Yesterday, I attended a virtual three-hour public consultation workshop hosted by the California Air Resources Board (CARB), where technical staff and legislators discussed how California’s new corporate responsibility climate laws, SB 261 and 253, will be implemented. Senators Scott Weiner and Henry Stern were in attendance, underscoring the state’s commitment to climate leadership and the role these laws play in shaping corporate responsibility.
Overview of SB 261 and SB 253
As explained in our previous Insight post, California’s new climate disclosure laws target two critical areas: climate-related financial risk and greenhouse gas (GHG) emissions. The Climate-Related Financial Risk Bill (SB 261) applies to companies with over $500 million in annual revenue and requires public disclosure of how climate-related risks may impact their operations and financial outlook. The Climate Corporate Data Accountability Act (SB 253) applies to companies with more than $1 billion in revenue and mandates public disclosure of GHG emissions across all three scopes—Scope 1 (direct emissions), Scope 2 (indirect emissions from energy use), and Scope 3 (value chain emissions). Both laws apply to companies that are incorporated in California, have their principal place of business in the state, or conduct significant operations there—such as selling goods or services, owning or leasing property, or employing staff.
For emissions disclosures under SB 253, the Greenhouse Gas Protocol (GHG-P) is the designated framework. Importantly, both laws are expected to include third-party assurance requirements. Limited Assurance for Scope 1 and 2 emissions under SB 253 will be required starting in 2026, progressing to Reasonable Assurance by 2030. Scope 3 Limited Assurance will phase in starting in 2027. For SB 261, disclosures must reflect climate-related risk exposure as of the end of 2025, with future guidance expected on whether independent verification will be required.
During yesterday’s meeting, we learned that CARB is still taking comments regarding the scope of these laws – i.e., what types and sizes of entities must report. While the CARB’s December 5, 2024 Enforcement Notice indicated that all regulations would be available to the public by July 1, 2025, it was apparent from yesterday’s meeting that this will not be the case. Despite the regulatory language still being finalized, companies that meet the proposed thresholds under either law are expected to begin collecting and retaining 2025 data for reporting in 2026.
During the meeting, CARB indicated that SB 261 is already a statute under California Law. The statute states that all California-based or doing business in California companies at the $500 million threshold or above must submit a formal report, published on their company website and to a State-approved third-party portal, of their business’ associated “physical and transition risks” by January 1, 2026. As per yesterday’s meeting, the exact report format and directions for publishing such a report will now not be available until late 2025. This means that to comply with the new law, companies must create such a report without specific guidelines available.
As for SB 253 GHG emissions reporting guidelines, it was confirmed that an entity’s 2025 Scope 1 and 2 emissions must be reported in 2026. A specific due date in 2026 was not mentioned. SB 253 regulations are still in development, and public comments are still being accepted.
Timeline and Compliance Expectations
In summary, CARB is currently drafting the implementing regulations, with final rules expected by late 2025. Despite the ongoing development of detailed guidance, companies must be ready to report in 2026 based on their 2025 data. This means internal preparation—data gathering, framework selection, and assurance planning—must begin now to ensure readiness and avoid compliance risks.
Recommended Frameworks
At Blue Sky Climate, we recommend the following based on our review of the legislation, alignment with global standards, and early regulatory signals from CARB. While the final regulatory details are still forthcoming, these frameworks appear to be the most applicable and adaptable to California’s requirements:
- For SB 261 compliance, companies should consider using the ISSB IFRS S2 standard. Built on the TCFD climate risk reporting framework, ISSB offers deeper guidance and global consistency, making it a strong foundation for disclosing climate-related financial risks.
- For SB 253, the Greenhouse Gas Protocol (GHG-P) remains the leading and widely adopted framework for GHG emissions measurement and reporting.
These frameworks are internationally recognized and are expected to align well with CARB’s final requirements. We recognize that further updates may be necessary once the regulations are finalized, but adopting these standards now allows companies to make meaningful progress and avoid future disruption.
Why Action is Needed Now
According to CARB’s December 5, 2024 Enforcement Notice, the agency will exercise enforcement discretion for the initial reporting cycle (covering 2025 data), provided companies can demonstrate a good faith effort to retain all relevant emissions data. In other words, while some flexibility may be offered early on, CARB will still expect a report as of January 1, 2026.
Organizations subject to SB 261 and/or SB 253 should begin preparing now by assessing their current reporting practices, selecting appropriate frameworks, and laying the groundwork for data governance and assurance. Blue Sky Climate will remain actively engaged with CARB’s rulemaking process to ensure our clients are informed, prepared, and aligned with evolving compliance expectations.
Reach out today to learn how we can support your organization in navigating these new requirements with clarity and confidence.
