California SB 253: Covered Companies, Scope 1-3 Disclosures, and Deadlines

California’s SB 253, the Climate Corporate Data Accountability Act, requires U.S.-formed companies with more than $1 billion in annual revenue that do business in California to publicly disclose their greenhouse gas emissions. Scope 1 and Scope 2 emissions are due first, by August 10, 2026, with Scope 3 phasing in starting 2027. Reports must be independently verified, and nonfiling can draw administrative penalties of up to $500,000 per reporting year.¹²

Which Companies Are Covered

SB 253 reaches any partnership, corporation, limited liability company, or other business entity formed under U.S. law that earns more than $1 billion in total annual revenue and does business in California.¹ The threshold is based on the prior fiscal year’s total revenue, not California-source revenue. Under CARB’s implementing regulation, the figure ties to gross receipts as reported to the California Franchise Tax Board.³

“Doing business in California” generally covers companies that conduct transactions for financial gain in the state, are organized under California law, maintain employees or property there, or otherwise have an active economic presence. The Franchise Tax Board applies its own sales, property, and payroll thresholds when assessing whether an out-of-state entity is doing business in California, and those principles inform SB 253’s reach.

Parent Companies and Subsidiaries

A parent company with qualifying subsidiaries can file a single consolidated emissions report. A subsidiary that meets the $1 billion threshold on its own does not need to file separately if the parent’s consolidated report covers it.² The reverse is not automatic: a parent is not pulled into SB 253 simply because one of its subsidiaries qualifies. CARB assesses applicability entity by entity.

What You Have to Disclose

Covered companies measure and report emissions using the Greenhouse Gas Protocol, and must disclose all three of its scopes.¹ Across every scope, different greenhouse gases are converted into carbon dioxide equivalents (CO₂e) so the figures are comparable.

Scope 1: Direct Emissions

Scope 1 captures greenhouse gases released directly from sources the company owns or controls, wherever located. Fuel burned in company vehicles, on-site boilers, and gas-releasing manufacturing processes all fall here. The data usually comes from internal records.

Scope 2: Purchased Energy

Scope 2 covers indirect emissions from electricity, steam, heating, or cooling the company purchases.¹ The emissions physically occur at the generating facility but are attributed to the consuming company. Utility bills and energy contracts generally feed the calculation.

Scope 3: Value Chain Emissions

Scope 3 covers all other indirect emissions across the company’s value chain, both upstream and downstream. Upstream includes purchased goods and services, business travel, and employee commuting. Downstream includes the end use and disposal of products sold.¹ For most large companies, Scope 3 is larger than Scopes 1 and 2 combined, and the data often lives with suppliers, logistics partners, and customers who don’t track emissions carefully. Where direct supplier data isn’t available, the Greenhouse Gas Protocol allows industry-average emission factors and estimation methods that follow its transparency and completeness principles.

When Reports Are Due

The rollout is phased:

Scope 1 and Scope 2: first reports due August 10, 2026, covering the prior fiscal year, then annually.³
Scope 3: first reports begin in 2027 on a schedule set by CARB.²

There is one accommodation for the first deadline. Companies that were not already collecting emissions data, and were not planning to, as of CARB’s December 5, 2024 Enforcement Notice are not expected to submit full Scope 1 and 2 figures in 2026. Those companies should send CARB a statement on company letterhead explaining that no data collection program was in place at that time. It’s a one-time accommodation, not a standing exemption.

Independent Verification

Emissions data must be verified by an independent third-party assurance provider, and the complete assurance report, including the provider’s name, must accompany the disclosure.¹ The level of rigor steps up over time:

Starting in 2026, Scope 1 and Scope 2 require limited assurance, a review intended to catch material errors.
By 2030, Scope 1 and Scope 2 move to reasonable assurance, closer in depth to a financial audit.⁴
Scope 3 may require limited assurance by 2030, subject to CARB’s assessment of market readiness and auditor capacity.

The statute also directs CARB to design the verification process so companies aren’t forced to hire multiple auditors and so enough qualified providers exist to handle the volume.⁵

Where Reports Get Filed and Published

Verified disclosures go to an emissions reporting organization: a nonprofit with existing experience running greenhouse gas reporting programs for U.S. companies. CARB may contract with that organization to receive reports and host them publicly, or receive the reports directly.¹ Either way, disclosures must be made available to the public within 30 days of receipt.⁵

Penalties for Noncompliance

CARB can impose administrative penalties of up to $500,000 per reporting year for nonfiling, late filing, or other failures to meet SB 253’s requirements.² CARB weighs factors including the company’s compliance history and the nature of the violation. Good-faith effort and prompt correction generally pull penalties down; negligence pushes them up.

Scope 3 Safe Harbor

Because Scope 3 figures depend so heavily on estimates and third-party data, the law shields companies from penalties for misstatements in their Scope 3 disclosures as long as those disclosures were made with a reasonable basis and in good faith.⁶ On top of that, between 2027 and 2030, Scope 3 penalties can only be assessed for nonfiling, not for errors or incomplete data.² The practical takeaway: submit something built on documented, reasonable estimates, and the filing itself keeps you out of the penalty zone.

Status of the Federal Court Challenge

The U.S. Chamber of Commerce and other parties have challenged SB 253 in federal court. On January 9, 2025, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit heard oral arguments, but the panel did not issue a ruling and a decision could take months. As of mid-2025, SB 253 remains fully in effect with no injunction blocking enforcement. Companies should continue preparing as though the August 2026 deadline will hold.

A Note on SB 261

SB 253 is the emissions-disclosure law. If your company is between $500 million and $1 billion in annual revenue, SB 253 does not apply, but the companion law SB 261 may. SB 261 requires biennial reports on climate-related financial risks for companies doing business in California with annual revenues above $500 million.⁷ Insurance companies regulated by the California Department of Insurance are exempt, as are insurance businesses operating under other states’ regulatory frameworks. SB 261’s enforcement is currently paused under a Ninth Circuit injunction granted in November 2025. That injunction does not extend to SB 253.

1
California Legislative Information. California Code Health and Safety Code HSC 38532
2
LegiScan. California SB 219 2023-2024 Regular Session Enrolled
3
California Air Resources Board. CARB Approves Climate Transparency Regulation for Entities Doing Business in California
4
California Air Resources Board. SB 253/261/219 Public Workshop Regulation Development and Additional Guidance
5
LegiScan. California SB 253 2023-2024 Regular Session Amended
6
LegiScan. California SB 253 2023-2024 Regular Session Amended
7
California Air Resources Board. Climate Related Financial Risk Disclosures Draft Checklist