What You Need to Know: Final Updates on  California’s Climate Disclosure Laws (SB 253, SB 261)

Updated March 6, 2026

Getting ready for California’s climate disclosure laws — now officially in effect.

 

California has seen an unprecedented number of climate-related occurrences over the last few years — wildfires, severe storms and floods, and even a rise in sea-level. In response, the State enacted two climate-related laws: The Climate Corporate Data Accountability Act (SB 253), and the Climate-Related Financial Risk Bill (SB 261) Together, they require large companies doing business in California to be held accountable for their GHG emissions, monitor their company’s climate risks, and report both to the California Air Resources Board (CARB).

On February 26, 2026, CARB’s board voted unanimously to approve the first implementing regulations for SB 253. The first round of emissions reporting under SB 253 is now due August 10, 2026, and thousands of companies are estimated to be in scope. CARB’s preliminary list of regulated entities remains under refinement, as the Board acknowledged data gaps in identifying all covered companies.

Here is a closer look at what the approved regulations mean, who’s affected, what’s required, and the status of the SB 261 injunction.

California’s Climate Corporate Data Accountability Act (SB 253)

California’s SB 253, or Climate Corporate Data Accountability Act (CCDAA), requires all U.S.-formed companies doing business in California with annual revenues exceeding $1 billion to publicly report their greenhouse gas (GHG) emissions each year. Reporting must follow the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard.

The CCDAA is the first law in the United States to require companies to report Scope 3 emissions, the emissions generated across a company’s entire value chain, which often account for the majority of an organization’s total carbon footprint. Scope 3 reporting begins in 2027.

 

Who’s In Scope?

A company is in scope for SB 253 if it meets all three criteria:

• It is a U.S.-formed entity (formed under U.S. law)
• It does business in California (as defined by Revenue and Tax Code § 23101, omitting subsections (b)(3)–(4) relating to property holdings and payroll)
• It has more than $1 billion in total annual  revenue (defined as gross receipts per RTC § 25120(f)(2), based on the lesser of the entity’s two previous fiscal years)

 

Both public and private companies are covered. A subsidiary may request for a parent to report on the subsidiary’s behalf, though parent-subsidiary relationships do not determine which entities are regulated. Each entity assesses its own compliance obligations individually. Each subsidiary still owes fees individually.

 

Who’s Exempt?

The approved regulations exempt the following categories from SB 253 reporting:

• Nonprofits: Entities that are tax-exempt under the Internal Revenue Code.
• Government entities: Federal, state, and local government entities, and companies that are majority-owned (more than 50%) by government entities. These are excluded by statute rather than exempted by regulation.
• Minimal presence entities: Companies whose only business in California consists of teleworking employees or solely through employee compensation and payroll expenses.
• Specific energy sector entities: The California Independent System Operator (CAISO) or companies whose only CA activity consists of wholesale electricity transactions occurring in interstate commerce.
• Insurance companies: Entities regulated by the California Department of Insurance or in the business of insurance in any other state. These are excluded by statute.

 

A note on insurance companies: At the February 26 hearing, CARB’s board adopted an amendment directing its Executive Officer to coordinate with the California Department of Insurance to evaluate and propose future regulatory requirements for insurance companies. This means insurers will likely face mandatory GHG reporting eventually, either directly through CARB or through CDI.

 

What’s Due and When?

The first Scope 1 and Scope 2 emissions report is due to CARB and should be published on a reporting company’s website by August 10, 2026. This is a one-time, first-year-only deadline proposed by CARB staff based on stakeholder feedback. Ongoing annual deadlines, Scope 3 mechanics, and assurance standards will be established through a second rulemaking later in 2026.

The year of emissions you report on depends on when your fiscal year ends. If your fiscal year ends between January 1 and February 1, 2026, you will report data from the fiscal year ending in 2026. If your fiscal year ends between February 2 and December 31, 2026, you will report data from the fiscal year ending in 2025. All entities will have at least six months after the end of their fiscal year to prepare and submit their report.

CARB has released a voluntary reporting template, but its use is not required for the first cycle. Companies may also submit existing GHG reports that already cover Scope 1 and Scope 2 emissions.

 

SB 253 Phase-In Timeline

The law will be phased in as follows:

Year	Requirement
2026	Report Scope 1 & 2 emissions (due August 10). Third-party assurance is not required. CARB will accept best-available data. Reports must follow the GHG Protocol Corporate Standard.
2027	Report Scope 1, 2, & 3 emissions. Limited Assurance (third-party verification) required on Scope 1 & 2.
2028	Limited Assurance extended to Scope 3 emissions.
2030	Reasonable Assurance (a higher standard of verification) required on Scope 1 & 2 emissions.

 

“Good Faith” Enforcement: What It Actually Means

You may have read that CARB is taking a “good faith” approach to enforcement in the first year. That’s true, but it’s narrower than many companies assume.

In its February 26, 2026 public hearing, CARB clarified that it will exercise enforcement discretion for good-faith first-year submissions, aimed at supporting reporting entities actively working toward full compliance. Companies may submit Scope 1 and Scope 2 emissions data that can be determined from information the company already possessed or was collecting at the time the notice was issued.

However, CARB’s notice explicitly states that this is enforcement discretion — not a rewrite of the statute. The law itself still requires Scope 1 and 2 reporting. The safe harbor covers incompleteness, not non-compliance in bad faith. And it applies only to the first reporting cycle (2026).

If your company was not collecting emissions data as of December 2024, CARB expects you to submit a statement on company letterhead confirming that you were not collecting data or planning to collect data at the time the enforcement notice was issued. Simply not reporting without communicating with CARB could be interpreted as non-compliance rather than good-faith engagement.

Why this matters: Your 2026 submission sets the baseline for all future reporting. Inconsistent or poorly documented methodology in year one may require restatement once mandatory assurance begins in 2027. The companies that invest in a sound methodology now will avoid costly corrections later.

 

Assurance: Not Required in 2026, But Worth Considering

CARB confirmed that for 2026 reporting, Limited Assurance is not required for data submission. However, companies that had already obtained assurance are expected to submit it alongside their report.

Even though it’s optional this year, there are strong reasons to consider it:

• For public companies: Releasing investor-facing emissions data without third-party verification creates exposure to securities litigation, shareholder suits, and greenwashing claims. Assurance also supports audit committee oversight and Sarbanes-Oxley disclosure control expectations.
• For private companies: Voluntary assurance demonstrates diligence, strengthens your good-faith position, prepares your systems for mandatory assurance in 2027, identifies boundary and methodology gaps early, and builds internal controls and governance infrastructure for Scope 3 reporting.

 

Penalties and Fees

Non-compliance has a price. Penalties for SB 253 violations can reach up to $500,000 per entity per year.

CARB will charge an annual flat fee to cover the costs of administering both the SB 253 and SB 261 programs. The fee is calculated as follows:

1. Required Revenue (RR) — total annual program costs including personnel, legal defense, and contracting expenses, adjusted each year for the California Consumer Price Index (CPI)
2. Total Required Revenue (TRR) — RR plus a 10% contingency allowance for unforeseen costs, plus any outstanding loan repayment owed to the Greenhouse Gas Reduction Fund
3. Fee per entity — TRR divided equally among all in-scope entities

 

Fee notices are issued by September 10 each year, with payment due within 60 days. Each covered subsidiary is assessed its own fee, though a parent company may pay all fees in one combined payment. Entities with more than $500M and less than $1B in revenue pay only the SB 261 fee annually; entities with more than $1B in revenue pay both the SB 253 and SB 261 fees.

Companies must also maintain records for five years demonstrating they meet the revenue and “doing business in California” thresholds, and provide those records to CARB upon request.

 

California’s Climate-Related Financial Risk Act (SB 261)

Current Status: Enforcement PAUSED, But Watch the Ninth Circuit Court of Appeals

SB 261, or Climate-Related Financial Risk Act (CRFRA, reports were originally due by January 1, 2026. However, on November 18, 2025, the Ninth Circuit Court of Appeals granted an injunction blocking enforcement while a legal challenge (led by the U.S. Chamber of Commerce) proceeded on appeal. CARB confirmed in a December 2025 enforcement advisory that it will not enforce SB 261 until the injunction is lifted. A new reporting deadline will be set after the appeal is resolved.

Oral arguments were heard on January 9, 2026. A decision is expected by late spring 2026. If the Ninth Circuit upholds SB 261, enforcement could resume relatively quickly — and thousands of additional companies would need to file.

An important note: The Ninth Circuit declined to block SB 253. The August 10, 2026 emissions reporting deadline under SB 253 is fully in effect, regardless of the SB 261 litigation.

California’s SB 261, or Climate-Related Financial Risk Act (CRFRA), applies to public or private companies with annual revenues over $500 million doing business in California, excluding insurance companies. These companies are required to prepare and publicly disclose a climate-related financial risk report, aligned with the recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD) or an equivalent framework such as the ISSB’s IFRS S2 standard, including examination of:

• Physical risks – risks caused by the actual effects of climate change, rising sea levels, changes in temperature, or extreme weather events that may interrupt operations, destroy property, and increase costs.
• Transition risks  – risks associated with the shift to a lower-carbon economy, new government regulations, technology changes, and consumer preferences that may lead to stranded assets, lost market share, or increased competition.

 

Reports must address both types of risk and include a clear plan for how the company intends to reduce and adapt. Under SB 261, reports are due biennially (every two years) and must be made publicly available on the company’s website. Should the Ninth Circuit lift the injunction and the law be fully enforced, these obligations will take effect.

 

SB 261 Minimum Reporting Requirements – Should the Law Go into Effect 

CARB has posted a detailed SB 261 reporting checklist on its website. Each report submitted to CARB should contain a statement on which reporting framework is being applied, discuss which recommendations and disclosures have been compiled and which have not, and provide a short summary of the reasons why any recommendations have not been included along with plans for future disclosures.

Four overriding principles underpin climate-related risk disclosures, informed by TCFD (2017) and IFRS S2:

• Governance
• Strategy
• Risk Management
• Metrics & Targets

Entities may use one of several frameworks to meet SB 261 disclosure requirements:

• TCFD Final Report of Recommendations (2017) or subsequent iterations
• International Financial Reporting Standards (IFRS) Disclosure Standards (ISSB/IFRS S2)
• A report developed in accordance with any regulated exchange, national government, or other governmental entity

 

What We’re Seeing From Early SB 261 Filers

Despite the injunction, CARB opened a public docket on December 1, 2025 for companies to voluntarily post their SB 261 reports. According to CARB’s February 26 press release, more than 120 climate-related financial risk reports had been voluntarily submitted and made publicly available at the time of the regulation’s approval — out of an estimated 3,900+ companies that will eventually be in scope.

CARB confirmed that the early filings represent both private and public entities spanning a wide range of industries, including manufacturing, technology, healthcare, energy, transportation, finance, and consumer services.

CARB Chair Lauren Sanchez noted that the early engagement from business leaders is “a clear indication they recognize the importance of climate-related risk transparency to inform business and consumer decisions.”

 

It’s Not Just California: The State-by-State Climate Law Wave

California is leading, but it’s not acting alone. Several other states are advancing climate disclosure requirements that follow the same playbook — same $1 billion revenue threshold, same GHG Protocol foundation, same phased approach to assurance. Here’s where things stand:

State / Bill	What’s Proposed	Status
New York S9072A	Scope 1 & 2 by 2028 (on 2027 data). Scope 3 by 2029. Limited Assurance. NY Attorney General enforcement with civil penalties. Significant alignment with SB 253 definitions.	Passed State Senate. Currently in State Assembly.
Colorado HB 25-1119	Scope 1 & 2 with third-party assurance. Scope 3 phased in by category (categories 1, 2, 11 first, then expanding).	In committee.
Illinois HB 3673	Scope 1, 2, and 3 emissions reporting with third-party assurance.	Stalled in Rules Committee since March 2025.
New Jersey S679	Scope 1 & 2 with Limited Assurance.	In committee (early 2026).
Washington SB 6092	Amended to require the Dept of Ecology to recommend whether to adopt a disclosure rule within 18 months of passage.	Stalled in House.

The reporting infrastructure you build for SB 253, organizational boundaries, data collection processes, emission factor documentation, and audit-ready methodology, becomes the foundation for complying with every state law that follows. Companies that treat SB 253 as a one-off California exercise – or worse, ignore it –  will find themselves starting over when New York, Colorado, or other states finalize their own requirements.

 

Your 5-Month Roadmap to August 10

With the regulations now approved, here’s a practical month-by-month roadmap for preparing your first SB 253 report:

When	What To Do
March	Governance and boundary setting. Confirm you’re in scope using CARB’s definitions. Consult the GHG Protocol Corporate Standard. Set your organizational boundary (operational control or equity share approach). Map data owners across business units. If you’re a subsidiary, confirm whether your parent will file on your behalf.
April	Data gathering. Collect activity data for Scope 1 emissions (direct GHG emissions from sources controlled or owned by your organization) and Scope 2 emissions (indirect GHG emissions from the purchase of electricity, steam, heat, or cooling). Build a data log documenting sources, collection methods, and any assumptions or estimates.
May	Calculation and analysis. Apply GHG Protocol methodologies and recognized emission factors (EPA, IEA, or regional sources). Review outputs for accuracy and consistency. Cross-check totals against energy bills, fuel records, and operational data.
June	Finalize your GHG emissions report and compile supporting evidence. Ensure your methodology documentation is audit-ready, even though assurance isn’t mandatory this year. CARB has released a voluntary reporting template you may use — its use is not required for the first cycle.
July	Optional but advisable: Limited Assurance or readiness review. This surfaces methodology issues before they compound in 2027 when assurance becomes mandatory.
Aug 10	Deadline: Submit your Scope 1 & 2 report to CARB’s reporting docket. Fee invoices follow by September 10. Payment due within 60 days.

 

The Bottom Line for Companies Doing Business in California

SB 253 is no longer a bill to monitor. It’s a regulation to comply with. The August 10 deadline is confirmed, the Ninth Circuit declined to block it, and CARB expects every in-scope company to report.

The first reporting year is intentionally structured as a transitional period. CARB is exercising enforcement discretion, assurance is not yet required, and best-available data is accepted. But this flexibility will not last. Starting in 2027, SB 253 requires full Scope 1, 2, and 3 emissions reporting with third-party assurance — and the second rulemaking later this year will define exactly how that works.

The companies that start now will have a defensible baseline, cleaner data processes, and fewer surprises when the requirements get stricter. The companies that wait will be playing catch-up — potentially at much higher cost.

 

Blue Sky Climate Reporting Services

Blue Sky Climate can help you understand these regulations and measure and report your company’s Scope 1, 2, and 3 GHG emissions. We can also guide you to set realistic, science-based GHG reduction goals and implement ongoing energy reduction programs.

We’re here to help — no matter if you’re a large multinational brand or a family-owned supplier. We offer our expert services at a fraction of the cost of global accounting firms, and large consulting firms.

Reach out today to complete your mandatory climate reporting — and to avoid fines of up to $500,000 per year for non-compliance.

 

This article is for informational purposes only and does not constitute legal or assurance advice. Companies should consult with legal counsel to determine the applicability of California’s climate disclosure laws to their specific circumstances.