California’s SB 253 and SB 261 climate disclosure rules require large companies doing business in the state to publicly report greenhouse gas emissions and climate-related financial risks, whether they are publicly traded or privately held. SB 253 applies to companies with more than $1 billion in annual revenue and covers emissions reporting. SB 261 applies at $500 million in revenue and covers climate financial risk. Both laws are in their implementation phase, but a November 2025 Ninth Circuit injunction has paused enforcement of SB 261 while leaving SB 253’s obligations fully in effect.
Which Companies Are Covered
A company falls under either law only if it meets two conditions: it is “doing business in California,” and its global revenue exceeds the relevant threshold. Because the thresholds differ, a mid-sized company can fall under SB 261 without being subject to SB 253.
SB 253 applies to entities with total annual revenues over $1 billion.1California Legislative Information. California Health and Safety Code 38532 SB 261 applies at $500 million.2California Legislative Information. California Health and Safety Code 38533 Revenue is measured based on the prior fiscal year. Both laws reach corporations, partnerships, LLCs, and other business entities formed under the laws of any U.S. state, the District of Columbia, or an act of Congress. A company headquartered in Texas or Delaware is still covered if it has enough California activity and revenue.
Both laws borrow the “doing business” definition from Section 23101 of the Revenue and Taxation Code. A company is doing business in California if it actively engages in any transaction for financial gain in the state, is commercially domiciled there, or exceeds certain dollar thresholds for California sales, property, or payroll.3California Legislative Information. California Code Revenue and Taxation Code 23101 For the 2025 tax year, those triggers were roughly $757,000 in California sales, $75,700 in California property, or $75,700 in California payroll. Falling below the dollar figures does not put a company in the clear, since actively transacting for profit in California independently qualifies.
What SB 253 Requires
The Climate Corporate Data Accountability Act, codified at Health and Safety Code Section 38532, requires covered companies to publicly disclose their annual greenhouse gas emissions using the Greenhouse Gas Protocol.1California Legislative Information. California Health and Safety Code 38532 The Protocol divides emissions into three categories:
- Scope 1 covers direct emissions from sources the company owns or controls, such as fuel burned in company vehicles or on-site natural gas combustion.
- Scope 2 covers indirect emissions from purchased electricity, steam, heating, or cooling.
- Scope 3 covers all other indirect emissions across the company’s value chain, both upstream and downstream: purchased goods and services, business travel, employee commutes, and use of the products the company sells.
Scope 3 is the most demanding. A manufacturer has to account for emissions from raw material suppliers, shipping partners, and customers using its finished products, which requires coordination with vendors who may not track their own emissions.
Reporting Deadlines
Scope 1 and Scope 2 reporting begins in 2026. CARB adopted August 10, 2026 as the deadline for the first round of reports, covering the prior fiscal year’s data. Companies with fiscal years ending on or before February 1, 2026 report the most recent fiscal year; companies with later year-ends report the prior fiscal year. Scope 3 reporting starts in 2027 on a schedule CARB will specify. A 2024 amendment (SB 219) gave CARB discretion over the exact Scope 3 timeline rather than fixing a date in statute. Reports go to CARB directly or to a nonprofit emissions reporting organization CARB contracts with, and filings continue annually thereafter.
Third-Party Assurance
SB 253 does not rely on self-reporting alone. An independent third-party assurance provider has to verify the reported data, and the required assurance level ramps up over time:
- Scope 1 and Scope 2: limited assurance starting in 2026, moving to reasonable assurance starting in 2030.
- Scope 3: limited assurance starting in 2030. During 2026, CARB will review market trends and may set assurance requirements as early as 2027.
Limited assurance means the provider checks for obvious errors and inconsistencies. Reasonable assurance involves deeper testing and offers a level of confidence closer to a traditional financial audit. The provider’s complete report, including the provider’s name, must accompany the emissions disclosure.
Scope 3 Safe Harbor
The law protects companies that disclose Scope 3 emissions in good faith and with a reasonable basis from penalties tied to inaccuracies in that data. CARB has signaled it will not impose penalties during 2026 for SB 253 as long as companies show a good-faith effort in preparing their disclosures. Many companies are building emissions tracking from scratch, and perfect first-year data across a global supply chain is not realistic.
What SB 261 Requires
The Climate-Related Financial Risk Act, codified at Health and Safety Code Section 38533, takes a different angle. Rather than an emissions inventory, it asks companies to describe how climate change could affect their finances and what they are doing about it. Covered companies must prepare a biennial report addressing the climate-related financial risks they face and the measures they have adopted to reduce or adapt to those risks.2California Legislative Information. California Health and Safety Code 38533
Reports must follow the framework published by the Task Force on Climate-Related Financial Disclosures (TCFD) or an equivalent standard. That means addressing both physical risks (wildfires, flooding, extreme heat) and transition risks (policy shifts, changes in consumer demand, technology changes that could strand assets). The report has to be published on the company’s own website so it is publicly accessible. SB 261 has no third-party assurance requirement.
Current Status: Voluntary
The statute set the first reporting deadline as January 1, 2026, with biennial reports after that. Because of the Ninth Circuit injunction described below, CARB has confirmed that all SB 261 reporting is voluntary while the injunction remains in place. Companies that want to get ahead of the requirement can still prepare and publish reports, but no penalties will result from missing the original deadline.
Penalties and Fees
Both laws authorize CARB to seek administrative penalties for noncompliance. Under SB 253, penalties can reach up to $500,000 per reporting year. Under SB 261, penalties can reach up to $50,000 per reporting period. CARB has indicated it will focus on good-faith compliance during the initial reporting cycle rather than aggressively penalizing early missteps.
CARB also has authority to assess annual administrative fees to cover its implementation costs. The board proposed fees of roughly $3,100 per entity for SB 253 and $1,400 for SB 261. Both apply annually even though SB 261 reporting is biennial, and CARB has indicated the fees will be adjusted for inflation. Program fee assessments are scheduled for September 2026.
The Lawsuit and What It Changes Right Now
The U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, and other business organizations sued CARB in federal court, arguing that SB 253 and SB 261 violate the First Amendment by compelling speech on climate change. The plaintiffs contend the laws force companies to adopt and publish a particular viewpoint on climate risk rather than simply disclosing neutral factual data.4Supreme Court of the United States. Emergency Application for Injunction Pending Appeal, Chamber of Commerce v. California Air Resources Board
The district court denied a preliminary injunction in August 2025, and the plaintiffs appealed. In November 2025, the Ninth Circuit split its ruling: it granted an injunction pausing enforcement of SB 261 but denied the request as to SB 253, allowing emissions reporting to move forward. Oral arguments took place on January 9, 2026, with judges reportedly focusing on whether emissions data is factual operational information or compelled ideological speech. A final Ninth Circuit ruling is still pending.
The practical effect: SB 253 obligations are active and enforceable, and SB 261 compliance is voluntary until the court resolves the case. Companies subject to both laws should prepare for SB 253 reporting on schedule while watching the litigation for SB 261.
What SB 219 Changed
In September 2024, California passed SB 219, which amended both laws. Governor Newsom had sought a two-year delay in reporting deadlines, but the legislature rejected that approach. Instead, SB 219 made targeted adjustments:
- CARB’s regulation-writing deadline moved from January 1, 2025 to July 1, 2025.
- CARB gained discretion to set the specific schedule for Scope 3 disclosures, rather than a fixed 2027 start date in statute.
- Companies can report at the parent-company level rather than entity by entity, simplifying compliance for large corporate groups.
- CARB can manage disclosures in-house or contract with a third-party digital platform.
The core reporting deadlines and revenue thresholds were not changed. SB 219 gave CARB implementation flexibility rather than scaling back the disclosure requirements.
How These Fit With Federal and EU Rules
There is currently no binding federal climate disclosure requirement comparable to California’s. The SEC finalized its own climate disclosure rule in March 2024, but stayed it during litigation, and in early 2025 the Commission voted to withdraw its defense of the rule entirely.5U.S. Securities and Exchange Commission. SEC Votes to End Defense of Climate Disclosure Rules The SEC’s older 2010 interpretive guidance on material climate impacts still applies but lacks the specificity of either the 2024 rule or California’s laws. That leaves SB 253 and SB 261 as the most aggressive climate reporting mandates in the United States.
Companies with EU operations may also face the Corporate Sustainability Reporting Directive, which requires Scope 1, 2, and 3 emissions disclosure and uses a “double materiality” standard that goes beyond California’s requirements. The frameworks are not identical, so preparing one report will not fully satisfy the other, though companies can look for efficiencies in data collection.