California’s SB 253 and SB 261 climate disclosure rules require large companies doing business in California to publicly report their greenhouse gas emissions and their climate-related financial risks, whether or not they are publicly traded. SB 253 covers companies with more than $1 billion in annual revenue and focuses on emissions. SB 261 covers companies with more than $500 million in annual revenue and focuses on financial risk. Both are now in their initial reporting phase, though a federal court has paused enforcement of SB 261 while leaving SB 253 fully in effect.
Who Has to Comply
Two things determine whether your company is covered: global revenue and whether you are “doing business in California.” The revenue thresholds are different for each law, so a mid-sized company can easily fall under SB 261 without being subject to SB 253.
- SB 253 applies to business entities with total annual revenues over $1 billion.1California Legislative Information. California Health and Safety Code 38532
- SB 261 applies to business entities with total annual revenues over $500 million.2California Legislative Information. California Health and Safety Code 38533
Revenue is measured by the prior fiscal year. Both laws reach corporations, partnerships, LLCs, and other entities formed under the laws of any U.S. state, the District of Columbia, or an act of Congress. A company headquartered in Delaware or Texas with sufficient California activity is still covered.
The “doing business” test is borrowed from California’s Revenue and Taxation Code. Under Section 23101, 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 specific dollar thresholds for California sales, property, or payroll.3California Legislative Information. California Code Revenue and Taxation Code 23101 Those thresholds adjust each year for inflation. For the 2025 tax year, they ran roughly $757,000 in California sales, $75,700 in California property, and $75,700 in California payroll. Falling below the numeric thresholds does not automatically put you outside the law, because actively transacting in California for profit is independently enough.
What SB 253 Requires
The Climate Corporate Data Accountability Act, codified at Health and Safety Code Section 38532, requires covered companies to publicly disclose annual greenhouse gas emissions using the Greenhouse Gas Protocol’s three-scope framework.1California Legislative Information. California Health and Safety Code 38532
- 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 value chain, upstream and downstream, including purchased goods and services, business travel, employee commutes, and the use of sold products.
Scope 3 is the most difficult category by a wide margin. A manufacturer has to account for emissions from raw material suppliers, shipping partners, and even customers using its finished products, which means coordinating with vendors that may not track their own numbers.
Deadlines
Scope 1 and Scope 2 reporting began in 2026. CARB set August 10, 2026 as the first filing date, covering the prior fiscal year’s data. Scope 3 reporting starts in 2027, also for prior fiscal year data, on a schedule CARB has discretion to set. After the first filing, reports are due annually.
Reports go to CARB directly or to a nonprofit emissions reporting organization that CARB contracts with.
Third-Party Assurance
SB 253 does not stop at self-reporting. An independent assurance provider must verify the emissions data, and the assurance level increases over time.1California Legislative Information. California Health and Safety Code 38532
- Scope 1 and Scope 2: limited assurance beginning in 2026, moving to reasonable assurance in 2030.
- Scope 3: limited assurance beginning in 2030, with CARB reviewing market readiness during 2026 and able to set requirements as early as 2027.
Limited assurance checks for obvious errors and inconsistencies. Reasonable assurance involves deeper testing and provides confidence closer to a traditional financial audit. The assurance provider’s full report, including the provider’s name, must be filed with the emissions disclosure.
Scope 3 Safe Harbor
The statute includes a safe harbor for Scope 3: companies that disclose in good faith with a reasonable basis are protected from penalties for inaccuracies in that data. CARB has also said it will not impose penalties during 2026 for SB 253 as long as companies show a good faith effort. Many companies are building emissions tracking systems from scratch, and the agency has acknowledged that perfect first-year data across a global supply chain is unrealistic.
What SB 261 Requires
The Climate-Related Financial Risk Act, at Health and Safety Code Section 38533, asks a different question. Rather than an emissions inventory, it requires a biennial report describing the climate-related financial risks the company faces and the measures it has adopted to reduce or adapt to those risks.2California Legislative Information. California Health and Safety Code 38533
The report must follow the Task Force on Climate-Related Financial Disclosures (TCFD) framework or an equivalent standard. That means addressing both physical risks (wildfires, flooding, extreme heat) and transition risks (shifts in policy, regulation, consumer demand, or technology that could strand assets). The report has to be published on the company’s own website.
Unlike SB 253, SB 261 does not require third-party assurance. Companies prepare their risk reports without mandatory external verification.
Current Status
The statute set the first reporting deadline as January 1, 2026, with biennial reports after that. The Ninth Circuit’s November 2025 injunction, discussed below, paused enforcement, and CARB has confirmed that SB 261 reporting is voluntary while the injunction stands. Companies that want to prepare and publish a report can do so, but no penalties will result from missing the original date.
Penalties and Fees
Both laws authorize administrative penalties. SB 253 penalties can reach up to $500,000 per reporting year. SB 261 penalties can reach up to $50,000 per reporting period. CARB has indicated its initial focus is good faith compliance rather than aggressive enforcement on early filings.
CARB also charges annual administrative fees to cover 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 both are expected to be adjusted for inflation.
The first program fee assessments are scheduled for September 2026.
The Legal Challenge Pausing SB 261
The U.S. Chamber of Commerce, the California Chamber of Commerce, the American Farm Bureau Federation, and other business groups sued CARB in federal court, arguing that both laws violate the First Amendment by compelling speech on climate change.4Supreme Court of the United States. Emergency Application for Injunction Pending Appeal, Chamber of Commerce v. California Air Resources Board They contend the laws force companies to adopt and publish a particular viewpoint rather than disclose neutral factual data.
The district court denied a preliminary injunction in August 2025. On appeal, the Ninth Circuit split its November 2025 ruling: it enjoined enforcement of SB 261 but denied the injunction as to SB 253, letting emissions reporting move forward. Oral arguments were held on January 9, 2026, with a final ruling still pending.
The practical takeaway is simple. SB 253 is active and enforceable now. SB 261 compliance is voluntary until the court rules. A company subject to both should prepare for SB 253 on schedule and watch the litigation for SB 261.
How This Fits With Federal and EU Rules
Preparing one climate disclosure does not automatically satisfy another, and the federal picture is thinner than many companies assume.
The SEC finalized a climate disclosure rule in March 2024, but it never took effect. The Commission stayed the rule during litigation and in early 2025 voted to withdraw its defense of the rule entirely.5U.S. Securities and Exchange Commission. SEC Votes to End Defense of Climate Disclosure Rules A coalition of 19 state attorneys general has stepped in to defend the rule in the Eighth Circuit, so the case technically continues, but the rule itself is inoperative. The SEC’s older 2010 interpretive guidance on material climate impacts still applies, with much less specificity than California’s requirements. For now, there is no binding federal climate disclosure requirement comparable to SB 253 or SB 261.
Companies also operating in the European Union may face the Corporate Sustainability Reporting Directive (CSRD). It also requires Scope 1, 2, and 3 emissions disclosure and uses a “double materiality” standard that goes beyond California’s. Most U.S. parent companies subject to the CSRD begin filing at the EU subsidiary level in 2026 and at the ultimate parent level by 2029. There are efficiencies in data collection between the two regimes, but the frameworks differ, and a single report will not satisfy both.