SB 253 reporting, extending beyond the earlier anticipated date of June 30. This deadline applies only to the first reporting cycle, with the understanding that subsequent years may have shorter timelines for submitting Scope 1 and Scope 2 emissions data.
The regulation also considers varying fiscal year-end dates: entities with fiscal years ending between Jan. 1 and Feb. 1, 2026, will report data for the 2026 fiscal year, while those with fiscal years ending after Feb. 1 to Dec. 31 will report data from the 2025 fiscal year. This allows for a minimum six-month period post-fiscal year-end to prepare and submit reports.
SB 253 flexibility in reporting and assurance
During a recent CARB workshop, it was emphasized that the agency will exercise enforcement discretion for initial submissions made in good faith, prioritizing support over penalties for first-year compliance efforts. This is in alignment with the Enforcement Notice issued in December 2024.
Entities are not mandated to use CARB’s draft reporting template for Scope 1 and 2 emissions in 2026. Instead, they may submit existing annual reports or data already reported under other regulatory or voluntary programs.
For the 2026 reporting year, entities that were not collecting data or planning to collect data at the time the Enforcement Notice was issued, at that time are not expected to submit reports but should provide a formal statement on company letterhead confirming this, which will be made publicly accessible via a CARB docket.
Regarding assurance, CARB confirmed at the November workshop that limited assurance will not be required for 2026 submissions.
See Appendix at the bottom of this article for further information.
- Biennial climate-related financial risk disclosures originally due Jan. 1, 2026, on company websites.
- Companies must submit a link to their report to a CARB public docket, which will be open from Dec. 1 until July 1, 2026, by which time all report links must be submitted.
- Enforcement currently stayed in pending appeal, expected to resume after the appeal is resolved.
See Appendix at the bottom of this article for further information.
Compliance considerations
Revenue thresholds
CARB defines “revenue” based on the “gross receipts” concept outlined in California Revenue and Taxation Code Section 25120(f)(2). This includes the total amount realized from sales, exchanges of property, provision of services or use of property or capital—such as rents, royalties, interest and dividends—in transactions that generate business income. Importantly, these amounts are not reduced by the cost of goods sold or the basis of the property sold. The income, gain or loss is recognized (or would be recognized) under the Internal Revenue Code as applicable.
To address fluctuations in revenue that may affect reporting obligations, CARB determines applicability by looking at the lesser revenue figure from the entity’s two most recent fiscal years. If revenue falls below the SB 253 or SB 261 threshold in either year, the entity is not required to report for that cycle.
According to CARB’s FAQs (FAQ 8), revenue calculations consider total gross receipts regardless of whether the income was generated within California. Additionally, the revenue threshold is assessed at the individual company level. However, if a parent company and its subsidiaries file taxes as a unitary business in California, the subsidiaries’ revenues are aggregated with the parent’s gross receipts to determine applicability. Entities should refer to their corporate tax filings to verify gross receipts (FAQ 15).
Doing business in California:
CARB staff proposes to define “doing business in California” in accordance with Revenue and Taxation Code Section 23101, with certain exceptions.
At its core, Section 23101(a) defines “doing business” as actively engaging in any transaction for financial or pecuniary gain or profit.
Under Section 23101(b), an entity is considered to be doing business in California during any part of a reporting year if it meets either of the following criteria:
- The entity is organized or commercially domiciled in California.
- The entity’s sales in California exceed the inflation-adjusted threshold of $735,019 for 2024, as defined in Revenue and Taxation Code Section 25120(e) or (f). This includes sales made by agents or independent contractors and accounts for the pro rata or distributive share of pass-through entities. Sales are determined based on specific assignment rules outlined in the Revenue and Taxation Code.
Notably, CARB staff proposes to exclude the criteria related to property holdings and payroll, found in Sections 23101(b)(3) and (4), from this definition.
Parent and subsidiaries
Both SB 253 and SB 261 permit parent companies to submit consolidated reports on behalf of their in-scope subsidiaries.
According to CARB’s proposals, a subsidiary is defined as a business entity over which another entity holds ownership or control through direct corporate association. This definition aligns with CARB’s Cap-and-Invest program and is detailed in California Code Regulations, Title 17, Section 95833. Key indicators of ownership and control include majority ownership, majority board or officer control or majority voting rights. A direct corporate association exists when two entities are connected either directly or through a chain of corporate associations.
CARB’s FAQs further clarify that foreign parent companies may file consolidated reports for their in-scope U.S.-based subsidiaries (FAQ 14). Additionally, these consolidated reports can include disclosures from subsidiaries that are out of scope (FAQ 16).
Exemptions
CARB’s proposals include exemptions for certain entities from the reporting requirements. For example, entities whose only presence in California consists of teleworking employees would be exempted.
Additionally, SB 261 explicitly exempts business entities regulated by the California Department of Insurance or similar state agencies. CARB is also proposing to extend this exemption to these entities under SB 253.
According to CARB’s FAQs, some organizations may not have reporting obligations based on how revenue and business activities in California are defined. Holding companies and mutual funds are cited as examples, as they typically do not report gross receipts on California corporate tax filings and therefore do not meet the revenue thresholds (FAQ 10).
Furthermore, both SB 253 and SB 261 exclude certain types of organizations by definition, including government entities, not-for-profits and charitable organizations.
Fees and future rulemaking
CARB plans a flat fee structure to cover program administration, with fees assessed per covered subsidiary but payable by the parent company if consolidated. Although SB 261 requires biennial reporting, CARB is considering annual fees.
Current working estimates are approximately:
- $3,106 for SB 253
- $1,403 for SB 261
A fee determination will be provided annually by CARB with a proposed due date of Sept. 10, 2026, for first year fees.
Further rulemaking in 2026 will address assurance requirements, enforcement provisions, and expanded reporting templates, incorporating stakeholder feedback to balance rigor with practicality.
Additional guidance and resources
CARB has updated its FAQs and finalized the SB 261 reporting checklist, providing clarity on disclosure expectations, including:
- Allowing early-stage reporters to disclose best available data and describe gaps or limitations.
- Encouraging alignment with industry-specific guidance.
- Referencing the International Sustainability Standards Board (ISSB) standards for emerging reporting practices.
Conclusion – Next steps for compliance
California’s SB 253 and SB 261 mark important milestones in corporate climate disclosure, raising the bar for transparency and accountability. While legal challenges continue, the regulatory landscape is advancing, and companies should take proactive steps to prepare for compliance. Leveraging CARB’s guidance, understanding your organization’s applicability and enhancing data management practices are critical to meeting these requirements successfully.
Key actions to take
Engage your legal, finance and compliance teams to:
- Confirm if your organization meets the revenue thresholds—$1 billion for SB 253 and $500 million for SB 261.
- Identify any applicable exemptions.
This foundational assessment will clarify your obligations and help shape your compliance strategy.
Develop a comprehensive GHG emissions inventory covering Scope 1, Scope 2 and relevant Scope 3 categories, following GHG Protocol standards. Document your scope and measurement approach within an Inventory Management Plan (IMP).
Implement a well-controlled GHG emissions reporting process that supports future assurance requirements. This includes:
- Maintaining supporting documentation for all emissions data and estimates
- Designing internal controls over data collection, aggregation and reporting
- Preparing for third-party assurance by ensuring traceability and auditability of data
- Even though limited assurance is not required for 2026 reporting, consider performing an assurance assessment as a dry run before the first mandatory year in 2027. This will help identify gaps in documentation, internal controls and data integrity early.
- Consider using ESG reporting platforms, data management tools and automation to streamline data collection, enhance accuracy and support internal controls.
Complete a climate risk and opportunity assessment and develop climate-related risk disclosures aligned with a recognized disclosure framework, such as TCFD or ISSB, to ensure consistent and comparable climate-related financial reporting. While SB 261 is currently staying, we recommend that companies continue preparing their reports to ensure readiness to act quickly once the legal process concludes. If the injunction is lifted in January, CARB may introduce a revised near-term timeline. Being prepared now will help avoid a compressed and stressful reporting period.
By taking these steps now, your organization will be better prepared for compliance and positioned to avoid potential penalties.
Appendix
SB 253 – Disclosure requirements:
Reporting under SB 253 is scheduled to commence in 2026. While some specifics may evolve during the ongoing rulemaking process, the current timeline from the legislation indicates that the initial reports will be due by Aug. 10, 2026.
| Reporting year | Data year | Scope 1 & 2 reporting | Assurance (Scope 1 & 2) | Scope 3 reporting | Assurance (Scope 3) |
| 2026 | 2025* |  Required** |
 Not required |
Not required |
Not required |
| 2027 | 2026 | Required |
Limited assurance likely | Required |
Not required |
| 2028 | 2027 | Required |
Limited assurance | Required |
Not required |
| 2029 | 2028 | Required |
Limited assurance | Required |
Not required |
| 2030 | 2029 | Required |
Reasonable assurance | Required |
Limited assurance*** |
* Entities with fiscal years ending from Jan. 1 to Feb. 1, will report data for FY 2026. All others should plan to submit data for FY 2025.
** For the initial reporting year (2026), only entities that were already collecting or planning to collect this data by 2024 are required to comply. Entities not collecting or planning to collect data at the time the Enforcement Notice was issued (Dec. 5, 2024) should submit a statement on company letterhead to CARB indicating non-submission and the reason, in line with the Enforcement Notice.
*** Assurance requirements for Scope 3 emissions are not yet in effect. Under current CARB guidance, Scope 3 disclosures will not require assurance until at least 2030, when limited assurance is expected to begin, subject to future rulemaking.
SB 253 - Filing and penalty information:
| Frequency | Reporting entities are required to disclose their GHG emissions annually. |
| Location | Publicly disclose on a digital platform (to be designated by the regulator). |
| Penalty for non-compliance | Administrative penalties due to non-compliance will not exceed $500,000 in any reporting year. |
| Enforcement | CARB’s December 2024 Enforcement Notice confirmed that administrative penalties under SB 253 would not be imposed for the initial 2026 reporting cycle, provided companies make good-faith efforts to comply. |
SB 261 – Disclosure requirements:
| Original date | Milestone | Current status |
| Dec. 1, 2025 | CARB’s public docket is now open for companies to voluntarily begin submitting URLs to their climate-risk reports. | |
| Jan. 1, 2026 | First SB 261 climate-related financial risk reports were originally due to be published on company websites and submitted to CARB. | Enforcement is temporarily paused by the Ninth Circuit of Appeals. This deadline will not be enforced; CARB will issue an alternate reporting deadline after resolution of the appeal. |
SB 261 - Filing and penalty information:
| Reporting requirements | Covered entities are required to disclose climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition. Covered entities have the option to prepare their reports using recognized frameworks such as the TCFD recommendations. If they choose alternative reporting methods, they must ensure that their disclosures meet the criteria specified in SB 261. |
| Minimum reporting requirements for Year 1 | Each report submitted to CARB should:
|
| Frequency | Biennially (every two years after initial report published on or before Jan. 1, 2026). |
| Location | Covered entities are required to make their climate-related financial risk reports publicly available on their websites with the URL submitted to CARB’s public docket. |
| Penalty for non-compliance | Administrative penalties due to non-compliance will not exceed $50,000 in any reporting year. |
| Enforcement | While SB 261 was not included within the December 2024 Enforcement Notice, CARB has emphasized that companies should make good-faith efforts to prepare SB 261 disclosures. This guidance, reiterated during stakeholder workshops, reflects CARB’s intent to prioritize support over penalties during the initial compliance period. |
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